<DOC>
[DOCID: f:49104168.wais]
DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND
URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR
2006
----------
THURSDAY, MAY 12, 2005
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Bennett, Burns, Murray, Byrd, Kohl,
Durbin, and Dorgan.
DEPARTMENT OF TRANSPORTATION
National Railroad Passenger Corporation
STATEMENT OF DAVID M. LANEY, ESQ., CHAIRMAN, AMTRAK
BOARD OF DIRECTORS
ACCOMPANIED BY:
DAVID GUNN, PRESIDENT, AMTRAK
JEFFREY M. ROSEN, GENERAL COUNSEL, DEPARTMENT OF TRANSPORTATION
KENNETH A. MEAD, INSPECTOR GENERAL, DEPARTMENT OF
TRANSPORTATION
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Good morning. The Senate Appropriations
Subcommittee on Transportation, Treasury, Judiciary, HUD and
Related Agencies will come to order.
Today we welcome a diverse panel: Mr. David Gunn, Amtrak's
President and CEO; David Laney, Amtrak's Chairman of the Board;
Jeffrey Rosen, General Counsel for the Department of
Transportation; and Kenneth Mead, Inspector General for the
Department of Transportation.
While I understand that Mr. Gunn will not be presenting
testimony but is here to answer questions, I look forward to
each of your views on Amtrak's fiscal year 2006 budget. More
importantly, I look forward to understanding your views on the
difficulty that Amtrak is facing and the options that will
dictate the future or demise of Amtrak as we know it today.
Unfortunately, the 2006 budgets presents a very bleak and
dour picture for the future of Amtrak. The OMB request includes
only $360 million in the Commuter Rail Operations Account,
intended to facilitate Amtrak's reorganization through
bankruptcy. This budget request is some $840 million less than
the $1.2 billion appropriated in the current year for Amtrak
operations and related needs. Under any circumstances, $360
million is not enough to meet Amtrak's needs in 2006, whatever
choice Congress makes about the future of Amtrak.
As I have told you individually, and I have told the
Director of the Office of Management and Budget, I think it is
irresponsible to propose bankrupting Amtrak without having any
significant plans for reforming it or the money either to fund
the bankruptcy which would be, in our opinion, far more
expensive than you have any concept here if you look at the
obligations of Amtrak, or keeping it alive.
Amtrak claims it needs $1.82 billion for 2006 and it cannot
survive in fiscal year 2006 even on flat funding $1.2 billion.
However, even if I was to agree that $1.82 billion for Amtrak
is justified, I do not see how this subcommittee will be able
to provide such a significant increase when we have been given
such a shortfall across our entire budget by OMB.
It is not your problem directly. It is Senator Murray's
problem and mine. But it has implications which are very
serious for you because we have a number of very difficult
funding decisions in a tight allocation.
The overall budget for domestic discretionary funding is
such that this subcommittee will have trouble reversing many of
the administration's recommendations that eliminate or reduce
funding for many other important and necessary programs.
OMB, for example, has eliminated funding of $51.6 million
for Essential Air Service, an important and popular program
that subsidizes air travel from remote rural airports, often
located in areas with few transportation options. I doubt that
we would be able to pass this bill on the floor of the Senate
if those funds were not included.
The budget request also proposes to dismantle the CDBG
program as well as 17 other programs, and put them in a block
grant with the Department of Commerce and take a huge whack at
them, cutting them by about $2 billion. CDBG, again not your
problem, it is ours. But CDBG is critical to HUD's mission of
being both a leader and partner with States and communities in
the development of housing and economic growth. The program is
a priority for all States and most communities, and it is also
a priority for the members of this subcommittee.
Under the budget request, the subcommittee will have to
find a way to also absorb a $2.5 billion rescission of excess
Section 8 funds. Over the last few years, the previous
committee that I had the pleasure of chairing before it was
blown up, VA/HUD, made a number of reforms to the Section 8
program to make it much more efficient and to reduce the
availability of excess Section 8 funds.
Having made that change, I have no idea how the
administration proposes to pay for this rescission. Neither the
Secretary of HUD nor the Director of OMB have any idea or any
methodology for determining this rescission of where the funds
will come from.
Having given you the bright news, now these are just a few
of the problems facing the subcommittee and unfortunately will
severely limit our ability to backfill funding for Amtrak.
Believe it or not, there is a laundry list of other program
cuts and shortfalls I will not bother you with, but all have
strong support and deserve funding. In truth, in a time of
deficit reduction, a program must not only demonstrate its
value but an ability to overcome substantial program flaws.
Unfortunately, Amtrak's problems only seem to get worse.
Bankruptcy will not solve it. It is too complex, the costs
potentially too great, and the results too uncertain. I am not
sure anyone understands the true cost, but I am from the Show
Me State and I would like to see it before I count on it.
Amtrak deficits run over $1 billion a year. The Northeast
corridor has had problems with Acela. Mr. Gunn, your
predecessor as president, Mr. Warrington, promised Congress
that Amtrak was on a glide path to profitability. He left
Amtrak in worse shape than he inherited it, with Amtrak's debt
increased from $1.7 billion in 1997 to $4.8 billion in 2002. At
least I would trust you not to make any promises like that
until we see a little better prospect.
Trouble is dogging Amtrak. As I mentioned, the Acela
Express, with 20 percent of the passenger service on the
Northeast corridor accounting for 11 percent of Amtrak's ticket
revenues, has been shut down because of the brake problems.
There has to be a reform plan. There must be structural reform.
And we cannot keep Amtrak on inadequate life support without a
light at the end of the tunnel. At this point, that light
appears to be an oncoming freight train.
We are looking for a responsible plan and we count on the
witnesses at the table today and the organizations you
represent to provide it.
In fiscal year 2004, the Omnibus Appropriations Bill
encouraged Amtrak to provide off-peak travel discount for
veterans and current military personnel. This has been ignored.
I would trust that you would take that into account and
consider implementing this positive policy.
PREPARED STATEMENT
Unfortunately, I am going to have to miss the latter part
of this hearing. I have a small bill on the floor that I have
to deal with. But we look forward to having your full comments
in the record and we will ask each of you to make 5-minute
opening statements and have time for questions. I will review
the record.
[The statement follows:]
Prepared Statement of Senator Christopher S. Bond
The Senate Appropriations Subcommittee on Transportation, Treasury,
the Judiciary, HUD and Related Agencies will come to order. I welcome a
diverse panel of Mr. David Gunn, Amtrak's President and CEO, Mr. David
Laney, Amtrak's Chairman of the Board, Mr. Jeffrey Rosen, General
Counsel for the Department of Transportation, and Mr. Kenneth Mead, the
Inspector General for the Department of Transportation.
While I understand that Mr. Gunn will not be presenting testimony
but is here to answer questions, I look forward to each of your views
on Amtrak's fiscal year 2006 budget. More importantly, I look forward
to understanding each of your views on the difficulties that Amtrak is
facing and the options that will dictate the future or demise of Amtrak
as we know it today.
Unfortunately, the fiscal year 2006 budget presents a very bleak
and dour picture for the future of Amtrak. The administration's Budget
Request includes only $360 million in the Commuter Rail Operations
account and that funding is intended to facilitate Amtrak's
reorganization through bankruptcy. This Budget Request is some $840
million less than the $1.2 billion appropriated in fiscal year 2005 for
Amtrak operations and related needs. Under any circumstance, $360
million is not enough to meet Amtrak's needs in fiscal year 2006,
whatever choice Congress makes about the future of Amtrak.
On the other hand, Amtrak claims it needs $1.82 billion for fiscal
year 2006 and that it cannot survive in fiscal year 2006 on flat
funding of $1.2 billion. However, even if I was to agree that the $1.82
billion request for Amtrak is justified, I do not know how this
subcommittee will be able to provide such a significant increase from
the Budget Request.
In particular, the subcommittee has a number of very difficult
funding decisions to make under what is likely to be a very tight
allocation. Because of the administration's overall budget for domestic
discretionary funding, this subcommittee will have trouble reversing
many of the administration's recommendations that eliminate or reduce
funding for many other important and necessary programs.
The administration, for example, has eliminated funding of $51.6
million for Essential Air Service, an important and popular program
that subsidizes air travel from remote rural airports, often located in
areas with few transportation options.
The Budget Request also proposes to dismantle the Community
Development Block Grant (CDBG) program along with 17 other programs and
replace these programs with a new block grant in the Department of
Commerce. The administration is proposing to fund this initiative at
$3.7 billion which is an overall reduction of almost $2 billion from
the fiscal year 2005 levels, of which CDBG would be reduced by some
$1.6 billion. CDBG is critical to HUD's mission of being both a leader
and partner with States and communities in the development of housing
and community development initiatives. This program is a priority for
all States and most communities. CDBG also is a priority for the
members of this subcommittee.
Under the Budget Request, this subcommittee will have to find a way
to absorb a $2.5 billion rescission of ``excess'' section 8 funds. Over
the last few years, the VA-HUD Appropriations Subcommittee made a
number of reforms to the section 8 program to make the program more
efficient as well as reduce the availability of ``excess'' section 8
funds. I do not know how we pay for this rescission. Neither OMB nor
HUD can identify the methodology for determining this rescission or
from where the funds will come.
These programs are merely illustrative of the problems facing the
subcommittee and which will limit severely our ability to backfill
funding for Amtrak. I could provide a laundry list of other program
cuts and shortfalls within this subcommittee that are troubling and
deserving of funding for fiscal year 2006--all are programs that have
strong support and deserve funding. In truth, in a time of deficit
reduction, a program must demonstrate not only its value but an ability
to overcome any substantial program flaws and problems.
Unfortunately, Amtrak's problems only seem to get worse. I do not
believe that bankruptcy will solve our Nation's problems with Amtrak.
Amtrak is too complex, the costs potentially too great and the result
too uncertain to trust bankruptcy as the solution. I am not sure anyone
understands the true costs of bankruptcy or who will pay for them. I am
from the Show-Me State and a great believer in certainty.
To be blunt, Amtrak runs deficits of over $1 billion per year.
Since 2001, Amtrak's annual operating losses have exceeded $1 billion
and annual cash losses have exceeded $600 million Amtrak also faces
some $600 million a year in capital costs, mostly with regard to the
Northeast Corridor. Amtrak also will have debt service of nearly $300
million annually for the foreseeable future. In addition, the deferral
of maintenance has created a significant risk of operational failure.
And it only gets worse. Mr. Gunn, your predecessor as President,
Mr. Warrington, promised the Congress that Amtrak was on a glide path
to profitability. Instead, Mr. Warrington left Amtrak in worse shape
than he inherited it with Amtrak's debt increased from $1.7 billion in
1997 to some $4.8 billion in 2002. I credit your integrity with making
no such promises. I also acknowledge your hard work and commitment to
making Amtrak work successfully. Unfortunately, it is still not enough.
In fact, Amtrak does not operate any more successfully than it did in
2002, or for that matter 1992, 1982 or 1972.
Trouble seems to dog Amtrak. Just this April, Amtrak was forced to
shut down its Acela Express Service because of cracked brake rotors on
most, if not all, of these passenger trains. The Acela Express has been
one of Amtrak's few success stories, representing some 20 percent of
its passenger service on the Northeast Corridor. As I understand it,
Acela trains accounted for some 11 percent of Amtrak's ticket revenues
for the month of February. Leaving aside Acela's success, how is it
possible that there are problems with all or almost all of the brakes
on trains just put in service a few years ago? How does Amtrak recover
from these losses and who is responsible? Most importantly, how
indicative is this problem of larger management problems at Amtrak?
There has to be a reform plan and there has to be reform
legislation. There must be fundamental structural reform if passenger
rail service is going to continue in the United States. This
subcommittee has too many other priority funding needs to keep Amtrak
on life support without a light at the end of the tunnel. In other
words, I expect action and a consensus on the future of Amtrak. Without
that, you do not have my support.
Finally, a small but important issue. The fiscal year 2004 Omnibus
Appropriations bill included language encouraging Amtrak to continue
providing an off-peak travel discount for our veterans and current
military personnel. It appears Amtrak has ignored this language and has
not made this service available since December of 2003. This is the
type of program that engenders goodwill and builds ridership, and I
urge you to reconsider this policy.
I am likely to miss much or most of this hearing as I have
responsibilities for helping to manage the highway bill on the floor. I
will have a number of questions for the record. Please be assured that
I will review the hearing record very carefully.
Thank you, I now turn to my ranking member, Senator Murray.
Senator Bond. Now I turn to my partner and ranking member,
Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Thank you very much, Mr. Chairman.
Today we will take testimony on what promises to be the
most challenging issue this subcommittee will face this year.
Amtrak, America's national passenger railroad, served 25
million passengers last year, the highest number in any year in
its history. One-point-one million of those passengers were in
my home State of Washington.
Even so, there are those in the administration and in
Congress who want to push Amtrak into financial collapse and
push 25 million passengers onto our already overcrowded
highways and runways.
The benefits provided by Amtrak, as well as costs, have
been debated in Congress every year since the Federal
Government established the corporation 35 years ago.
But make no mistake, this year is different. This year
Amtrak's detractors smell blood. As we take each step in the
Federal budget process, they have additional reason to be
optimistic that this will be the year that Amtrak service
finally grinds to a halt.
Up until this year, the path of Amtrak's funding during
each of the years of the Bush Administration has been largely
the same. The Bush Administration proposes a funding figure
that would throw Amtrak into bankruptcy. The Amtrak Board of
Directors requests a sizable funding increase to truly allow
the railroad to invest in its infrastructure and modernize.
Congress has come along each year and generally provided Amtrak
just enough money to limp along but not enough to invest and
improve service.
Over the life of the Bush Administration, actual
appropriations for Amtrak have been about 141 percent above the
levels sought by the administration. But have also remained
some 30 percent below what the Amtrak board has said it needed.
But as I said, this year is different. After working hard
to keep Amtrak on a starvation diet over the last 4 years, the
Bush Administration is now proposing to terminate all subsidies
for Amtrak. Whether it is for State-supported trains like the
Cascadia service in my State or the Empire Builder that runs
from Seattle to Chicago, or for the service in the Northeast
corridor, the Bush Administration's request is the same--zero
funding. And zero funding means zero service.
While the administration seeks $360 million for a special
rail account in the Surface Transportation Board, that funding,
by law, can only be used to allow certain local mass transit
agencies like the Sounder Commuter Rail Service to continue to
operate over Amtrak property once Amtrak has ceased all
operations.
Strangely, at the same time the administration is proposing
to zero out subsidies and park all Amtrak trains, Secretary
Mineta is flying around the country saying the Bush
Administration is supporting Amtrak--they just want reforms.
In fact, Secretary Mineta has stated publicly that the Bush
Administration would support between $1.5 billion and $2
billion in funding for Amtrak per year if his reforms were
enacted. For me, the fallacy that this administration might
actually support funding for rail service, reformed or not, was
made clear during our hearing 3 weeks ago with OMB Director
Josh Bolten. I specifically asked Director Bolten if the Bush
Administration would be submitting a new Amtrak budget if
reforms were adopted. Not once but twice Director Bolten made
it very clear to us that the committee has received the only
Amtrak budget from the Bush Administration that we are going to
get, zero for Amtrak.
One week after we took testimony from Director Bolten, the
Congress took another act to help push Amtrak into insolvency.
It adopted the conference report on the budget resolution. That
budget set the cap on discretionary spending at the level
consistent with the President's budget request, a budget
request that assumes zero funding for Amtrak.
On March 15 and 16, during Senate debate on the budget
resolution, Senators Byrd and Specter offered an amendment to
bring the level of funding for Amtrak up to $1.4 billion to
provide some certainty and stability to the funding process for
Amtrak this year. That amendment was defeated by a vote of 52
to 46.
So today our subcommittee finds itself in the posture of
having to cut and cannibalize other programs as we have never
done before, only to see if we can scrape together enough
funding from other programs to extend Amtrak for another 12
months. If the Senate had voted differently back in March, we
might not be in this predicament.
Today, we are joined by Amtrak's Board Chairman and
President, David Laney and David Gunn. Three weeks ago,
Amtrak's Board finally submitted its grant request to the
Appropriations Committee. While I was disappointed that this
request arrived some 2 months late, it is notable that the
Amtrak Board, made up entirely of Bush Administration
appointees, is asking this subcommittee to provide $1.82
billion for Amtrak next year, more than a 50 percent increase
over current funding.
Much of the discussion of today's hearing might focus on
the asserted proposals to reform Amtrak. We have two separate
comprehensive reform proposals, one from the administration and
one from the Amtrak Board. While senators might want to discuss
these proposals, I want to remind my colleagues that these
reform proposals are the responsibility of the Senate Commerce
Committee.
What this subcommittee needs to focus on is how much these
reform proposals are going to cost. I think my colleagues will
find as we discuss these reform packages is that neither of
them, not the administration's proposal or the Amtrak Board's
proposal, save money in the near term. They all require
investments over the long-term that will require larger, not
smaller, annual appropriations in the future.
In that regard, perhaps the most important testimony we
will hear this morning is not from the Bush Administration or
the Amtrak Board. The DOT Inspector General Ken Mead has been a
consistent monitor of Amtrak's finances. He will testify this
morning that Amtrak can no longer limp along on $1.2 billion in
funding it has received in each of the last 2 years. He will
testify that in order to maintain that status quo at Amtrak
next year, we will need to appropriate between $1.4 billion and
$1.5 billion.
Given the failure of the Byrd-Specter Amendment, finding
even $1.2 billion will be extraordinarily difficult. Finding
$1.4 billion or $1.5 billion will be a monumental and painful
challenge. Unfortunately, the majority of the Senate voted to
put us in this box. Only time will tell if we can find our way
out of it.
PREPARED STATEMENT
One thing that is certain is that Amtrak's 25 million
passengers will be anxiously watching to see if we can succeed.
Thank you very much, Mr. Chairman.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Today, we will take testimony on what promises to be the most
challenging issue this subcommittee will face this year. Amtrak,
America's national passenger railroad, served 25 million passengers
last year--the highest number in any year in its history. One-point-one
million of those passengers were in my home State of Washington.
Even so, there are those in the administration and in Congress who
want to push Amtrak into financial collapse and push 25 million
passengers onto our already-crowded highways and runways. The benefits
provided by Amtrak, as well as costs, have been debated in Congress
every year since the Federal Government established the corporation 35
years ago. But, make no mistake, this year is different.
This year, Amtrak's detractors smell blood. As we take each step in
the Federal budget process, they have additional reason to be
optimistic that this will be the year that Amtrak service finally
grinds to a halt. Up until this year, the path of Amtrak's funding
during each of the years of the Bush Administration has been largely
the same. The Bush Administration proposes a funding figure that would
throw Amtrak into bankruptcy. The Amtrak Board of Directors requests a
sizable funding increase to truly allow the railroad to invest in its
infrastructure and modernize. Congress has come along each year and
generally provided Amtrak with just enough money to limp along, but not
enough to invest in improved service.
Over the life of the Bush Administration, actual appropriations for
Amtrak have been about 141 percent above the levels sought by the
administration. But they have also remained some 30 percent below what
the Amtrak Board has said it needed.
But, as I said, this year is different. After working hard to keep
Amtrak on a ``starvation diet'' over the last 4 years, the Bush
Administration is now proposing to terminate all subsidies for Amtrak.
Whether it is for State-supported trains like the Cascadia Service
in my State, or for the Empire Builder that runs from Seattle to
Chicago, or for the service in the Northeast Corridor, the Bush
Administration's request is the same--zero funding. And zero funding
means zero service.
While the administration seeks $360 million for a special rail
account in the Surface Transportation Board, that funding by law can
only be used to allow certain local mass transit agencies like the
Sounder Commuter rail service to continue to operate over Amtrak
property once Amtrak has ceased all operations.
Strangely, at the same time the administration is proposing to zero
out subsidies and park all Amtrak trains, Secretary Mineta is flying
around the country saying that the Bush Administration is supporting
Amtrak--they just want reforms.
In fact, Secretary Mineta has stated publicly that the Bush
Administration would support between $1.5 and $2 billion in funding for
Amtrak per year, if his reforms were enacted. For me, the fallacy that
this administration might actually support funding for rail service--
reformed or not--was made clear during our hearing 3 weeks ago with OMB
Director Josh Bolten.
I specifically asked Director Bolten if the Bush Administration
would be submitting a new Amtrak budget with reforms or without them.
Not once, but twice, Director Bolten made it very clear to us that the
committee has received the only Amtrak budget from the Bush
Administration that we are going to get--zero for Amtrak.
One week after we took testimony from Director Bolten, the Congress
took another act to help push Amtrak into insolvency. It adopted the
conference report on the Budget Resolution. That budget set the cap on
discretionary spending at the level consistent with the President's
budget request--a budget request that assumes zero funding for Amtrak.
On March 15 and 16, during Senate debate on the Budget Resolution,
Senators Byrd and Specter offered an amendment to bring the level of
funding for Amtrak up to $1.4 billion to provide some certainty and
stability to the funding process for Amtrak this year. That amendment
was defeated by a vote of 52-46.
So, today, our subcommittee finds itself in the posture of having
to cut and cannibalize other programs--as we have never done before--
only to see if we can scrape together enough funding from other
programs to extend Amtrak for another 12 months. If the Senate had
voted differently back in March, we might not be in this predicament.
Today, we are joined by Amtrak's Board Chairman and President--
David Laney and David Gunn. Three weeks ago, Amtrak's Board finally
submitted its grant request of the Appropriations Committee. While I
was disappointed that this request arrived some 2 months late, it is
notable that the Amtrak Board--made up entirely of Bush Administration
appointees--is asking this subcommittee to provide $1.82 billion for
Amtrak next year--more than a 50 percent increase over current funding.
Much of the discussion of today's hearing might focus on the
assorted proposals to reform Amtrak. We have two separate comprehensive
reform proposals--one from the administration and one from the Amtrak
Board. While Senators might want to discuss these proposals, I want to
remind my colleagues that these reforms proposals are the
responsibility of the Senate Commerce Committee. What this subcommittee
needs to focus on is how much these reform proposals are going to cost.
I think my colleagues will find as we discuss these reform packages
is that neither of them--not the administration's proposal or the
Amtrak Board's proposal--save money in the near-term. They all require
investments over the long-term that will require larger, not smaller,
annual appropriations in the future.
In that regard, perhaps the most important testimony we will hear
this morning is not from the Bush Administration or the Amtrak Board.
The DOT Inspector General, Ken Mead, has been a consistent monitor of
Amtrak's finances. He will testify this morning that Amtrak can no
longer limp along on the $1.2 billion in funding it has received in
each of the last 2 years. Indeed, he will testify that in order to
maintain that status quo at Amtrak next year, we will need to
appropriate between $1.4 and $1.5 billion.
Given the failure of the Byrd/Specter amendment, finding even $1.2
billion will be extraordinarily difficult. Finding $1.4 or $1.5 billion
will be a monumental and painful challenge.
Unfortunately, the majority of the Senate voted to put us in this
box. Only time will tell if we can find our way out of it. One thing
that is certain is that Amtrak's 25 million passengers will be
anxiously watching to see if we succeed.
Senator Bond. Thank you, Senator Murray. Senator Burns, do
you have an opening statement?
STATEMENT OF SENATOR CONRAD BURNS
Senator Burns. Mr. Chairman, I have an opening statement
and I am going to make it part of the record. I think you and
the ranking member have pretty well summed up our problems over
here, and we could not add too much to that, other then we all
have our different little sections of the country that we like
to take care of.
I think we have got a sizable mountain to climb here and I
am looking forward to hearing from our witnesses today. Thank
you.
[The statement follows:]
Prepared Statement of Senator Conrad Burns
Mr. Chairman, thank you for holding this hearing today. As I am
sure you know, Amtrak is an issue near and dear to my heart. It is also
an issue of great importance to Montana. The Empire Builder covers a
lot of ground in Northern Montana, and is a valuable link in our
transportation infrastructure.
The Empire Builder is more than just a popular train for tourism.
Folks use the train to seek medical services, to travel across the
State when roads are covered in snow, and as an alternative to air
service that isn't always easy to come by in rural Montana. Estimates
indicate that the Empire Builder brings $14 million annually to
Montana. Amtrak is a vital link in our infrastructure, both in Montana
and across the country.
However, clearly some type of reform is needed. Those reform
proposals should be guided by some basic principles. We need to invest
in infrastructure. Crumbling tracks, aging equipment, and outdated
technology risk Amtrak's future. We need a national system. State
budgets are already incredibly tight, and a national train system can
not be jeopardized by individual States that may not be able to
allocate funds to rail service. Reform proposals need to be informed by
a commitment to public service. While I believe that Amtrak must be
financially responsible, and get its budgetary house in order, I also
think that Amtrak serves an important public need that can't be easily
calculated.
Amtrak is America's rail system, and I think it will probably
always need some type of public support. The public is committed to
passenger rail, so allocating some amount of taxpayer dollars makes
sense. Those investments need to be made wisely, of course, but they do
need to be made. Looking at Amtrak only in terms of the bottom line
fails to account for the public value it provides.
Mr. Chairman, the Congress faces an important and difficult task
this year in authorizing Amtrak funding. We will need to be creative,
but I am ready to roll up my sleeves and get this done. As a member of
both the authorizing and appropriations committees that oversee Amtrak,
I am dedicated to preserving passenger rail. I look forward to working
with you on this challenging task, and I look forward to hearing from
the witnesses today.
Senator Bond. Thank you, Senator Burns. I know what a
champion you have been for Amtrak and I am looking forward to
learning from you, your experiences, as well as the other
members of this committee.
I think on early bird, Senator Bennett was the next one
here.
STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. Thank you very much, Mr. Chairman.
I will repeat now to the board of Amtrak what I have said
to this committee. I have been a supporter of Amtrak since
before it was born, because I was in the Nixon Administration
when the idea was conceived. And it was my responsibility to
convince the Congress to pass the act. And I have a very nice
letter from Secretary Volpe commending me on my success in
bringing that to pass.
Having said that, I repeat the refrain that I have many
times before. The debate of whether we are for or against
Amtrak is the wrong debate. We need passenger service in this
country. We need a good passenger service in this country. And
we should be prepared to pay for that passenger service in this
country. But it should be in places where it makes sense. And
the present nationwide grid of the Amtrak system does not make
any sense.
I got into trouble the last time I said that. I got some
nasty letters from people in Utah saying how can you say you
want to give up Utah's service? Utah's service is wonderful and
we must hang onto it. I have now gotten the exact statistics. I
may have been a little off in what I said before. The total
Utah ridership is less than 100 people per day. One airplane
per day could take care of the entire use of Amtrak. Two buses,
all right three if you get a small bus, could take care of the
entire use of Amtrak.
And what are we spending to run an Amtrak train? It has a
wonderful name. It is the California Zephyr. And boy, for those
who love train traffic, the California Zephyr calls up all
kinds of wonderful, wonderful memories and images. It goes
through Salt Lake City, arrives at 3:35 in the morning, and
leaves at 4:06 in the morning. I have watched the terminal for
Amtrak go from an old train terminal that had great nostalgia
around it, that has now been turned into a mall, to a smaller
building, to a smaller building. And now it is a quonset hut
that handles those less than 100 people a day who show up
literally in the middle of the night.
And I wonder if it really is the best use of public funds
to keep that train running, all the way from Chicago to San
Francisco, with this kind of service along the way when that
money should be spent making sure the brakes are working on
Acela and the Northeast corridor that is absolutely dependent
on Amtrak is properly funded and properly taken care of.
I am willing to spend what is necessary to spend to keep
Amtrak going. But I applaud the Bush Administration in a very
significant wake-up call that says Amtrak has to be changed to
face the realities of where the market is.
We do not have a market for transcontinental train traffic,
either from the standpoint of those who are willing to pay for
it. I realize we have to subsidize it. We are subsidizing
Amtrak riders to the tune of about $200 per trip. I am
perfectly willing to subsidize it with Federal funds in an area
where it makes a significant contribution to the reduction in
pollution and congestion. But I think subsidizing it to the
point that less than 100 people per day can use it in my State
does not make any sense.
So Mr. Chairman, I am perfectly willing to raise the amount
of money above what the budget calls for from the President.
But I do think we should recognize that Amtrak remains
virtually unchanged in its route structure since I helped
convince the Congress to create it in 1970. That is 35 years
ago. It is time we brought it up to reality.
Thank you, Mr. Chairman.
Senator Bond. Thank you, Senator Bennett, for the
confession. I know it is good for the soul. I appreciate your
prospective suggestions, as well.
Senator Durbin.
STATEMENT OF SENATOR RICHARD J. DURBIN
Senator Durbin. Thank you, Mr. Chairman. It is a pleasure
to be with you at this new committee alignment. We see some new
faces but some similar challenges to what we have faced in the
past.
I come from a railroad family. My mother, my father, my two
brothers and I all worked for the New York Central Railroad in
East St. Louis, Illinois. I have many fond memories of steam
locomotives and trains and just loved them as a child.
But I do not come to this hearing motivated by memories. I
come to this hearing motivated by the economic reality of
Amtrak in Illinois today. Amtrak in Illinois serves 3 million
passengers a year. By Senator Bennett's standard, we are in the
range of 8,000 to 10,000 passengers each day.
Amtrak is a huge part of our State's economy--2,000
employees. The thought of those 3 million passengers losing
Amtrak and then turning to cars on the road is a frightening
thought. The traffic congestion, the pollution that would
result from it--how can that be good for us as a Nation? How
can that possibly be a move in the right direction?
Many of the passengers, incidentally, happen to be college
students. We serve a lot of campuses with Amtrak. I have met
with the presidents and leaders at those universities and
colleges down-State who say the reason they bring kids in from
Chicago is because students know the Amtrak service is going to
be there to Champaign. It is going to be there to Macomb. It is
going to be there to Quincy and all the other campuses served,
Bloomington and other places. So it is not easy to replace that
by saying buy all those kids a car. Let us take care of it that
way. How can that possibly be the answer to moving people
efficiently in an environmentally sensible way?
Let me just add one footnote. It is not as if the State of
Illinois is just saying give, give, give. The State of Illinois
is a contributor to Amtrak--a substantial contributor--$12
million a year from a State budget that is in trouble. About 90
percent of the operating costs of Amtrak come from our State
taxpayers who believe it is important. But for the capital
investment in Amtrak and the rest of the operating costs we
rely on Amtrak itself.
I will just say one other thing. How many times are we
going to go through this debate? How many times are we going to
fight this battle? It is getting old. Amtrak cannot improve and
modernize its service to the point where it attracts more
passengers and more customers unless we are prepared to do for
Amtrak what every successful company must do, invest in the
future. We need capital investment in Amtrak so that they have
better rail bids, faster service, and enough units.
My wife recently took the train with my daughter from
Washington to New York. And she said that the entire trip there
were people standing in the aisles and sitting in the
restrooms. There just were not enough cars to accommodate all
of the passengers that were needed. The same thing happened on
a recent trip from Chicago to Springfield.
So there is a lot of pent-up demand out there. We need to
make capital investments in Amtrak to make it work. I cannot
justify every route in America. I will not even try to. But I
can tell you in my State of Illinois we stand by Amtrak as an
important part not of some nostalgic memory but an important
part of our economic future.
Thank you, Mr. Chairman.
PREPARED STATEMENT OF SENATOR THAD COCHRAN
Senator Bond. Thank you, Senator Durbin. Senator Cochran
has submitted a statement to be included for the record as
well.
[The statement follows:]
Prepared Statement of Senator Thad Cochran
Mr. Chairman, thank you for holding this hearing today to discuss
Amtrak's funding request for fiscal year 2006.
I want to thank David Gunn for appearing before this subcommittee
to answer questions and for his good service at Amtrak.
When Congress received the President's Budget Request, many people
were surprised to find that funding was not requested for our Nation's
intercity train system. It is my understanding that the administration
has still not requested funding for Amtrak, and I look forward to
hearing from the Department of Transportation's representatives about
this rationale.
I hope we will be able to consider legislation that will outline
the legal authority for a new national passenger rail system. The
Appropriations Committee can't do it all.
Senator Bond. Finally, we will get down to the meat of this
and find out how those of you with responsibility and expertise
in the area, what your recommendations are. First I call on Mr.
David Laney, Chairman of the Amtrak Board of Directors.
Welcome, Mr. Laney.
STATEMENT OF DAVID M. LANEY, ESQ.
Mr. Laney. Thank you, Mr. Chairman, Senators.
I appreciate the opportunity to appear before you today. My
name is David Laney. I am Chairman of the Amtrak Board of
Directors. Joining me is, as you all know, David Gunn,
President and CEO of Amtrak.
On April 21, Amtrak transmitted to Congress and the
administration a series of strategic reform initiatives that
are aimed at reforming Amtrak and maybe more importantly,
revitalizing rail passenger service in the United States. Let
me touch just briefly on our package before detailing our
fiscal year 2006 budget request.
Our plan advances four essential objectives. First,
development of passenger rail corridors throughout the country
based on an 80/20 Federal/State capital matching program with
States becoming purchasers of a variety of competitively bid
corridor services.
Second, return of the Northeast Corridor infrastructure to
a state of good repair and operational reliability over the
next 4 to 5 years with all users of the Northeast Corridor
gradually assuming increased financial responsibility for their
share of corridor operating and capital needs.
Thirdly, preservation of our national long-distance system,
with gradually restructured routes to address your concern,
Senator Bennett, that will over time have to meet minimal
financial performance requirements, in some cases requiring
State assistance.
And finally, the opening of the intercity passenger rail
industry to competition and private commercial participation.
This plan is the product of a significant amount of work by
Amtrak's Board of Directors and senior management with
considerable input from rail experts from outside Amtrak as
well. Additional details on these reforms are covered in my
full statement but this is a serious proposal that will
revitalize the passenger rail industry if it is implemented and
adequately funded. I believe it also answers the call to reform
made by the administration and by so many others.
We have provided you with a full copy of the plan and hope
you will take it into consideration as we move forward with the
reauthorization and appropriations process.
I would also like to add a point and at least emphasize the
very thoughtful proposals also from the Inspector General of
DOT, Ken Mead. He will get into those this morning, but there
is substantial common ground between the Amtrak board's
presentation and proposals as well as Mr. Mead's and I
recommend his proposals as well for your review.
FISCAL 2006 BUDGET REQUEST
As to the fiscal 2006 budget request, let me turn to that
now. As Senator Murray pointed out, typically Congress receives
our grant request in February. Since we were well into our
strategic planning effort at that time, we elected to defer
submitting the request in order to present it in the context of
our reform package. The last dozen pages of the reform proposal
detail our fiscal 2006 budget request and our requirements,
which is $1.82 billion or $1.645 billion if our working capital
needs are covered by a short-term credit facility instead of a
grant.
We have also included a preview of how we would go about
reporting Amtrak's financial information by business line.
Let me make a few points about this funding request. First
of all, the increase over our current funding level of $1.2
billion is solely attributable to essential capital spending,
not operating expenses. These investments have very lasting
value.
The operating side is slightly lower than previous years
and reflects the company's ability to keep operating costs
constant despite inflation, rising insurance costs and the
considerably higher cost of fuel.
During the last 3 years we have not borrowed any additional
funds nor have we assumed any new debt except for the DOT loan
during the summer of 2002, which is being paid back in annual
installments.
We have lowered the head count at Amtrak from 25,000 in
fiscal year 2001 to 19,500 today. Our deficit per train mile
has decreased from $22 in fiscal year 2000 to $13 in 2004.
Ridership, as a couple of you have pointed out, has continued
to increase. Last year we had just over 25 million passenger
trips, which was a company record. In fact, during fiscal years
2000 to 2004, ridership has grown from 22.5 million to 25.1
million, or 11.6 percent.
We are very confident that there is additional, significant
suppressed demand.
On the capital side, we have made significant early headway
in addressing the mountain of deferred maintenance in both
plant and equipment facing us when the new management team
arrived in 2002. The work that we have completed and plan to do
is detailed in our budget proposal.
In fiscal year 2006, we expect to continue this type of
capital investment, renewal of track, signals, wire, equipment,
switches, and interlockings. But we also will begin major
multi-year projects to rebuild structures critical to the
Northeast Corridor operations. These include replacement of the
failure-prone movable bridge spans over the Thames and Niantic
Rivers, replacement of the 1930's era cables in the Baltimore
tunnels, and major track work on the Harrisburg line. Until we
complete the bridge and tunnel work, we will continue to court
the risk of a failure that could sever NEC service.
These projects involve outside contractors and long lead
times in ordering of materials as well as multi-year funding
commitments to support the projects. But when they are
completed, the repaired and rebuilt structures will last a
lifetime.
CANNOT SURVIVE ON CURRENT FUNDING LEVEL
Finally, it is important to emphasize that Amtrak's board
and management have concluded that the company cannot continue
to operate on Amtrak's current funding level of $1.2 billion in
fiscal year 2006. Moreover, the negative financial impact of
the recent Acela problems will substantially deplete our
working capital by year's end. We have taken and will continue
to take aggressive steps to achieve short-term savings but we
have very little maneuverability in our operating budget and
cannot responsibly make material reductions in capital
expenditures principally tied to Northeast Corridor
infrastructure and its state of good repair. Over time,
significant savings will be achieved only through aggressive
and systematic multi-year transitioning with legislative
assistance.
It is for this reason that we have brought forward our
strategic reform initiatives to help inform your decision-
making for fiscal year 2006 and beyond.
PREPARED STATEMENT
In closing, we look forward to working with you. We fully
understand the difficulties you have in this budget year. We
also look forward to working with stakeholders in the months
ahead as we further develop and implement our reform plan and
move this debate forward. I cannot emphasize enough that
adequate funding for Amtrak in 2006 will be a critical first
step in advancing the objectives of our strategic reform
initiatives plan.
We look forward to your questions. Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of David M. Laney, Esq.
Mr. Chairman and members of the committee, thank you for the
opportunity to appear before you today. My name is David Laney, and I
am Chairman of the Amtrak Board of Directors. Joining me is David Gunn,
the President and Chief Executive Officer of Amtrak.
On April 21, Amtrak transmitted to Congress and the administration
a series of Strategic Reform Initiatives that we believe will help
shape the discussion on the future of Amtrak and intercity rail
passenger service. While the majority of the report was geared toward
the reauthorization discussion, it did contain Amtrak's fiscal year
2006 grant request. I will provide an overview of both.
For the past several months, the Board and senior management at
Amtrak have worked to produce a set of proposals to reform Amtrak and
revitalize rail passenger service in the United States. The reform
initiatives released April 21 are the results of those efforts. The
reform plan contains a detailed set of initiatives, some of which
Amtrak will accomplish on its own and others which will require
government action. Taken together, we believe that Amtrak's Strategic
Reform Initiatives can revitalize intercity rail transportation.
Our proposal advances four essential objectives:
--Development of passenger rail corridors based on an 80-20 Federal-
State capital matching program, with States becoming
``purchasers'' of a variety of competitively bid corridor
services.
--Return of the Northeast Corridor infrastructure to a state of good
repair and operational reliability, with all users gradually
assuming increased financial responsibility for their share of
corridor operating and capital needs.
--Preservation of our national long distance system, with gradually
restructured routes that will over time have to meet minimum
financial performance requirements, in some cases requiring
State assistance.
--Finally, the opening of the intercity passenger rail industry to
competition and private commercial participation.
We have identified three sets of reform initiatives to achieve the
objectives that I just mentioned. They include, in general terms,
structural, operating and legislative changes.
STRUCTURAL INITIATIVES
As you know, Amtrak has already made substantial progress in
establishing an organizational structure and creating management
controls which have resulted in cost savings and better management; but
there is room for further improvement. We will continue to implement
these types of changes and refine those already in place. To build on
such improvements, our plan focuses on providing planning, budgeting,
accounting and reporting of financial activity and performance along
our distinct business lines--infrastructure management, Northeast
Corridor rail operations, State corridor operations and long-distance
operations. This type of change will improve our own planning and
performance capabilities, and enhance the financial clarity of our
operations.
OPERATING INITIATIVES
Separately, operating initiatives identified in our plan highlight
a range of actions intended to improve the performance of each business
line to provide better service, achieve savings and enhance revenues.
Our recommendations for changes in legislation hinge directly on
creation of a Federal capital matching program. Other recommendations
in our view, if implemented, would create a more fertile environment
for competition in intercity rail passenger services and operations.
LEGISLATIVE INITIATIVES
The lynchpin of this plan is the establishment of a Federal
matching program appealing enough to attract and accelerate State
financial involvement in emerging and existing corridors. Continued
development of rail corridors is critical to the future of rail
passenger service, and the pace of development will increase with the
Federal Government as a reliable financial partner--the role it has
played for almost half a century with highways, transit and aviation.
The demand that exists today for high quality intercity passenger rail
in this country will only grow with the rising congestion in highways
and airports. A number of States have already begun developing rail
corridors, largely on their own nickel. They have recognized the value
of passenger rail capacity in responding to increasing congestion, and
the popularity of rail service when it is adequately supported.
(Ridership on corridor trains has grown 22 percent over the last 5
years.) However, to realize the full potential of intercity passenger
rail in addressing transportation challenges will require a Federal
match program comparable with other modes.
Returning the Northeast Corridor's infrastructure to a state of
good repair is another essential part of our reform proposal. In
compiling this plan, we studied various proposals and reviewed models
that other countries have pursued for separating the maintenance and
operations of busy rail corridors and have concluded for now that the
complexities and risks associated with such a split outweigh any
benefits. Amtrak owns most of the Northeast Corridor, is the only end-
to-end user of the Corridor and, in terms of train miles operated, is
also the majority user. Amtrak NEC trains operate at the highest speeds
in North America, and there are still segments of the NEC where Amtrak
is the only entity operating trains. Our immediate challenge is to
restore the infrastructure to a state of good repair, which we are
doing, as detailed in our proposal. Ridership continues to grow along
the Northeast Corridor; in the near term we will have to begin planning
for additional capacity to meet that ridership demand.
Amtrak operates 15 long-distance trains and for more than half of
the States we serve, they are the only Amtrak service. Unfortunately,
long-distance trains have become the flash-point in the debate over
``reform'' of passenger rail service. That single-minded focus is
misleading, although our long-distance service presents a variety of
challenges. To be clear, Amtrak is committed to the preservation of
national passenger rail service. Many communities served by long-
distance trains lack real transportation choices and rely on these
services. While we believe the continued operation of these trains is
important to many communities they serve, they also represent the basis
for interconnection and future expansion of rail corridors. We are
confident that we will reduce the operating losses on long distance
trains through a series of steps outlined in our plan, and we believe
those reductions will be substantial; however, we will not eliminate
the need for financial support for long-distance operations. Central to
this is the establishment of a phased-in performance improvement
program that will couple cost-saving efficiencies with revenue
enhancement initiatives, so that over time these trains will achieve
financial performance thresholds or be discontinued.
Finally, we believe that there are many opportunities for
competition in the delivery of rail passenger services. Having a single
provider such as Amtrak does allow for economies of scale and certain
cost efficiencies. Yet, Amtrak is not always the most efficient
provider of rail-related services. There should be alternatives. Key to
our plan is the development of a competitive supply industry and
multiple service delivery options. Amtrak can take a few essential
steps in that direction, but without Federal legislative assistance, we
will not reach the station. Some of the legislative decisions in this
area will be difficult and will encounter predictable resistance from
entrenched interests. Any discussion of competition will involve making
decisions about access rights to the freight rail infrastructure, tort
liability limitations and limited changes to certain labor and labor
retirement laws. We have provided a discussion of these matters in our
proposal.
FISCAL YEAR 2006 GRANT REQUEST
Let me turn to our fiscal year 2006 funding request. Typically,
Congress receives our grant request in February. Since we were well
into our strategic planning effort, we elected to defer developing the
request, in order to present it in the context of our reform package.
The last dozen pages of the proposal detail our fiscal year 2006 budget
requirement, which is $1.82 billion or $1.645 billion if our working
capital needs are covered by a short-term credit facility instead of a
grant. We have also included a preview of how we would go about
reporting Amtrak's financial information by business line.
Let me make a few points about this request.
--The operating request is slightly lower than previous years and
reflects the company's ability to keep operating costs
constant, despite inflation, rising insurance costs and the
high cost of fuel.
--During the past 3 years, we have not borrowed any additional funds
nor have we assumed any new debt, except for the DOT loan
during the summer of 2002, which is being paid back in annual
installments.
--We have lowered headcount from 25,000 in fiscal year 2001 to
19,500--its current level--or a reduction of about 20 percent.
--Our deficit per train mile has decreased from $22 in fiscal year
2000 to $13 in fiscal year 2004.
--Ridership has continued to increase. Last year we had just over 25
million passenger trips, a company record. In fact, during the
period fiscal year 2000 to fiscal year 2004, ridership has
grown from 22.5 million to 25.1 million or 11.6 percent.
On the capital side, we have made significant early headway in
addressing the mountain of deferred maintenance in both plant and
equipment facing us in 2002. The work that we have completed and plan
to do is detailed in our budget proposal. In fiscal year 2006, we
expect to continue this type of capital investment--renewal of track,
signals, wire, equipment, switches and interlockings--but we will also
begin major, multi-year projects to rebuild structures critical to
Northeast Corridor operations. These include replacement of the failure
prone moveable bridge spans over the Thames and Niantic rivers,
replacement of 1930's era cables in the Baltimore tunnels, and major
track work on the Harrisburg line. Until we complete the bridge and
tunnel work, we will continue to court the risk of a failure that could
shut down NEC service. These projects involve outside contractors and
long lead time in ordering of materials, as well as multi-year funding
commitments. But when they are completed, the repaired and rebuilt
structures will last a lifetime.
Finally, it is important to emphasize that Amtrak's Board and
management have concluded that the company cannot continue to operate
at Amtrak's current funding level of $1.2 billion in fiscal year 2006.
Moreover, the negative financial impact of the recent Acela problems
will diminish our working capital significantly by year-end. We have
taken and will continue to take aggressive steps to achieve short-term
savings, but we have very little maneuverability in our operating
budget and cannot responsibly make material reductions in capital
expenditures (principally tied to NEC infrastructure, and its state of
good repair). Over time, significant savings will be achieved only
through an aggressive and systematic, multi-year transition process
with legislative assistance. It is for this reason that we have brought
forward our Strategic Reform Initiatives to help inform your decision-
making for fiscal year 2006 and beyond.
In closing, David Gunn, his management team, my fellow Board
members and I look forward to working with you and other stakeholders
in the weeks and months ahead as we further develop and implement our
plan and move this debate forward. I cannot emphasize to you enough
that adequate funding for Amtrak in fiscal year 2006 will be a critical
first step in advancing the objectives of our strategic reform
initiatives plan.
We look forward to your questions.
Senator Bond. Thank you very much, Mr. Laney.
We are very excited that you are putting forth a workable
plan. I must tell you that until somebody can talk to the
Office of Management and Budget, no matter how good a plan is
put forward, this subcommittee is going to have tremendous
difficulty funding it. And with your background, experience and
your ability as a skilled counselor and advocate, we are going
to have to count on you to help sell that because without the
dough this subcommittee just cannot go.
On that bright and cheery note, let me turn now to Mr.
Rosen for his comments.
STATEMENT OF JEFFREY A. ROSEN
Mr. Rosen. Mr. Chairman, Senator Murray and members of the
subcommittee, thank you for inviting me here today. You have my
full written statement, so I am going to limit my oral remarks
to three primary topics.
The first item I would like to address is some comments on
the President's budget submission for Amtrak. Some have asked
if the administration's budget is serious in seeking reform of
Amtrak this year, and it is.
Others have asked if we are serious that if we get real
reform, we will support funding for a reformed system of
intercity passenger rail. And the answer is that we are serious
about that, too.
Still others have asked well, how much money? But I cannot
answer that until we get actual reforms. The administration
will be prepared to talk about the amount of funding when
Congress itself takes serious steps to fix passenger rail. But
the reforms have to come first. Otherwise, we know from
history, we will never see any real reforms.
The administration is very serious about opposing the
status quo arrangement. We do not support continuing funding
for a broken system that has proven itself fatally flawed.
So the second topic that I want to briefly address is what
constitutes reform? That is a fair question but the
administration has submitted its proposals for reform to the
Congress, both in 2003 and again this year. Those proposals
would modernize, revitalize and enhance intercity passenger
rail. The five key principles of those proposals are included
in my written statement so I will not go through them because
it would take too long here. But I encourage all to review them
because they underlie the reforms that we seek.
By contrast, I should say that the administration does not
consider a $2 billion a year simple reauthorization to be a
serious plan and would certainly not be reform. In fact, any
approach that relies on just funneling more money into
operating subsidies is not reform.
And that takes me to the third and final item I would like
to address for today, that some have already alluded to, and
that is that the alternative to legislative reform is not the
status quo. As Amtrak itself has said, the status quo is
unsustainable. Amtrak continues to spend at a rate far in
excess of its revenues. And that is why the $360 million that
the President's budget proposes for protecting commuter train
service and protecting Northeast corridor trains needs to be
taken seriously in the budget. But that is also the reason that
those of us who want to save intercity passenger rail hope to
work with the Congress to change the system and change where
the funding goes.
PREPARED STATEMENT
And while we are working with the authorizing committees to
discuss the reform proposals, and we appreciate that Amtrak
itself and Mr. Gunn are themselves supporting of the concept of
reform, ultimately reform may also need some assistance from
this committee as well as intercity passenger rail goes through
a necessary transition away from the 1970 model that we have
been living with for a number of years to something more
contemporary and workable.
Thank you, and I will be pleased, of course, to respond to
any questions.
[The statement follows:]
Prepared Statement of Jeffrey A. Rosen
Mr. Chairman, Senator Murray, and members of the subcommittee, I
appreciate the opportunity to appear before you today to address the
urgent need for reform of intercity passenger rail service before
further appropriations are provided to Amtrak.
By now, everyone is of course aware of the President's budget
proposal for Amtrak. That budget proposal was meant as a call to
action. Fundamental change in the way we support intercity passenger
rail service is not only necessary but inevitable. And that change
needs to happen this year, before we appropriate one more taxpayer
dollar to prop up a fundamentally broken system. As you are aware, the
administration transmitted its legislative proposal to Congress, the
Passenger Rail Investment Reform Act (PRIRA), and we hope Congress will
move quickly to enact needed reforms.
At this juncture, the only funds this subcommittee should
appropriate are $360 million to provide for directed service of
commuter and Northeast corridor trains in the event the current Amtrak
model cannot deliver that service. Intercity passenger rail needs major
reform, and it would do more harm than good to simply continue funding
the status quo without reform.
Amtrak itself has acknowledged the urgent need for reform, and that
the 1970's model of passenger rail should not continue. Amtrak recently
released its own strategic plan, which states ``Business as usual for
Amtrak and intercity passenger rail is not sustainable as currently
structured or funded.'' While it is the responsibility of the
Authorizing Committees to consider the reform legislation, the subsidy
questions are closely related to the reform issues, so I would like to
set forth some of the facts and analysis that underlie the
administration's reform proposal to assist in the appropriations
process for fiscal year 2006.
First and foremost, it is essential to recognize that the passenger
rail service model created by the Federal Government in 1970 is not
viable in 2005. The model created in 1970 was a single national
monopoly set up to be a private corporation but it has instead become
like a government agency relying on Federal support to survive, with a
legacy system of routes incapable of adapting to market forces and
demographic changes (but with less accountability than a government
agency would have). It has little in common with our other modes of
transportation and the deregulatory and market-oriented changes other
modes have experienced in the last three decades. America's
transportation system as a whole--our system of roads, airports,
waterways, transit lines, and the mostly private operators who use
them--provides excellent mobility, connectivity, and efficiency that
have undergirded our economic growth. Sadly, intercity passenger rail
has been a different story. The supposedly private for-profit
corporation set up in 1970 to provide all intercity passenger rail
nationally has never once covered its own costs, much less made a
profit. And the Federal taxpayers have infused more than $29 billion
into Amtrak during the last 34 years as it has lurched from crisis to
crisis without ever achieving a stable and viable business model.
Whatever one thinks of Amtrak or passenger rail more generally, this
situation has been good for no one.
To some, perhaps this is old news. Congress directed change in the
Amtrak Reform and Accountability Act of 1997, and actually required
that ``Federal financial assistance to cover operating losses incurred
by Amtrak should be eliminated by the year 2002.'' In fact, the notion
that Amtrak should operate free from Federal operating subsidies is
codified as law in the United States Code: 49 U.S.C. 24101(d) states
that ``Commencing no later than the fiscal year following the fifth
anniversary of the Amtrak Reform and Accountability Act of 1997, Amtrak
shall operate without Federal operating grant funds appropriated for
its benefit.''
In the 1997 Act, Amtrak was afforded new flexibility to get its
house in order. But by 2002, Amtrak's situation was no better; to the
contrary, it had grown worse, with massive increases in Amtrak's debt,
continuing operating problems, and financial crises in both 2001 and
2002. Amtrak's response once again was to turn to the Federal
Government for even greater Federal financial assistance, simply
ignoring 49 U.S.C. 24101(d) as well as 204 and 205 of the Amtrak
Reform and Accountability Act of 1997. In no other functioning service
market would rising costs and declining revenues be defined as a
``success'' if this produced a small increase in the number of
customers. Yet, that is exactly what the defenders of the 1970 approach
now say, as if the loss for each rider were ``made up in volume''. In
2004, Amtrak increased its ridership by approximately 4 percent to a
record 25 million passengers, asked for a record $1.8 billion Federal
subsidy, and recorded a financial loss of more than $1.3 billion, of
which approximately $635 million was a cash loss.\1\ This year again,
Amtrak indicates that it may have less than $75 million in cash
remaining at the end of fiscal year 2005.
---------------------------------------------------------------------------
\1\ These are unaudited numbers.
---------------------------------------------------------------------------
Things do not have to be this way. It is simply untrue that all
passenger rail everywhere must have operating subsidies from
government. It is simply untrue that there is no alternative to
passenger rail remaining the most heavily subsidized form of
transportation on a per passenger basis. The administration has made
clear that there is an important role for intercity passenger rail in
our transportation system, but only with a new model that will be
responsive to the needs of the traveling public. We can only get there
by reforming the failed model of 1970, and committing to a new
approach. That is the point of the President's budget request.
RIDING THE RAILS: AMTRAK'S PAST AND PRESENT
Amtrak was created in 1970 as a private corporation in a
restructuring of the larger rail industry, which was in a state of
major financial distress. In that restructuring, freight railroads
ceased providing passenger service altogether. Instead, for the first
time, there would be a single national provider of intercity passenger
rail service to replace the multiple regional systems that reflected
the areas covered by each of the freight railroads' route systems. The
intent was that the national monopoly would reinvigorate passenger rail
by permitting Amtrak to consolidate operations and achieve efficiencies
that, after a very brief period of Federal assistance, would preserve
and expand intercity passenger rail service as a for-profit company.
By now we know that the hopes of Amtrak's creators have never been
realized. Intercity passenger rail service has not been reinvigorated.
The Department of Transportation (DOT) expects that each and every one
of Amtrak's 15 long-distance trains will this year lose money on a
fully allocated cost basis, even excluding depreciation and interest.
On a per passenger basis, with depreciation and interest, the loss for
long-distance trains ranges from $47 per passenger to $466 per
passenger. But the long-distance trains are not alone: with
depreciation and interest included, every one of Amtrak's 43 regularly
scheduled routes loses money. See Appendix A, attached. After 34 years
and $29 billion in Federal subsidies, intercity passenger rail's
financial performance has not improved, service and on-time performance
are below expectations, and passenger rail's market share relative to
other modes has continued to erode. Last year's so-called ``record''
Amtrak ridership amounted to a one-half of 1 percent share of the total
intercity passenger transportation market. Airlines alone carry more
U.S. passengers in 3 weeks than Amtrak does in a year.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
[Sources.--Rail travel: Association of American Railroads, Yearbook
of Railroad Facts; Amtrak. Total intercity passenger travel is an FRA
estimate synthesized from data provided by the Federal Highway
Administration, Federal Aviation Administration, Bureau of
Transportation Statistics (including travel behavior characteristics
the 1995 American Travel Survey), the AAR, and Amtrak. For rail,
``intercity'' passenger-miles are an approximation as they include all
passenger-miles generated on intercity trains, regardless of the length
or purpose of individual trips. All air travel is deemed ``intercity.''
For highway modes (privately-owned vehicles and buses), the synthesis
approximates intercity travel as trips of 100 miles or more one-way.]
That also belies one of the frequent arguments of today's defenders
of the 1970 model--that the Federal Government supposedly subsidizes
other modes of transportation at a greater rate than Amtrak. In fact,
fiscal year 2005's appropriated subsidy of $1.207 billion represented
approximately 9 percent of the total discretionary Federal funds for
the Department--9 percent of Department funds go for one-half of 1
percent of the market. The argument also passes quickly over another
important fact: highways, transit and aviation are, unlike rail, funded
substantially by user fees and also by State investments. Perhaps most
importantly, however, the argument overlooks that Federal financial
support for roads, airports, and transit goes to infrastructure and not
to operations. In other modes of transportation, Federal aid goes to
highway and airport infrastructure, for example, but Federal taxpayers
are not regularly asked to write annual billion dollar checks to
private trucking companies, private bus companies, private automobile
commuters and vacationers, nor even to private airlines, although the
taxpayers have regularly done so with regard to Amtrak.
In considering where we are with Amtrak, it is useful to consider
the varied things that Amtrak presently does to understand that recent
appropriations to this private company have not been limited to rail
infrastructure, but also go into actual train operations. Generally,
Amtrak's business can be grouped into activities relating to (1) rail
infrastructure, (2) corridor train operations, and (3) long-distance
train service.
Rail Infrastructure
Amtrak owns its own right of way and rail infrastructure along most
of the Northeast Corridor (NEC), except in Massachusetts and part of
Connecticut, where the infrastructure is owned by those States. Amtrak
also owns some infrastructure in Michigan, as well as train stations in
a number of States. Otherwise, Amtrak mostly operates trains on rail
infrastructure owned by others.
Within the Northeast Corridor, Amtrak controls the infrastructure
not only for its own use, but for use by numerous other railroads and
transit agencies.
----------------------------------------------------------------
List of Users of the NEC Other than Amtrak
CSX
Long Island Rail Road
Maryland Rail Commuter Service
Massachusetts Bay Transportation Authority
Metro-North Commuter Railroad
Delaware DOT
Rhode Island DOT
Canadian Pacific
New Jersey Transit
Norfolk Southern
Providence and Worcester Railroad
Shore Line East (Connecticut)
Southeastern Pennsylvania Transportation Authority
Virginia Railway Express
Consolidated Rail Corporation
----------------------------------------------------------------
These other users of the NEC pay Amtrak for access and associated
services, such as train dispatching. In total, trains operated by other
users on the NEC actually exceed the number of trains operated by
Amtrak itself on the NEC.
Because of the way the 1970 model of intercity passenger rail was
organized, maintenance and development of infrastructure in the NEC has
been left to Amtrak.
In fiscal year 2005, Amtrak has budgeted $215 million on fixed
facility infrastructure projects, and a total of $587.2 million for
capital expenses, most of which will come from the $1.2 billion of
Federal appropriations made available by this subcommittee. None of
those funds will be allocated to States, or to infrastructure in
locations where Amtrak does not presently operate. Federal
infrastructure dollars are allocated by a private corporation, Amtrak,
instead of by State, local, and even Federal transportation planning
officials.
Corridor Services
When viewed from the perspective of moving passengers, and the
distance they are moved (passenger-miles), Amtrak can be seen as
providing two types of services: ``corridor services'' of approximately
100-500 miles and frequently under contract to States in which these
corridors are located; and ``long-distance'', primarily leisure travel
services. Within the category of corridor services, there are two
different types: services on the NE corridor, where Amtrak operates on
its own track and infrastructure, and services on other State
corridors, where Amtrak operates on track and infrastructure owned and
controlled by others.
Northeast Corridor.--Approximately 20 million people, or 80 percent
of all Amtrak riders in 2004, traveled on a corridor service. The
largest portion of Amtrak corridor trips are on the Washington-New York
City-Boston Northeast Corridor (NEC). If one looks at NEC train
operations, separate from the NEC infrastructure, this is the one area
where Amtrak operates at something close to a breakeven basis.
Other Corridors.--In addition to the NEC main line, Amtrak operates
trains for corridor service in 15 other States.
----------------------------------------------------------------
List of States with Corridor Service
CALIFORNIA: Pacific Surfliner, Capitols, San Joaquins.
CONNECTICUT/MASSACHUSETTS: Inland Route (New Haven-Springfield).
ILLINOIS: Chicago-St.Louis, Illini, Illinois Zephyr, Hiawatha (with
Wisconsin).
MAINE: The Downeaster.
MICHIGAN: Wolverines, Blue Water, Pere Marquette.
MISSOURI: Kansas City-St.Louis.
NEW YORK: Empire/Maple Leaf, Adirondack.
NORTH CAROLINA: Carolinian (Extended corridor), Piedmont.
OKLAHOMA: Heartland Flyer.
OREGON: Cascades (with Washington).
PENNSYLVANIA: Keystone Service, Pennsylvanian (Extended corridor).
WASHINGTON: Cascades (with Oregon).
WISCONSIN: Hiawathas (with Illinois).
VERMONT: Ethan Allen Express, Vermonter (Extended corridor).
Note.--States listed are the primary States served by each
corridor.
----------------------------------------------------------------
In 2004, a total of approximately 8 million people (i.e.,
approximately one-third of the total Amtrak ridership) traveled on
these additional corridor routes. In many instances, these corridors
are subsidized in part by States. State operating subsidies for these
trains totaled 10 percent of the combined Federal and State funding of
Amtrak. However, States have not borne the full cost of these routes,
and some States that have corridor trains have not paid anything at
all, thereby producing issues of equity among the States, as well as
market uncertainties about how travelers value the services. In the
aggregate, on a fully-allocated basis, the non-NEC corridor trains
(including both corridor and extended corridor service) had an average
operating subsidy of $28 per passenger in fiscal year 2004.
Long-Distance Services
Amtrak's 15 long-distance trains have seen declining revenues and
ridership--and increasing costs--over the last 10 years. DOT refers to
these services as Transcontinental (more than 1 night), Overnight (1
night) or extended corridor (greater than 500 miles, but with no
sleeping accommodations). Amtrak presently operates 15 such trains.\2\
Amtrak has continued to lose long-distance trip customers to an airline
industry that is offering a low cost, high quality service, and to
automobile drivers who choose to use highways rather than rail. Amtrak
has had little or no success responding to this competition. As
Amtrak's presence in this segment of the intercity transportation
market has dwindled, Federal subsidies per passenger have continued to
grow. In fiscal year 2004, the average passenger on a long-distance
train received a subsidy of approximately $214 per trip on a fully-
allocated basis,\3\ up from $158 in the year 2000--a 35 percent
increase quintupling the 7 percent inflation over the same period.
---------------------------------------------------------------------------
\2\ The long-distance routes are as follows: Vermonter, Silver
Service, Cardinal, Empire Builder, Capitol Limited, California Zephyr,
Southwest Chief, City of New Orleans, Texas Eagle, Sunset Limited,
Coast Starlight, Lake Shore Limited, Crescent, Pennsylvanian,
Carolinian. The Auto-Train, a specialized service, also operates over a
long-distance route but with completely different characteristics. The
Three Rivers (New York-Pittsburgh-Akron-Chicago) was discontinued in
March 2005.
\3\ Fully allocated costs include depreciation and interest.
FULLY ALLOCATED LOSSES OF LONG-DISTANCE PASSENGER TRAINS, FISCAL YEAR 2004 \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidy Status Fully Allocated
---------------------------------------- Loss (Fully Fully Fully
Loaded with Allocated Allocated
Service Type/Route Route No. Unsubsidized by a Subsidized by a Depreciation, (Loss) Per (Loss) Per
State State Interest, and All Passenger Passenger-Mile
Overheads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
EXTENDED CORRIDORS:
Pennsylvanian................... RT57................... x ................. ($11,911,500) ($69) ($0.337)
Vermonter....................... RT04................... ................... x ($11,793,249) ($47) ($0.254)
Carolinian...................... RT66................... ................... x ($16,723,244) ($55) ($0.197)
OVERNIGHT:
Silver Service.................. RT16A.................. x ................. ($173,078,522) ($234) ($0.374)
Three Rivers (discontinued)..... RT17................... x ................. ($75,173,377) ($492) ($0.990)
Cardinal........................ RT18................... x ................. ($18,602,874) ($209) ($0.497)
Capitol Limited................. RT26................... x ................. ($43,784,083) ($242) ($0.486)
City of New Orleans............. RT30................... x ................. ($30,429,407) ($160) ($0.335)
Texas Eagle..................... RT32................... x ................. ($42,914,712) ($183) ($0.282)
Coast Starlight................. RT34................... x ................. ($63,002,725) ($152) ($0.271)
Lake Shore Limited.............. RT45................... x ................. ($63,803,165) ($228) ($0.387)
Crescent........................ RT52................... x ................. ($64,761,043) ($252) ($0.445)
TRANSCONTINENTAL:
Empire Builder.................. RT25................... x ................. ($75,338,574) ($172) ($0.223)
California Zephyr............... RT27................... x ................. ($89,696,739) ($267) ($0.320)
Southwest Chief................. RT28................... x ................. ($121,849,944) ($420) ($0.390)
Sunset Limited.................. RT33................... x ................. ($44,953,841) ($466) ($0.406)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Source.--Amtrak Route Profitability System.
See Appendix A for a more detailed account.
Moreover, these long-distance trains have had considerable
difficulty with regard to on-time departures and arrivals:
ON-TIME PERFORMANCE OF LONG-DISTANCE TRAINS, FISCAL YEAR 2004
----------------------------------------------------------------------------------------------------------------
Average
Minutes Average
Percent On- Late Minutes
Train Name Service Type Between --And Time (Zero per Late
Tolerance) Train per
(All Late
Trains) Train
----------------------------------------------------------------------------------------------------------------
California Zephyr............ Transcon........ Chicago......... Bay Area....... 14.2 136 159
Capitol Ltd.................. Overnight....... Chicago......... Washington..... 13.8 101 118
Cardinal..................... Overnight....... Chicago......... New York via 33.1 48 74
Cincinnati.
Carolinian................... Extended New York........ Charlotte...... 26.9 38 51
Corridor.
City of New Orleans.......... Overnight....... Chicago......... New Orleans.... 47.7 26 50
Coast Starlight.............. Overnight....... Seattle......... Los Angeles.... 10.8 139 157
Crescent..................... Overnight....... New York........ New Orleans.... 41.6 34 58
Empire Builder............... Transcon........ Chicago......... Seattle........ 68.3 11 36
Lake Shore Ltd............... Overnight....... Chicago......... New York....... 8.2 123 134
Pennsylvanian................ Extended New York........ Pittsburgh..... 17.2 32 39
Corridor.
Silver Meteor................ Overnight....... New York........ Miami.......... 25.6 84 113
Southwest Chief.............. Transcon........ Chicago......... Los Angeles.... 28.5 68 96
Sunset Limited............... Transcon........ Orlando......... Los Angeles.... 1.6 359 366
Texas Eagle.................. Overnight....... Chicago......... San Antonio.... 41.9 57 98
Vermonter.................... Extended Washington...... St. Albans VT.. 32.1 21 30
Corridor.
----------------------------------------------------------------------------------------------------------------
Overall, the picture of where things stand in intercity passenger
rail service is far from what was hoped for when Amtrak was created in
1970. In short, while service and ridership erode, Amtrak continues to
require extraordinary and ever-increasing subsidies from the Federal
taxpayer despite the original model's intent and Congress' clear call
for an end to operating subsidies by 2002 in the 1997 Amtrak Reform
Act.
Commuter Rail.--In addition, Amtrak has contracts to operate trains
for certain transit agencies and State governments. These are:
Connecticut Department of Transportation Shore Line East (SLE/CONNDOT),
Long Island Rail Road (LIRR), New Jersey Transit (NJT), Southeastern
Pennsylvania Transportation Authority (SEPTA), Delaware Transit
Corporation (DELDOT), Maryland Transit Administration (MARC), Virginia
Railway Express (VRE), Northeast Illinois Regional Commuter Railroad
Corporation (METRA), Southern California Regional Rail Authority
(SCRRA) Metrolink, North San Diego County Transit District Coaster
Commuter Rail Service, Peninsula Corridor Joint Powers Board
(CALTRAIN), Central Puget Sound Regional Transit Authority (Sound
Transit), and Altamont Commuter Express Authority (ACE). In the event
of a business failure by Amtrak, the President's budget calls for $360
million to be appropriated to fund directed service of these trains (as
well as those of the NEC). Such funding would protect commuter service
affecting approximately 2,342 trains and 1,187,860 passengers each
weekday for the relevant transit agencies, so that they would not be
impacted by Amtrak's problems involving intercity service.
RECENT HISTORY AND THE CALL TO CHANGE
During the 1990's, there was an increasing recognition that the
1970 model of intercity passenger rail had developed some very serious
problems. Congress sought to redress some of those in the 1997 Amtrak
Reform Act. Unfortunately, the reforms embodied in the 1997 Act did not
prove sufficient to solve the problems.
Many of the reforms in the 1997 Act empowered Amtrak to improve its
own performance and removed impediments to its doing so. After passage
of the 1997 Act, Amtrak's then-management repeatedly reported that it
was it on a ``glide path'' to self-sufficiency by 2002. That did not
happen. The problems worsened, and it became increasingly clear that
they were not solely the result of business misjudgments, but also
involved inherent flaws in the 1970 model.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
Instead of a successful ``glide path'', Secretary Mineta was
greeted with some unwelcome surprises in his initial experiences with
Amtrak during the current administration. Early in 2001, instead of
Amtrak being months from self-sufficiency as reported, Amtrak's then-
management advised that Amtrak would be insolvent within 2 weeks unless
the DOT subordinated the interest of U.S. taxpayers to a foreign bank
so that Amtrak could mortgage its rights to use Pennsylvania Station in
New York City. Within a year, Amtrak had lurched to yet another
financial crisis, informing the Secretary that if the Department and
Congress did not provide the company another $300 million, it would be
insolvent within 2 weeks and would shut down commuter and intercity
services. In response, to obtain time to assess and identify more long
term reforms, DOT provided Amtrak a $100 million loan under the
Railroad Rehabilitation and Improvement Financing Program, and Congress
provided the remaining $205 million through a supplemental
appropriation.
These crises highlighted fundamental problems, some of which needed
immediate action by Amtrak, and some of which were revealed to be
inherent to the 1970 business model and in need of legislative change.
Among the most urgent for Amtrak itself was the state of its financial
books and records. Indeed, it took independent auditors almost all of
fiscal year 2002 to close their audit of Amtrak's fiscal year 2001
financial performance. That audit required $200 million in net audit
adjustments and found 5 material weaknesses and 12 reportable
conditions that needed to be addressed to fix the problems with
Amtrak's accounting practices. It also revealed that Amtrak had taken
on almost $3 billion in new debt in order to pay for (1) costly
overruns of poorly managed capital improvements, (2) an unsuccessful
foray into the express package business, and (3) day-to-day operational
expenses.
Since 2002, Amtrak's record-keeping has improved. In 2005, the
independent audit was completed in March instead of September and no
material weaknesses were found. While Amtrak's auditors still find
significant areas for improvement, they comment favorably on
developments over the last 3 years.
Through participation on the Amtrak Board, and through changes to
the appropriations process that enabled stronger FRA oversight of the
grant process to Amtrak, Secretary Mineta and DOT have sought a variety
of improvements that Amtrak could make on its own. That process
continues and is ongoing. Happily, Amtrak operates in a more efficient
and better way than it did 3 years ago, and the new requirements
imposed by recent appropriations bills have produced significant
improvements, and need to remain in place.
But notwithstanding the very significant management improvements
and a much-enhanced and valuable involvement of the Amtrak Board,
fundamental difficulties continue to confront Amtrak, because the 1970
model of intercity passenger rail is a framework that is flawed. Amtrak
continues to spend dramatically more money than the revenues it
generates, and this year is spending at a pace greater than the
appropriation from Congress. Amtrak has estimated that by the end of
fiscal year 2005 it will have less than $75 million to $100 million of
cash remaining, with its costs continuing to far exceed its ticket
sales.
As shown by the two charts below, the structural problem in
Amtrak's condition is long-term, and is getting worse, not better.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
Further adding to Amtrak's deterioration is that the company's debt
increased massively in the late 1990's, from $1.7 billion in 1997 to
$4.8 billion in 2002 (with $3.8 billion non-defeased), without
adequately increased passenger revenues to pay the debt service.
Because of this increased debt, Amtrak's repayment requirements
(principal and interest) are forecasted to be approximately $273
million in fiscal year 2005 (up from $111 million in 1997). Amtrak has
recently suggested that the company be absolved from this $3.8 billion
debt by the Federal taxpayers' assumption of all of it, as compared
with the Federal appropriation covering approximately 40 percent of all
Amtrak expenses the last 2 fiscal years. Amtrak would give the Federal
Government nothing in return. That is unacceptable to the
administration.
The fiscal year 2005 appropriation for Amtrak of $1.2 billion
itself represents a 134 percent increase over the appropriation for
fiscal year 2001. Amtrak's President has said that as presently
configured, Amtrak cannot successfully operate through fiscal year 2006
without much larger amounts of taxpayer funds being allocated to this
private company. Indeed, the increase sought by Amtrak--256 percent
above the 2001 appropriation--would far outstrip the 22 percent
increase in domestic discretionary spending over the same time period.
For the Federal taxpayers, that is a spiral in the wrong direction.
Passenger rail is already by far the most heavily subsidized form
of intercity passenger transportation. When viewed on a per passenger-
mile basis, analysis by the Bureau of Transportation Statistics
indicates that the aggregate Federal expenditure for intercity
passenger rail is 30 times greater than for commercial aviation.
Likewise, the intercity bus industry, where there are no comprehensive
or dedicated Federal operating subsidies, carries as many as 350
million passengers annually (according to Eno Foundation estimates)--14
times Amtrak's ridership. (Although not comprehensive or directed, FTA,
under 49 U.S.C. 5311(f) provides for grants supporting rural
intercity bus service. This grant program amounted to approximately $22
million in fiscal year 2004, which is a minor amount relative to the
taxpayer burden for Amtrak each year.) So continually increased
operating subsidies is not the right answer.
What is more clear now than ever is that the basic business model
through which we provide intercity passenger rail service in this
country--a single national entity called Amtrak--is unworkable and is
not adequately positioned to respond to the changing transportation
needs of this country. Massive increases in funding to merely slow a
downward spiral are neither sustainable nor justifiable. At the same
time, doing nothing at all will eventually result in a business failure
and a lost opportunity for intercity passenger rail for this country. A
change is needed.
The administration's budget request reflects the importance of
reform for America's intercity passenger rail system, which Amtrak has
been operating at a loss for 34 years. As noted above, Amtrak has
received more than $29 billion in taxpayer subsidies, including more
than $1 billion in each of the last 2 years, despite the contradicting
requirements of the 1997 Amtrak Reform Act. In 2003 and again this
year, the administration sent to Congress, the President's Passenger
Rail Investment Reform Act. This proposal would align passenger rail
programs with other transportation modes, under which States work in
partnership with the Federal Government in owning, operating, and
maintaining transportation facilities and services.
Deteriorating infrastructure and declining service further the case
that, without congressional action on the administration's reform
proposals, continued taxpayer subsidies cannot be justified.
Consequently, no funding is included in the 2006 budget for Amtrak.
Rather, $360 million is budgeted to allow the Surface Transportation
Board to support existing commuter rail service along the NEC and
elsewhere should Amtrak cease commuter rail operations in the absence
of Federal subsidies. The President's budget is a serious call to
action: The time for reform is now. If the administration's management
and financial reforms are enacted, the administration is prepared to
commit additional resources for Amtrak--but if, and only if, reforms
are underway. Today is too soon to know if funding will be appropriate,
or what the right amounts should be under a new model of intercity
passenger rail service.
THE ADMINISTRATION'S PLAN FOR REFORM AND PRESERVATION OF INTERCITY
PASSENGER RAIL
As a matter of transportation policy, the administration supports
the availability of intercity passenger rail, but with a very different
vision than the failed model of the past. Secretary Mineta has
repeatedly set out the fundamental principles needed to reform
intercity passenger rail and place this form of transportation on a
sound footing. These principles are:
--Establish a long-term partnership between States and the Federal
Government to support intercity passenger rail.--Partnerships
between the States and the Federal Government for the planning,
decision-making and capital investment in transportation have
been one valuable element in the success of Federal programs
for highways and transit to date. The States, through their
multi-modal planning mechanisms, are in a much better position
to determine their intercity mobility needs and which form of
investment makes the most sense in meeting these needs than a
sole supplier company in Washington, DC. State-supported
intercity passenger rail services in places like the States of
Washington, North Carolina, California, and Wisconsin have been
one of the bright spots for intercity passenger rail ridership.
The administration wants to build upon these successes through
a new program of Federal/State capital funding partnerships in
which the Federal Government would provide matching grants.
--Require that Amtrak transition to a pure operating company.--Amtrak
today is both an operating company and the owner and maintainer
of significant infrastructure that forms a key component of the
intercity and commuter transportation systems of eight States
in the Northeast, as well as many stations and other facilities
that have local or regional transportation importance. These
are two very different functions. By having them both reside in
the same entity, the company is faced with conflicting
priorities, which the company has found difficult, if not
impossible, to balance. Infrastructure decisions have depended
on Amtrak decisions, rather than those of the States and
localities who are largely responsible for such planning in
other transportation modes such as highways, airports, and
transit. Amtrak, and the Nation's transportation system, would
be better off with Amtrak able to focus on one thing--operating
trains--and doing it well.
--Create a system driven by sound economics.--One of the flaws of the
1970 model is that intercity passenger rail has sometimes been
defined by politics, habit and fear of change. That is one
reason that some routes have high subsidies, such as the $466
per passenger subsidy in fiscal year 2004 on the Los Angeles to
Orlando Sunset Limited. Intercity passenger rail needs to serve
the markets where there is an identifiable demand that
intercity passenger rail can meet. It cannot and should not try
to serve every market regardless of the cost and regardless of
the revenue. Just as with other transportation modes and other
successful businesses in general, intercity passenger rail
needs to have the dexterity to recognize changing business
patterns and demand, and that sometimes the services of
yesterday are not needed or justified today or tomorrow.
Intercity passenger rail service needs to be designed to cost-
effectively meet and support the transportation needs of the
traveling public and sponsoring public authorities.
--Introduce carefully managed competition to provide higher quality
rail services at reasonable prices.--For the last 34 years
under the 1970 model, intercity passenger rail service has not
been subject to the discipline of the market place. On corridor
services, for example, States do not have any alternative but
to have Amtrak operate the intercity service. This has resulted
in a service that is more costly than one would expect in a
competitive situation, and which often has not been responsive
to changing transportation patterns, demands or expectations.
In a free market economy, competition leads to improved cost
effectiveness, higher quality and innovation, elements that
have been sorely lacking in intercity passenger rail for the
past generation. Transition to competition is never easy, but
it is necessary for the public to get the service it demands
and deserves.
--Create an effective public partnership, after a reasonable
transition, to manage the capital assets of the Northeast
Corridor.--The Washington-New York City-Boston Northeast
Corridor main line is the most heavily utilized rail route in
the country, forming an essential link for intercity passenger
and freight transportation and commuter access to the major
cities of the Northeast. By some measures, such as the number
of persons per day that use this infrastructure, Amtrak is a
minority user of this infrastructure--particularly in urban
areas. Transportation services on this corridor need to be
insulated from the unpredictable consequences of Amtrak's own
finances and needs at any given time. At least initially, the
ownership of these assets should be in the public sector, and
management and control of this asset should reflect significant
input from the States that depend on the Northeast Corridor for
passenger and freight mobility.
As noted, the administration's Passenger Rail Investment Reform Act
was transmitted to Congress last month. It sets out and details the
administration's proposals on specific ways to achieve these
objectives. After a generous transition period, intercity passenger
rail would become an economically viable and strategically effective
mode of transportation, supporting numerous successful rail corridors
nationwide. As set out in Secretary Mineta's transmittal letter
accompanying our legislative proposal, we look forward to working with
Congress to discuss and fashion the specifics of legislation in ways
that will successfully reform intercity passenger rail for the future.
In addition, Amtrak itself released its plan of strategic
initiatives crafted by Amtrak to begin the process of reform within the
company itself. That is a timely development, with many positive
elements. Amtrak's own recognition of the need for reform is a welcome
response to Secretary Mineta's steadfast resolve to address the
problems of intercity passenger rail, and create a viable future. But
Amtrak's plan would not accomplish everything needed, and legislation
will be needed that achieves all of the objectives set out by Secretary
Mineta and the administration.
From an appropriations perspective, it is worth noting that the
administration's reform proposals would authorize funding for rail
infrastructure to States rather than to Amtrak (except during a
transition period). Conversely, some have asked whether it would be
sensible to authorize some form of Federal bonds to support Amtrak.
That would be a serious error, from multiple perspectives. It is not
appropriate to issue government-sponsored or supported debt for a
private corporation like Amtrak in this circumstance. Amtrak has no
real ability or revenue to repay any bonds. While Amtrak can issue
bonds on its own, no one would currently buy them because it lacks the
incentives that discipline private issuers. In addition, Federal
financing of Amtrak through any non-Treasury debt would be more costly
than a General Fund appropriation supported by U.S. Treasury debt.
Whatever one thinks about particular forms of bonding for
transportation needs, Amtrak is a poor candidate for any such approach.
CONCLUSION
My own experience with Amtrak's Board persuades me that Amtrak
itself recognizes the necessity for reform and that time is critical.
It is essential that others come to recognize this, too. Without
reform, Amtrak is not sustainable at its current level of funding or at
any level Amtrak is likely to receive in these difficult budgetary
times. Moreover, history tells us that merely throwing money at the
1970 model of intercity passenger rail without addressing the problems
that have been identified in the subsequent years does not result in
any long-term improvements in Amtrak's finances or quality of service.
Some people appear to assume that reform necessarily means that
many areas will lose intercity rail service, but that is not
necessarily so. There are other ways to run intercity passenger service
and, given the chance, States are likely to try some of them and
succeed at improving service and eliminating operating subsidies. The
experience of the Alaska Railroad, which has done just that since the
State of Alaska bought it from the government 20 years ago, is
instructive. It did not change routes; it got creative about providing
service based on the markets it serves. Today, the Alaska Railroad gets
capital grants, but no operating assistance. It makes a profit ``above
the rails.'' One of the Alaska Railroad's innovations is to supplement
its basic, year-round passenger service by seasonally hauling special
first-class cars belonging to the cruise ship companies. This is the
kind of creative adaptation the administration's bill envisions, but
making such improvements depends upon freeing intercity passenger rail
from the frozen mold of 1970. It should not surprise anyone that
continuing to do the same thing that failed before 1970 has failed
again.
The administration has been clear that it cannot support the failed
model of the past, nor pouring more funding into that failed approach.
We have been equally clear that IF meaningful reform is accomplished
and implemented, the administration would support funding of
infrastructure and transition needs for train operations and related
costs. Although this complicates the appropriations process, we do not
believe there is a basis for arriving at any ``baseline level of
support'' for Amtrak until Congress has sent significant reform
legislation to the President and it is enacted with his signature. In
this regard, while the administration maintains that no funds should be
appropriated for Amtrak's use in the absence of meaningful reform, any
future appropriations should be subject to a variety of necessary and
stringent grant conditions to ensure an improved intercity passenger
rail system is achieved.
Secretary Mineta and his team look forward to working with the
Congress to resolve the recurrent crisis that plagues the old model of
intercity passenger rail. Thank you for the opportunity to share our
perspective on Amtrak and intercity passenger rail service. I would be
pleased to respond to any questions you may have.
Senator Bond. Thank you, Mr. Rosen. Mr. Mead.
STATEMENT OF KENNETH M. MEAD
Mr. Mead. Thank you, Mr. Chairman.
You know, the appropriations committees have been doing the
heavy lift for passenger rail since Amtrak's reauthorization
expired in 2002. We have testified several times since then on
Amtrak's high debt of nearly $4 billion, large operating
losses, poor on-time performance and deferred capital
investment in the billions. Amtrak seems perpetually on the
edge of collapse.
We are testified again today on the same subject, but with
greater urgency. As time goes by, the limp along status quo
system of today comes closer to a major failure but no one
knows when or where that failure will occur.
The current model is indeed broken and the reasons why go
beyond just budgetary shortfalls and extend to matters like who
decides on the type and amount of service. Also, other than
budget cuts, the current model provides few if any incentives
for cost control.
Amtrak is quite literally coming to the end of its rope,
now projecting cash on hand of about $30 million at the end of
this fiscal year. That will cover less than 2 weeks of Amtrak's
operating expenses. And that does not take into account at all
the loss off Acela services.
I have heard some discussion of the bankruptcy option, but
think that would be a complex and risky undertaking. Rather, a
comprehensive reauthorization that provides new direction and
adequate funding is needed and is needed soon.
Reauthorization, in our opinion, ought to focus on
improving mobility in short distance corridors around the
country, not just in the Northeast, and in restructuring long-
distance service to complement corridor service. That is going
to require new relationships between the Federal Government and
the States, among the States, Amtrak and the freight railroads,
and also give the States greater authority over passenger rail
decisions.
But in order for that to work, Mr. Chairman, a considerably
more robust Federal funding program for capital with a
reasonable State match is going to be required.
The administration proposal confronts several key issues
straightforwardly while leaving others unanswered. We concur
with the emphasis on corridor development within and outside
the Northeast corridor. These are the places where the demand
actually is. And we concur also with the greater decision-
making power vested in the States.
Also, reauthorization should leave open the door to
competition. Amtrak is the sole provider and has few incentives
other than the threat of budget cuts to operate efficiently.
But we are not in a position to really say whether or how many
potential competitors there might be, but there should at the
very least be an even playing field for competition.
Freight railroads own the track outside of the Northeast
and they, too, have very legitimate interests.
But a central issue left unanswered by the administration's
proposal is the level of Federal funding it supports. This has
fostered, in our judgment, a perception that while the States
would be given more responsibility and authority, the funding
burden would fall largely on them with no corresponding
commitment to significantly expand Federal funding.
To be sure, the current model's problems extend well beyond
just funding matters but you are going to have to tackle the
funding issue to secure anything approaching consensus.
I would like to give you our own take, Mr. Chairman, on the
funding situation. For 2005, Amtrak's appropriation was $1.2
billion. In addition, Amtrak anticipates another several
hundred million dollars this year in State contributions. If
Amtrak receives only $1.2 billion in Federal funds in 2006,
service will need to be cut almost certainly in significant
ways. For 2006, passenger rail needs Federal funding between
$1.4 billion and $1.5 billion plus the existing State
contributions in order to move the system forward towards a
state of good repair and better performance.
For 2070 and beyond, Federal funding levels between $1.7
billion and $2 billion should put you on the road to bringing
the system to a state of good repair and better position the
States to invest in rail corridors. That assumes the States
would provide a reasonable match of 15 to 30 percent for
capital grants, would cover a larger portion of operating
subsidies, and that cost-saving measures in such areas as food
service would be implemented.
The committee may wish to consider the following, as well.
First, a perspective on long-distance trains. It is important
to appreciate that while they are highly subsidized and often
inefficient, their total elimination will not come close to
making ends meet. Savings ultimately would be in the
neighborhood of around $300 million and the savings would not
be immediate due to the need for labor severance payments.
Also, 23 States have only long-distance service today. And of
these, 16 have little potential for corridor development in the
near term.
Second, formula grants with no match required to go
primarily to those States who have only long-distance service
today and no real potential for corridor development in the
near term and hence, would not see a capital grant program as
particularly advantageous to them. Formula grants could be used
to help offset the cost of service. Today we send the checks
directly to Amtrak.
Third, the Federal Government brings fleet and capital
infrastructure to a state of good repair in the Northeast and
outside the Northeast with no match required. But thereafter,
once it is in a state of good repair, the States must share in
the cost of keeping it in a state of good repair.
And finally, Amtrak's high debt. Portions of this debt,
which approach about $4 billion, are financed at very high
interest rates. One example is 9.5 percent at Penn Station,
much higher than the Treasury borrowing rate. But we currently
pay the full tab anyway through the appropriations process.
Consider discharging portions of that debt where it is
financially advantageous to do so and, in return, take title to
the Northeast corridor.
PREPARED STATEMENT
Also, I would place very heavy restrictions on Amtrak's
ability to incur debt in the future.
Thank you.
[The statement follows:]
Prepared Statement of Kenneth M. Mead
Mr. Chairman and members of the subcommittee, we appreciate the
opportunity to testify on intercity passenger rail and Amtrak.
Intercity passenger rail is an important component of a balanced
transportation system. Amtrak's authorization expired in 2002. In the
interim, Congress has provided direction in piecemeal fashion in the
appropriations process. We have testified several times since then on
Amtrak's unsustainably large operating losses, poor on-time
performance, and increasing levels of deferred infrastructure and fleet
investment. We find ourselves testifying again today on these same
subjects, but with greater urgency. As time goes on, the current limp-
along status quo system comes closer to a major failure, but no one
knows where or when such a failure may occur.
We reported in November 2004, that the current model for intercity
passenger rail is broken. And the reason it is broken goes beyond
persistent budgetary shortfalls and extends to matters like who decides
on the type and amount of service, who provides service, and who
selects the providers. Other than budget cuts or the threat of budget
cuts, the current model provides few incentives for cost control or
delivery of services in a cost-effective way.
Amtrak is quite literally coming to the end of its rope. Amtrak's
most recent cash flow analysis forecasts cash on hand of about $32
million by the end of fiscal year 2005, excluding the impact from the
loss of Acela service. This amounts to less than 2 weeks of Amtrak's
average cash requirements. For several reasons, a bankruptcy option
would be an extraordinarily complex and risky undertaking--in our
opinion, one not to be relied upon if the objective is to promote a
more rational and reliable national passenger rail system. In short, a
comprehensive reauthorization that provides new direction and adequate
funding is needed and needed this year.
A reauthorization, in our opinion, should focus on improving
mobility in short distance corridors around the country--not just in
the Northeast Corridor--and in restructuring long-distance services to
complement corridor services. This will require new relationships or
partnerships between the Federal Government and the States and among
the States, Amtrak, and the freight railroads, and give the States much
greater authority and control over intercity passenger rail decisions.
But, in order for this to work, a considerably more robust Federal
funding program for capital, with a reasonable State match will be
required, along with additional State contributions.
The administration's proposal recognizes that the current model is
broken and confronts several key issues in a straightforward way, while
leaving others less clear or unanswered. We concur with the emphasis on
corridor development within and outside the Northeast Corridor--these
are the places where the demand is--and we concur as well with the
greater decision-making powers given the States.
Also, reauthorization should leave open the door to competition.
Amtrak is the sole provider of intercity passenger rail service and, as
such, has few incentives, other than the threat of funding cuts, to
operate more efficiently. While we are not in a position to say how
many, if any, potential competitors there might be, there needs to be a
level playing field to promote competition, and consideration must be
given as well to the legitimate interests of the freight railroads who
own the rail infrastructure outside the Northeast Corridor.
Left unanswered by the administration's proposal, however, is a
central issue, most notably the approximate level of funding it
supports. This has fostered a perception that while the States would be
given more authority, the funding burden for operating losses would
fall largely on them, with no corresponding commitment to significantly
expand Federal capital funding. The debate on reauthorization would be
much better informed if the administration's bill spelled out Federal
funding levels with greater clarity. We fully recognize that the
problems of the current model extend beyond matters of money, but
funding levels are an integral part of any solution and in reaching
consensus.
Our own take on the funding issue is as follows. In fiscal year
2005, Amtrak received a Federal appropriation of $1.2 billion. In
addition, Amtrak anticipates $140 million in State contributions for
operating costs and $200 million for capital projects. In effect,
Amtrak had access to funds totaling about $1.5 billion. This level of
funding is not sufficient to make progress toward achieving a state of
good repair.
If Amtrak receives only $1.2 billion in Federal funding in fiscal
year 2006, even combined with expected State operating and capital
contributions, it will likely continue to defer needed capital
investment and will need to cut services. Intercity passenger rail
needs Federal funding between $1.4 billion and $1.5 billion, plus
existing state contributions, in order to maintain the status quo as we
know it today. However, this level of funding would not be sufficient
to move the system to a state-of-good-repair, let alone permit
investment in new corridor development.
For 2007 and beyond, Federal funding levels between $1.7 billion
and $2.0 billion would put us on the road to bringing the existing
infrastructure and fleet to a state-of-good-repair and better position
States to use Federal funds plus their own revenues to invest in rail
corridors. This assumes that States would provide a reasonable match of
15 to 30 percent for capital grants and would cover a larger portion of
operating subsidies and that Amtrak would implement cost saving
measures in such areas as food and beverage service.
current model is broken, resulting in severe financial instability and
DECLINING SERVICE QUALITY
Despite multiple efforts over the years to change Amtrak's
structure and funding, we have a system that limps along, never in a
state-of-good-repair, awash in debt, and perpetually on the edge of
collapse. In the end, Amtrak has been tasked to be all things to all
people, but the model under which it operates leaves many unsatisfied.
Consider the following:
--Amtrak is in a precarious financial condition. Its system continues
to suffer operating losses on all but a handful of routes.
Losses on some long-distance trains (excluding depreciation and
interest) exceed $400 per passenger. For the last 6 years the
average annual cash losses have exceeded $600 million. The
growth in cash losses since fiscal year 2000 is primarily
attributable to rising interest expense.
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--Amtrak is carrying a large debt burden. Its total debt grew 178
percent between fiscal year 1997 and fiscal year 2002, although
it has declined slightly in the past 2 years. For the
foreseeable future, Amtrak's annual debt service payments will
approach $300 million.
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--While ridership increased to 25.1 million in fiscal year 2004,
passenger revenues were $1,304 million, below the $1,341
million achieved in 2002, due primarily to fare pressures. For
the first 6 months of fiscal year 2005, passenger revenues were
$7.4 million lower than the same period in fiscal year 2004.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
--Amtrak has an estimated $5 billion backlog of state-of-good-repair
investments, and underinvestment is becoming increasingly
visible in its effects on service quality and reliability.
Deferred capital investment has led to several system failures
in recent years, including a failure of a key 12-kilovolt
electric cable during the August 2003 northeast power blackout;
fallen overhead power lines (catenary) on the line between New
York and New Rochelle; and broken bolts on the Thames River
bridge in Connecticut. No one knows where or when a critical
failure will occur, but continued deferral of needed investment
increases the risk that it may not be too far away.
--Further, on-time performance fell from 74 percent in fiscal year
2003 to 71 percent in fiscal year 2004, with even Amtrak's
premier service--Acela Express--achieving on-time performance
of only 74 percent. On-time performance for long-distance
trains averaged less than 50 percent. Last year, the poorest
performing train, in this regard, was the Sunset Limited, with
an on-time performance of only 4 percent.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
Today, Amtrak's corridor trains outside the Northeast Corridor,
based on current schedules, average 48 miles per hour and long-distance
trains average only 46 miles per hour. These speeds reflect scheduled
time and overstate the lower actual speeds due to delays. Deteriorating
infrastructure and increasing freight and commuter rail congestion will
continue to impact on-time performance.
BANKRUPTCY IS NO SUBSTITUTE FOR REAUTHORIZATION
A rail bankruptcy is an extraordinarily complex and risky
procedure, and we cannot predict how the passenger rail system would
emerge from bankruptcy. An Amtrak bankruptcy is no substitute for
reauthorization. In our opinion, this is not an option to be relied
upon if the objective is to promote a more rational and reliable
national passenger rail system.
--Labor Costs.--Labor negotiations are outside the bankruptcy
process. In a non-railroad bankruptcy, the bankruptcy court can
cancel or change collective bargaining agreements, which some
airlines successfully used as leverage when renegotiating with
their unions. In a rail bankruptcy, the Trustee would have to
negotiate with Amtrak's unions under the Railway Labor Act.
--Cash Crunch and Infrastructure Needs.--Amtrak's cash crunch would
be exacerbated in bankruptcy. Once in bankruptcy, vendors often
demand cash or provide credit under stringent terms. As a
result, absent a Federal cash infusion, there is a possibility
that major assets such as Penn Station and the Northeast
Corridor would need to be sold or remortgaged to raise cash to
sustain operations. Meanwhile, the value of the Federal
Government's mortgages on these properties would be diluted,
and the infrastructure would continue to deteriorate.
--Public Interest.--Once in bankruptcy, a federally appointed Trustee
would direct and manage Amtrak. The Trustee must consider the
``public interest,'' which has generally been broadly
interpreted as continued operations of the railroad, but in
what fashion would clearly be left up to the Trustee, which
might not be the best solution or a solution that the
reauthorizers would prefer or what the States would prefer. For
example, in order to continue operations, the Trustee may need
to shut down various State corridors or long-distance service
to stop the bleeding of cash and operating losses.
ELIMINATING LONG-DISTANCE SERVICE WILL NOT SOLVE THE FUNDING PROBLEM
Long-distance service has sparked widespread controversy, in part,
because of its heavy subsidies. In 2004, long-distance trains
cumulatively incurred operating losses of more than $600 million
(excluding interest and depreciation). In fact, the loss per passenger
exceeded $400 on two of these trains--Sunset Limited and Southwest
Chief. Eliminating long-distance service reduces operating losses
associated with long-distance trains by about half (or $300 million)
but will not make Amtrak profitable.
Because long-distance trains share stations and facilities with
corridor trains, eliminating the long-distance trains would not
eliminate the shared costs. In addition, Amtrak allocates a share of
overhead and infrastructure maintenance to the long-distance trains--
some of these costs will be reallocated to all remaining trains. For
example, we estimate that $300 million or more in shared and system
costs would be shifted to other corridor trains. Thus, the expected net
savings are only about $300 million. However, these savings would not
be immediate. In fact, in the first year, it may cost Amtrak more to
eliminate the service than to operate it because of its labor severance
payouts (commonly called C-2).
Long-distance trains represent about 15 percent of total intercity
rail ridership. However, many long-distance riders do not really travel
long distances. That is, long-distance trains carry only a small number
of end-to-end riders. Of the 3.9 million long-distance riders in fiscal
year 2004, only 527,000 rode the entire length of the route and another
403,000 rode between city pairs also served by existing corridor
service. The remaining 3 million riders traveled along portions of the
route. These trips mostly ranged from 500 miles to 700 miles--slightly
longer trip lengths than corridor riders.
While eliminating long-distance service may seem appealing from a
Federal budgetary standpoint, especially with the large deficits, it
ignores the mobility needs of rural areas of the country and the
benefits passenger rail provides. Amtrak provides long-distance service
in 41 States and is the only intercity passenger rail service in 23 of
those States. The questions of whether to provide long-distance
service, who makes those decisions, and who funds the losses are
critical policy decisions that will need to be made.
WHERE DO WE GO FROM HERE? REAUTHORIZATION GUIDANCE IS ESSENTIAL
The ``limp along'' approach is costly and leaves many unsatisfied.
The current model for providing intercity passenger service does not
leave the States in a position to decide upon the best mix of service
for their needs--what cities are served, schedules and frequency of
service, and service amenities. The model provides little balance
between the national goals of an integrated network and regional and
State transportation needs. How much funding and who provides the
funding--Federal, State, or a combination--are also critical questions
that need to be addressed. In providing reauthorization guidance, some
core elements need to be considered in determining how passenger rail
is funded and delivered, specifically, deciding the levels and mix of
Federal and State funding, achieving a state-of-good-repair in the
Northeast Corridor, determining the appropriate framework to integrate
competing demands of infrastructure and operations in the Northeast
Corridor, and paying off Amtrak's legacy debt.
In our opinion, a new model for intercity passenger rail should
also include several important aspects. The first is that funding and
governance build in incentives for cost cutting. Specifically,
eliminating direct subsidies to Amtrak, or any other operator, and
channeling funds through the States will likely promote more cost
control because an operator will need to better justify costs in order
to retain an operating contract. In addition, it will encourage States
to maximize efficiency by keeping their own costs to a minimum. Second,
the introduction of private competition into the management and
operation of intercity passenger rail services will exert additional
market pressures on operators to provide cost-effective, higher quality
service.
ADEQUATE FEDERAL AND STATE FUNDING SHOULD BE PROVIDED IN ORDER TO
RESTORE THE INTERCITY PASSENGER RAIL SYSTEM AND INVEST MEANINGFULLY IN
CORRIDOR DEVELOPMENT
Federal funding levels, along with State contributions, have not
been sufficient to subsidize operations, address deferred capital
needs, and significantly improve service along the existing rail
network. In the last 2 years, Amtrak has received annual Federal
funding of $1.2 billion. This amount was supplemented by operating and
capital contributions from State and local sources--in fiscal year 2004
these were $135 million and $114 million, respectively. In effect,
Amtrak received about $1.45 billion in public funds.
It will require at least $2 billion in funding from all sources to
begin any meaningful corridor development. The policy challenge is
determining who pays for what portions of the system. Federal funding
of $1.4 billion to $1.5 billion would not provide sufficient funding to
maintain a 5-year program for restoring the system to a state-of-good-
repair. Projects in both the Northeast Corridor and in the corridors
and long-distance routes outside the Northeast Corridor would continue
to be deferred. This simply maintains the limp-along status quo.
One approach to promote adequate Federal and State funding could be
to use a variety of grant programs similar to those used in aviation,
transit, and highways that place funds in the hands of States. These
programs are based on a combination of Federal/State matches and
formula grants. More specifically:
--Capital Grants With a Reasonable Match.--Like the administration's
proposal, this approach would provide capital grants on a
competitively determined basis and would be administered by the
Department of Transportation (DOT). States that desire to
improve existing intercity rail service and/or develop new
corridor services would apply to DOT for a matching grant,
similar to the Federal Transit Administration's New Starts
Capital Program. The administration's proposal also suggests
such a program but provides a 50/50 capital match rate by the
end of the reauthorization period. Our view is that a lower
State match rate requirement would provide incentives for
States to take an ``ownership'' role in developing rail
corridors on a more competitive basis with other transportation
modes (historically, highways and transit have used an 80/20
match rate).
To accommodate the need for different types of capital
investments, two types of capital matches could be established.
For investments that qualify as traditional capital investment,
such as track or purchases of passenger equipment, the Federal
share could go up to 80 to 85 percent. On the other hand, for
investments that qualify as capital maintenance (for example,
those under the transit definition) the Federal share might be
70 to 75 percent.
--Formula Grants With No Match Required.--This approach provides
funds to States outside the Northeast Corridor that do not have
corridor development potential and that rely on long-distance
trains for substantially all intercity passenger rail service.
By discussing this approach, we are not taking a position on
the ultimate policy of whether long-distance service should be
retained or eliminated but merely presenting it as an approach
for funding States that do not have the population densities to
support corridor development. There are at least 16 States with
only long distance service and little potential for any
corridor development. These States are unable to take advantage
of the matching capital grants for corridor development.
This approach could initially include sufficient funds to
subsidize existing long-distance and corridor services. Over
the reauthorization period the funds associated with corridor
services would be reduced and then eliminated at the end of the
period. Further, we expect the level of Federal funds
subsidizing the long-distance services would be reduced to
reflect greater operating efficiencies resulting from capital
investments as well as other savings resulting from food and
beverage service changes, improved labor productivity, and
efficiencies that may be introduced by competitive service
providers.
As determined by the States, funds could be used to defray the
cost of operating subsidies, capital investment, or both, with
no match required. The amount of the formula grant could be
calculated on the basis of Amtrak's fiscal year 2005 operating
loss allocable per embarking/disembarking passengers in the
affected State or some other formula that provides an equitable
allocation.
--Restore Northeast Corridor to a State-of-Good-Repair.--The
Northeast Corridor presents a difficult challenge. The funding
priority for the Northeast Corridor reflects the accumulated
deferral of investments which has resulted in an estimated $5
billion backlog of capital projects, threatening current and
future service reliability. The effects of the deteriorating
infrastructure are readily evident. For example, Amtrak's
reported on-time performance in the Northeast Corridor as a
whole between 1994 and 2002 ranged from 82 to 89 percent. In
fiscal year 2003, it dropped to about 80 percent. For fiscal
year 2004, even Amtrak's premiere Acela service posted an on-
time performance of only 74 percent, far short of Amtrak's
stated goal of 94 percent. If the decision were made to keep
the current Northeast Corridor intact, we estimate Amtrak would
need to spend about $550 million annually for an extended
period on infrastructure and rolling stock to eliminate the
backlog of capital investment in the Northeast Corridor.
Bringing the eight Northeast Corridor States and the District of
Columbia together in a short period of time to direct and
manage this effort is incredibly complex but may be achievable
by the end of the reauthorization period. Recognizing this
challenge, one option during the reauthorization period could
be for the Federal Government to fully fund the Northeast
Corridor's capital requirements until a state-of-good-repair is
achieved. This would also address the States' reluctance to
inherit a legacy system they did not create. We suggest that
DOT distribute funds directly to the Northeast Corridor
infrastructure manager separately from the competitive grant
process.
Construct for 5-Year Reauthorization Funding
Congress and the administration have a difficult decision to make
in determining the appropriate level of funding for intercity passenger
rail. The level of funding can obviously vary. We have been giving this
some thought and would like to present a construct for consideration.
We recognize that many assumptions need to be made about who pays for
what and how to balance national, regional, and State transportation
needs. Those are decisions for Congress and the administration to make.
In building this construct, we made several assumptions for
purposes of illustration as follows.
--Formula grants will not fully cover train operating losses.
Amtrak's forecast net cash operating needs (excluding interest)
were used as the starting point. The levels of funding
represent imputed cost savings of 10 percent per year from a
combination of revenue growth and operating cost savings.
--Over the 5-year reauthorization period, Federal subsidies decline
for long-distance trains and corridor operating subsidies shift
to the States. We expect States to place higher performance and
efficiency demands on the service provider to lower operating
costs to more affordable levels.
--Debt service is based on Amtrak's projected debt service payments
through fiscal year 2009, adjusted for installment payments on
their RRIF loan and possible early buyout options on leased
equipment.
--Capital requirements to restore the system to a state-of-good-
repair are based on Amtrak's Strategic Plan for fiscal year
2005 through fiscal year 2009 and on assumptions we made on
allocating capital needs between the Northeast Corridor and the
rest of the system. The funding allocation assumes a capital
need of $550 million for infrastructure and fleet in the
Northeast Corridor and $250 million for infrastructure and
fleet outside the Northeast Corridor.
--Funds available for capital match represent funds remaining after
state-of-good-repair funding requirements, formula grants, and
debt service are met.
CONSTRUCT FOR REAUTHORIZATION FUNDING
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Federal Contributions Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 Year 2010
----------------------------------------------------------------------------------------------------------------
Formula Grants (Capital and/or Operating 570 570 510 460 410 370
Subsidy).....................................
Debt Service.................................. 276 278 358 306 308 375
Capital to Restore System State of Good Re- 355 655 755 800 800 800
pair.........................................
NEC Infrastructure + Fleet\1\................. 300 525 550 550 550 550
Non-NEC Infrastructure + Fleet................ 55 130 205 250 250 250
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Subtotal................................ 1,201 1,503 1,623 1,566 1,518 1,545
Available Capital for Match................... ......... ......... 27 234 432 455
-----------------------------------------------------------------
Total Federal Contributions............. 1,201 1,503 1,650 1,800 1,950 2,000
----------------------------------------------------------------------------------------------------------------
\1\ NEC: Northeast Corridor.
New Federal capital available for State match does not become
available until annual Federal funding levels reach $1.65 billion. This
construct highlights the policy choice that needs to be made between
restoring the system to a state-of-good-repair and investment in new
corridor development. At $2 billion, we would expect about $455 million
to be available to States to match for use in new and/or improved
corridor development.
TOO PREMATURE TO SEPARATE MANAGEMENT OF NORTHEAST CORRIDOR
INFRASTRUCTURE FROM OPERATIONS
Proposals to separate the Northeast Corridor infrastructure
management and operations into two independent companies present a
level of complexity and risk that needs a more thorough examination. At
some point down the road, this split might be feasible and may prove a
better way of controlling costs. However, at this juncture, not enough
is known about the benefits and risks of this proposal. As we witnessed
in Great Britain's experience, there are risks associated with
establishing a commercial, for-profit entity to operate the
infrastructure. Allowing an infrastructure company to operate ``like a
business'' may mean relinquishing control over how certain expenses are
cut or which capital investments are made. An infrastructure company
focused on its bottom line has incentives to make decisions that are in
its financial best interest but may not be in the best interest from a
safety or efficiency perspective for the operator. The result could be,
at best, disruption to service and a decline in on-time performance
and, at worst, compromised safety conditions.
Aside from the risks of separating the infrastructure from
operations in the Northeast Corridor, there are benefits to the
integration. In particular, an integrated Northeast Corridor provider
of track maintenance, capital programs, operations, and dispatching is
likely to be more efficient and less costly than two providers, each
having a separate organizational support structure. In addition, a
bifurcated approach would require a fully functional oversight and
control organization at the outset lodged in the Northeast Corridor
compact or the DOT to coordinate between operations and infrastructure.
If formation of the Northeast Corridor compact is delayed, there could
be disruptions to the operation of the corridor.
It may be possible at some point down the road to develop a model
where all interests are best served, but a more thorough review and
understanding of lessons learned from other similar attempts would be a
valuable precursor to such a division in the Northeast Corridor.
PAY OFF LEGACY DEBT AND RESTRICT FUTURE BORROWINGS
As of September 30, 2004, Amtrak had long-term debt and lease
obligations of about $3.8 billion with amortization periods extending
beyond 20 years. Amtrak's balance sheet shows $845 million in escrowed
proceeds to defease a portion of this debt, leaving close to $3 billion
in unfunded long-term debt or lease obligations. Under the current
model, these obligations are paid for with Federal appropriations.
Because portions of Amtrak's debt were financed at higher interest
rates than what the Federal Government can borrow, Congress and the
administration should consider a one-time appropriation for the
specific purpose of discharging any debt that can benefit from the
Federal Government's borrowing power, producing long-term Federal
savings. For example, Amtrak pays 9.5 percent interest on its mortgage
obligation for Penn Station, New York, whereas recent 10-year Treasury
notes issued by the Federal Government are yielding a little over 4
percent. In addition, Amtrak's ability to incur long-term debt should
be restricted, except for refinancing opportunities that lower interest
expense and do not increase the outstanding principal, and no
commitments should be made without advance approval by the Secretary of
Transportation. In return for discharging Amtrak's debt, title to
Amtrak's assets would transfer to the U.S. Government.
Mr. Chairman, that concludes my statement. I would be happy to
answer any questions at this time.
Senator Bond. Thank you very much, Mr. Mead.
I apologize for being jumpy but I am going to have to get
back to the Highway Bill and I want to ask essentially two
broad questions and then turn it over to my colleagues to run
this.
First, let me say that when I was governor of Missouri, I
started the process of subsidizing Amtrak, convinced by the
silver tongue of now Senator Bennett. And Missouri now
subsidizes Amtrak at $6.2 million a year, which is behind
Illinois, Washington and several other States. And we have a
very modest $32 loss per passenger, which it is certainly not
quite the best looking one in the whole ugly bunch but it is up
there.
Let me ask Mr. Laney and Mr. Mead and others to comment.
While we are waiting for the Commerce Committee to act, and I
gather your reorganization and restructure has go through the
Commerce Committee, we cannot reauthorize in this committee.
You are going to have to get it through there.
If Congress does what Congress sometimes does, and that is
nothing, would you go bankrupt this year? What would be the
prospects of trying to restructure Amtrak in bankruptcy? Mr.
Laney?
BANKRUPTCY
Mr. Laney. Bankruptcy presents an enormous set of
challenges and complexities that we have not worked through
from start to finish and it is much less flexible in the
railroad context than it is in a normal business context.
Nonetheless, we have considered it because of the proposed
zero budget from the administration, and DOT.
Senator Byrd. I am having difficulty hearing Mr. Laney.
Could we have some way of making it louder?
Senator Bond. Can you pull that up a little closer?
Mr. Laney. I thought I had run out of funds and you turned
off the electricity.
It is an enormous challenge and really limits our
flexibility. We have considered it. We do know that without any
action by Congress that sometime, my guess is in the first
quarter to the first half of fiscal year 2006--and Mr. Gunn may
disagree with me and may think it is earlier--depending to some
extent on the ultimate impact of the Acela problems right now,
that we will in effect run out of cash.
Senator Bond. Can you restructure in bankruptcy or do you
have too many costs?
Mr. Laney. It is totally out of our control in bankruptcy.
It is a different structure. There is a U.S. trustee appointed
and he, with proposals from DOT, selects someone, in effect, to
run Amtrak in bankruptcy.
Senator Bond. Mr. Mead.
Mr. Mead. Pursuing the bankruptcy approach, in my opinion,
is like taking a round peg and trying to pop it through a
square hole. The reason why is most people, when you go through
this type of bankruptcy, you want to emerge with something that
is better or more rational. But you are going to need cash to
do it.
The short answer, as I said in my statement, you are going
to have $32 million at the end of this year. That is 2 weeks.
You are not going to have much cash.
The second, big reason, very unlike the airlines. In
bankruptcy for railroads, the labor issues, labor contracts
which comprise over 40 percent of Amtrak's budget, they are
handled on a totally separate track. They do not go to the
Bankruptcy Court, they go to special labor boards.
I do not know if that separate track is going to work very
well.
Senator Bond. Do you have a comment on that, Mr. Rosen or
Mr. Gunn?
Mr. Gunn. I will agree with my chairman.
Senator Bond. Always a good idea.
Mr. Gunn. But I do think the problem of the threat of
bankruptcy is very imminent, given the Acela problem.
Mr. Rosen. Senator, the only thing I would like to say
about that is the preferred course of reform is clearly
legislative through the Commerce Committee and in other ways,
as well as board actions. I think it would be a mistake for
anybody to believe that any approach should be off the table,
depending on how events unfold, and that there are airlines
that are operating in bankruptcy as we speak today.
And clearly, one of the questions in a bankruptcy that
anybody would be interested in is what would the service look
like? How would it continue?
And so I do not mean to have this misconstrued to saying
that is the preferred option, but I think the complexities of
bankruptcy are things that there is some experience with.
Senator Bond. Mr. Rosen, excuse me. I want to ask one big
question. Mr. Mead finally referred to what I believe is the
900 pound gorilla in the room. When I talk to my colleagues,
the one thing they ask about are what some perceive to be
unreasonable labor costs. People talk about 3- and 4-hour
workdays, work weeks that are significantly less than 40 hours.
What are the impacts? Are the labor costs of Amtrak out of line
with other transportation companies and organizations?
I would ask Mr. Mead, Mr. Rosen, Mr. Laney and Mr. Gunn to
comment on it. Mr. Gunn.
LABOR ISSUES
Mr. Gunn. I will start. I think if you look at Amtrak's
labor situation, first of all, we have made a lot of progress
tightening up the operation. As Mr. Laney said, we have dropped
our head count from 24,800 to about 19,500. And at the same
time we are running more trains and handling more passengers
and doing a lot more maintenance work.
The basic problem we have, I think, revolves around some of
the work rule issues that we have. I think that if you look at
our rates of pay on, for example, locomotive engineer or
machinist, the rates of pay are not the problem for those
groups of people. The problem is work rules.
To give you a sense of what it means to us, these are
probably between 700 and 1,000 people on the payroll that would
not be there if you had control over crew consist and if you
did not have the shops organized around crafts.
Senator Bond. Is it true that traveling from St. Louis to
Kansas City they have to change crews in Sedalia?
Mr. Gunn. I do not know the crew change point on that train
right now but----
Senator Bond. It is a 4-hour trip and at one point there
was a crew change.
Mr. Gunn. On the Northeast Corridor we get a full day's
work out of a crew. I think what they are doing on that is the
crew probably takes the train and goes back home. In other
words, they swap trains.
To give you a sense of this, an engineer in the Northeast
Corridor, a day's work, they come to work in Washington, they
go to New York, they have a break, they get back on a train and
bring it back to Washington. That is a fairly full day's work.
If we have the frequencies and so forth, we get a day's
work out of our train crews. The problem is we may have more
people on the train than we need. That is the problem. It is
not the basis of pay. That is my opinion.
Mr. Mead. I think the labor rates are not out of line with
what rail people would normally get. But I do agree with Mr.
Gunn, that the work rules really do inspire a lot of
inefficiencies. Plus, any organization where your ticket sales
are exceeding--where your labor costs are exceeding your ticket
sales is a prescription for problems. That is the case we have
here.
Mr. Rosen. The only thing I would add is that the
difficulties that Amtrak faces go well beyond their labor
difficulties.
Senator Bond. Mr. Laney, any comment on that?
Mr. Laney. No, Senator.
Senator Bond. Thank you very much, gentlemen. I would have
to say that to gain support on the floor, I think that the
reorganization and restructuring plan may have to address the
work rule question because there are a number of people who are
reluctant to support anything for Amtrak until that is done.
With that, I turn now to Senator Murray.
Senator Murray. Mr. Chairman, I intend to be here for the
duration of the committee and Senator Byrd wanted a chance to
do a statement and he had another obligation. So I will let him
go ahead of me on this round.
STATEMENT OF SENATOR ROBERT C. BYRD
Senator Byrd. Senator Murray, I thank you. You are very
gracious.
Mr. Chairman, I thank you for holding this hearing.
I will speak today about the millions of Amtrak passengers
who board in stations like Montgomery, West Virginia;
Greenwood, Mississippi; Winslow, Arizona; and Cut Bank,
Montana.
I recognize that Amtrak has problems. Amtrak provides
crucial transportation services, not just for our major cities,
but for millions of people across rural America. They pay the
taxes that fund infrastructure in Iraq. They help to supply the
men and the women from whose veins flow the blood that is shed
in the deserts of Iraq. They need service. They are Americans,
too.
It is perhaps those citizens who have the most at risk in
losing rail service as a result of the Bush Administration's
budget. Once those towns fall off the national rail map, they
are not coming back.
Mr. Mead points out that many riders of Amtrak's so-called
long-distance trains do not really travel long distances. We
are talking about passengers who might be riding from
Martinsburg, West Virginia, to Pittsburgh, Pennsylvania, on
Amtrak's Capitol Limited, or passengers who may be traveling
from Hinton, West Virginia, to Maysville, Kentucky, on The
Cardinal.
For residents of those communities, Amtrak provides an
essential transportation option. Not every grandmother can just
get behind the wheel and drive to see her grandchildren. Not
every college student has the option of driving home from
school for the Easter recess. There are over 120 communities
across the Nation that receive regularly scheduled Amtrak
service but have no commercial air service whatsoever. Several
of these communities have also seen their bus service
eliminated as a result of the shrinking of the national
Greyhound network.
The administration does not seem to grasp the
transportation needs of rural America. Not only does its budget
propose to eliminate all subsidies to Amtrak, the
administration's budget also proposes to cut in half funding
for the Essential Air Service program, causing dozens of
communities across the Nation to lose their guaranteed air
service.
These budget proposals appear to be consistent with many
other provisions in the President's budget that do real harm to
the quality of life in rural American communities.
The President's budget includes deep cuts for rural housing
loans, and for water and sewer grants that help rural
communities have clean water. The President's budget eliminates
funding for vocational education grants that help students in
rural America who are not going on to college but who need
training to get a job that pays a livable salary.
When it comes to the President's budget for Amtrak, we are
not talking about just another proposal to cut a program by 10,
20, or 30 percent. We are talking about a proposal to eliminate
all of Amtrak's Federal funding and all of Amtrak's available
services.
I should point out that, just 2 months ago, I tried to
rectify this situation when the Senate debated the budget
resolution for the coming fiscal year. On March 15, I offered a
bipartisan amendment, with Senator Specter and several other
Senators, which sought to boost Amtrak funding to $1.4 billion
for 2006. I did not take that funding figure out of thin air.
When President Bush submitted his budget request last year for
Amtrak, $1.4 billion was the level that he, himself, included
in his budget for 2006.
As I stated on the floor during debate on that amendment,
the elimination of Amtrak's subsidy, as called for under the
President's budget, is not a recipe for a streamlined railroad.
It is not a recipe for a more efficient railroad. It is a
recipe for a dead railroad.
My amendment sought to bring that railroad back to life as
part of the budget for the coming fiscal year. Unfortunately,
that amendment failed on a vote of 52 to 46. So, unfortunately,
a dead railroad may very well be what we get from the coming
fiscal year.
I have been fighting for Amtrak for a long time, Mr. Gunn,
Mr. Rosen, for a long time. I was hopeful of landing a rail
passenger route in southern West Virginia 30 years ago. In
1974, I had proposed to the Appropriations Committee,
Subcommittee on Transportation, that we add money to Amtrak's
budget to help bring this about. On April 11, 1974, in a
hearing conducted by the Transportation subcommittee, which I
chaired at the time, Roger Lewis, then-president of the
National Rail Passenger Corporation, Amtrak, told me that $4
million would provide adequate funding to begin a route through
southern West Virginia. The route that I had been trying to
secure would run from Norfolk, Virginia, to Cincinnati, Ohio,
with stops in West Virginia at Bluefield, Welch, Williamson,
Fort Gay, and Kenova. I told Mr. Lewis that I would add the $4
million by offering an amendment to the Transportation
Appropriations bill.
In answer to my questions, Mr. Lewis said that he
anticipated no problem in securing the cooperation of the
railroad. He also said that this amount of money would provide
adequate funding to initiate capital improvements and initial
operating costs for the operation of Amtrak on a new route from
Norfolk to Cincinnati.
According to Mr. Lewis, N&W tracks could be used all the
way; or, as an alternative, both N&W and C&O tracks could be
used. In any event, repairing tracks and rebuilding passenger
facilities along the route, Mr. Lewis explained, could be
accomplished within 6 months if the railroad labor forces were
available and if the N&W Railroad was willing to undertake that
program.
On April 24 of that year, 1974, the Transportation
Appropriations Subcommittee accepted my amendment, adding $4
million to the Transportation Appropriations bill to provide
Amtrak rail service between Norfolk, Virginia, and Cincinnati,
Ohio, and on April 30, the full Appropriations Committee
approved my amendment.
Then, on March 24, 1975, 30 years ago, the Mountaineer, a
new Amtrak passenger train, made its inaugural run in southern
West Virginia.
Mr. Gunn, the Amtrak president at that time was Paul
Reistrup. He and I were among the passengers on the maiden run.
On its daily runs from Norfolk, Virginia, to Chicago, Illinois,
the train would stop, as I have already indicated, at
Bluefield, Welch, and Williamson in West Virginia, and would be
made up of two coaches, a snack/diner, a sleeper, and a baggage
car. A guaranteed operation of 2 years for the new route
through southern West Virginia had been made by Amtrak.
Mr. Reistrup said that the Mountaineer would habitually
lose money and that the run would lose $4.5 million in each of
the first 2 years of operation, while taking in only $900,000
in the first year.
I had been instrumental in making the Mountaineer a reality
by securing an appropriation of $4.6 million, which was reduced
to $2 million in the Senate/House conference. That was an
experimental run, and its continuance beyond the 2-year
experimental run would depend upon the ridership achieved.
The Mountaineer did not last all that long. I was also
instrumental in getting The Cardinal. Amtrak still serves West
Virginia, the only State among the 13 in Appalachia that is
wholly in the Appalachian regional system.
Unfortunately, a dead railroad may very well be what we get
for the coming fiscal year. That would all depend, perhaps, on
whether this subcommittee can find the resources to meet
Amtrak's needs next year.
Mr. Chairman, I thank you for being a good chairman. I hope
that we can come to the aid of Amtrak. We have people down
there, people who pay taxes, whose sons and daughters die in
the unnecessary war in Iraq, and who pay taxes to build the
infrastructure in Iraq. Perhaps, we ought to have Amtrak in
Iraq. Maybe we could get more money for it, even though it
would lose money. That would not be a question over there, I
suppose.
I recognize the problems. I want to help. I, for one, plan
to work with my colleagues as best as we can to accomplish that
goal.
In closing, I thank my leader on this issue, Senator Patty
Murray, for her diligence and dedication to her work in
providing the rail passenger service to people like those who
have sent me to Washington for eight terms. I fought for them
before, and I am going to fight for them now.
Thank you, Mr. Gunn, for your services. Thank you very
much. You are trying hard, and I want to work with you.
Senator Murray, the challenge will be considerably greater
due to the failure of the Senate to adopt my amendment a while
back.
Now, when Cicero spoke, the people said he makes a good
speech. But, when Demosthenes spoke, they said let us go
against Philip. So, Mr. Chairman, let us go against Philip. Let
us go against Philip, Mr. Gunn. Do not lose heart. It is going
to be a problem. It is going to be hard work. I will tell you
this, people in the rural areas of this country vote, too.
Thank you very much.
Senator Burns [presiding]. Thank you, Senator Byrd. I think
I am next on the list here, and I will kind of open up this
morning.
I also serve on the Commerce Committee. We have looked at
this Amtrak thing for the last couple of years and we have
drawn some conclusions from the testimony of Mr. Mead and Mr.
Rosen, and then a short visit over here with my good friend
from Utah.
We are going to have to be very imaginative if we make this
thing work. But we cannot be imaginative if we are not a part
of the overall transportation plan of this country and it does
not sound like that has been the case.
I am going to be very critical of the Department of
Transportation now. You say reforms but I have not seen anybody
knocking on my door up here, saying we have got these reforms
that we think would work for Amtrak or a national
transportation plan. We have not heard that. I have had no
request for an appointment to come up and say we should look at
this because we think it is a vital part of the overall plan of
this country.
And I aim to take this to the Secretary. We cannot expect
any kind of imagination to flow unless we get some cooperation
down there. Or, if it is not on the radar screen, tell us it is
not on the radar screen and we will do something else. We will
put it over in another department. Let's put it over in the
Department of Defense because we might want to move some troops
one of these days. Who knows?
We can sure get it out of here if it is not a priority.
Mr. Rosen, am I incorrect in that statement? What is your
take on that?
Mr. Rosen. Senator, let me first say I would be more than
happy to be with you at any time or your staff, of course. So
let me put that to the side.
But we have been working with the committee staff and have
had a number of consultations. And as you know, I did testify
before the Commerce Committee on April 21, both written
testimony and oral testimony. The administration's bill was
transmitted by the Secretary, I want to say the first week of
April. It is substantially similar to a bill that was submitted
previously, in 2003. My predecessors, as the Secretary's
designee to the Amtrak board, each testified about that bill,
Michael Jackson and Alan Rutter.
So I think there has been consistent efforts by the
Department to explain, lay out, discuss the administration's
reform concepts. But I hear you and we can certainly do more
and better. And I would like to work with you.
Senator Burns. It is going to take that kind of a
situation. All of the questions have pretty much been covered.
In my case across Montana, for a transcon, we are a flyover
State or we are a ride-through State. We do fairly well up
there in the State of Montana in the support of Amtrak.
But you put it through the most desolate part of the State.
If you run it down through Billings--and I know I am going to
get telephone calls from my people that live in Havre and Wolf
Point and Shelby and Whitefish, I will get a letter from them.
But we used to have Amtrak service down on the southern part,
too. And that connected all of the schools down there. In fact,
that is where most of your population is.
Right now we have got about 129,000 people who ride that
train in Montana and into some areas that are mostly
recreation: over at Whitefish, skiing in the summer, vacation
in Flathead. But it is also used by others because we have no
bus service. There is no bus service. We cannot make that work.
And I am kind of like Senator Byrd. Those folks up there in
those Hi-Line counties vote, too.
So I am going to go back to Senator Murray. I just do not
think that we can make it work unless we have got an advocate
down at the Department of Transportation. Everybody got all
excited the other day when United made their announcement that
they are going to forego and abandon their pension programs.
And pension programs do not carry people but we sure got
excited about it. And now with this, you are touching real
people in areas where we have no other alternatives.
You made the statement that you want to go intercity. How
many options do people have to get from point A to point B in
the inner city? You have your competition bus service You can
also go out here from 6 o'clock in the morning until 9 o'clock
in the morning on 395, and it is the world's largest parking
lot. You can go there and watch. But there are still options.
And then there is the Metro. There are options there.
We have no other options. And that is the point I want to
make.
ADMINISTRATION BUDGET REQUEST
Senator Murray.
Senator Murray. Mr. Rosen, last year, when the Bush
Administration sent up its budget request for Amtrak, you
proposed to cut Amtrak funding by $300 million. But you said
that you would support as much as $1.4 billion each year if
your reform proposals for Amtrak were enacted.
When we reviewed OMB's multi-year budget documents, the
administration was true to its word. You budgeted $1.4 billion
for Amtrak for 2006 and every year thereafter. That was last
year.
This year, when you look at the President's budget, he is
requesting zero for 2006 and anticipates requesting zero for
every year after that.
If that is the case, why is Secretary Mineta publicly
stating that the Bush Administration would support $1.5 billion
to $2 billion for Amtrak if your reforms are enacted?
Mr. Rosen. Two things, Senator, let me to clarify. The
original proposal that you are alluding to, when the
administration proposal was $900 million, contemplated that
there would be an increase if the administration's reform
proposals were adopted.
As you will recall, they were not adopted to date. And when
this year's budget came out and the Secretary made clear that
the President's current budget was a call to action. It was
clear that the earlier budget proposals, if they were a call to
action, they did not work.
So the President's budget this year, as a call to action,
has at least had the effect of being more effective at calling
attention to the need for reform. That is point No. 1.
I indicated in my opening remarks to the effect that we
know from history that the reforms have to come first, the
money to follow.
The second part is with respect, Senator, I think you are
mistaken what you said that Secretary Mineta has said.
Secretary Mineta has not said that the administration would
support $1.5 billion to $2 billion a year.
What he said was he was asked, I believe, a question about
what it would cost to bring the Northeast corridor up to a
state of good repair. And he referenced what is a multi-year
number, 5 or 6 years I believe, that there are estimates--I
think Amtrak itself is estimated approximately $1.5 billion to
$2 billion to do that. Although I would add the caveat that
Amtrak has begun the process of spending to bring the Northeast
corridor to a state of good repair. So some of that money has
actually been spent last year and this year.
So I think there may be some confusion or a mistake as to
what numbers are being referenced. I do not think the Secretary
has said what the numbers associated with a true reform package
would be.
Senator Murray. Mr. Rosen, let me just share with you that
on March 4, 2005, I believe it was on NPR, Secretary Mineta was
asked, ``The budget says zero dollars. What is the real figure
that the administration is willing to spend on Amtrak?'' And
Secretary Mineta said very clearly, probably in the area of
$1.5 billion to $2 billion.
So he has stated that.
Mr. Rosen. Again, with respect, I think you need to look at
the full context of those remarks. I do not think that was a
question that--I think it was a question that related to the
Northeast corridor.
Senator Murray. No, I disagree. Actually, I will read you
the whole question. He was asked: ``Democrats in Congress who
have criticized your proposal have said well, this thing that
Secretary Mineta is talking about is not what the budget says.
The budget says zero dollars. What is the real figure that the
administration is willing to spend on Amtrak?''
To that, Secretary Mineta answered probably in the area of
about $1.5 billion to $2 billion. So he has said very clearly.
Mr. Rosen. Again, I have a different interpretation, that
that figure relates to a multi-year capital item.
Senator Murray. I do not see any reference to multi-year
capital. But I will tell you this, when OMB Director Bolten
testified before our subcommittee, it was 3 weeks ago now, I
asked him whether the administration would ever consider
sending us a revised budget for Amtrak. And Director Bolten was
really clear. He said that this committee has received the only
budget we should expect to get from Amtrak under any
circumstance.
I would like to know what conversation you or Secretary
Mineta have had with the White House that makes you think that
the administration might request Amtrak funding if a reform
bill is enacted?
Mr. Rosen. I am not sure if I fully understand the
question, so let me try this. In formulating the
administration's reform proposals, there have been regular
discussions with the Office of Management and Budget. And
indeed, the reform proposals had to be approved by the Office
of Management and Budget when they were transmitted to the
Congress, both in 2003 and 2005.
I think the earlier budget proposals that you referenced in
the administration proposal for fiscal year 2005 came out, did
contain both a number for that fiscal year and a number with
regard to what reform funding would look like. This year, a
different approach was taken and you have that before you.
Senator Murray. Mr. Rosen, you said you did not understand
my question. Let me make it very clear.
The administration is saying that zero funding for Amtrak
unless a reform is enacted. Director Bolten made it very clear
to us that the administration was not going to request
additional funding. So where do we get the idea that if
Congress does enact reform, that the administration will then
request the $1.5 billion to $2 billion that Secretary Mineta is
talking about? Are we going to get a request or not?
Mr. Rosen. So far we do not have reform legislation that
has been enacted. I think perhaps that is the key point to
start with.
Senator Murray. Say we pass reform. Is the administration
going to request the $1.5 billion to $2 billion? Or are they
just going to say they support it?
Mr. Rosen. Well, first of all I have told you that I do not
think you are accurate with regard to the $1.5 billion to $2
billion figure. But putting that aside----
Senator Murray. I am quoting--I will submit this to the
record, the statement from Secretary Mineta.
[The information follows:]
[From Morning Edition, National Public Radio, March 4, 1005]
Secretary Norman Mineta Comments on the President's Proposal to Cut
Funding for Amtrak
Mr. STEVE INSKEEP [host]. The Bush Administration says it is not
trying to bankrupt Amtrak. In the budget the President sent to
Congress, there is no money for the passenger rail system and that
prompted an angry response from Amtrak supporters. But the President's
top transportation official says the administration is willing to
subsidize Amtrak if it's restructured. Norman Mineta is a former
Democratic congressman who's now Transportation Secretary.
Secretary Norman Mineta [Transportation Department]. The reason
that the President has put no funding for Amtrak subsidy this year is
that we submitted our reform legislation in 2004. There's been no
action on it, and so finally we decided in order to get people's
attention, we would just put no money in for the subsidization of
Amtrak.
Mr. Inskeep. The President called a lot of attention to this. He
said he was cutting more than 150 Federal programs. Amtrak was
described by the administration as one of them.
You're saying the administration didn't really mean that.
Secretary Mineta. If we get the reform that we're looking for, then
we will be asking for the funds to fund a national inner-city passenger
rail system. And that's why in our reform legislation, what we do is to
make Amtrak an operating company. Right now we subsidize Amtrak, and so
they put money into their capital investment program as well as the
operational side of their program. And the problem is that much of
their money goes into the operation of lines that nobody uses. At the
same time capital improvements are being starved. So what we're saying
is, let Amtrak be an operating company and the Federal Government will
do the financing of capital infrastructure.
Mr. Inskeep. Democrats in Congress who have criticized your
proposal have said, ``Well, this thing that Secretary Mineta is talking
about is not what the budget says. The budget says zero dollars.''
What's the real figure that the administration is willing to spend on
Amtrak?
Secretary Mineta. Probably in the area of about $1.5 billion to $2
billion. Right now the state of the tunnels and all those things are
woefully neglected and we would bring those up to good standards and
then turn it over to the States. And then we would participate on a
local match on the continued improvement of any capital investment
that's made into the system.
Mr. Inskeep. You're proposing that the Federal Government would
continue to pay for upkeep of track or new trains, Amtrak would run
them and would be expected to run trains that at least broke even or
made a profit?
Secretary Mineta. The lines would be determined by States and not
by Amtrak itself. As an example, we have now some 12 States that are
spending something like $345 million a year for passenger rail service;
$140 million of that is for capital improvements. If our bill had been
in place then those States would be getting a 50:50 match on the $140
million on capital investment, whereas right now they're making all of
that investment with their own State money. By our taking over the
capital investment part of it and let the operations of the railroad be
done by Amtrak or other operating agencies, they then can concentrate
on delivering the service that people deserve. We're treating Amtrak
inner-city passenger rail no differently than we treat highways,
airport improvements or transit right now.
Mr. Inskeep. Although, forgive me, you can improve part of an
interstate highway and leave the rest of it unimproved for later. But
if you've got a rail line that goes across seven States and just one of
them doesn't want to contribute, that rail line goes away. It can't
run.
Secretary Mineta. No. No. The rail line will still run but we won't
stop in that State or open its doors.
Mr. Inskeep. Do you really think that this system could maintain
political support if a number of States stopped having service there?
Secretary Mineta. We have spent over $29 billion in subsidies to
this rail system. I don't think we should continue pouring money into a
flawed system. If the President and I really were out to kill Amtrak,
we wouldn't do anything.
Mr. Inskeep. Secretary Mineta, thanks very much.
Secretary Mineta. Not at all. It's great to be with you, Steve.
Mr. Rosen. Rather than debate that, I will put that to the
side and say what I said in my opening remarks, that if the
Congress itself takes the serious steps to reform and fix
intercity passenger rail, then the administration is serious
that if we get real reform we will support funding for reformed
system.
Senator Murray. What does support mean? Does that mean
request or you will just say it on the radio?
Mr. Rosen. It does not mean that we will say it on the
radio, but as I have said here and I have said previously, I
think it is premature to talk about what exact steps and what
exact amounts the administration will take or propose until we
have the reforms.
Senator Murray. I take it your answer is----
Mr. Rosen. We know where that leads.
Senator Murray [continuing]. We should not expect a request
from the administration on the exact dollar amount? They will
just say that they support money once reform is enacted.
Mr. Rosen. I am sorry, Senator, I do not understand the
question.
Senator Murray. It is a statement. It sounds to me like
your response to us is that we cannot expect a request from the
administration whether or not we do pass any kind of reform.
I believe my time is up.
Mr. Rosen. I think what I can say is that if there is no
reform, you have the administration's request. But that is not
necessarily the end of the story.
Senator Burns. Senator Bennett.
Senator Bennett. If I could just pick up on what Senator
Murray is saying, and give you a little advice, and I am fully
supportive of what you are trying to do. I am fully supportive
of reform. And I think the Congress needs a jolt and we
certainly have had one.
But I would advise you to define the carrot instead of just
saying we will support something. It would be nice to say if
you really do come through with the reform, this is what we
will do. And I think it is reasonable that Senator Murray is
asking for some more concrete definition of what the carrot
looks like.
You are saying there is a carrot out there for us. You have
hit us with a 2 by 4 between the eyes and got our attention to
the fact that something serious has to be done. And I am
supportive of that. But having used the stick, I think a little
bit clearer carrot would probably be a good idea.
I think that is what Senator Murray is asking for.
With that, let me go back to the subject I have raised. I
have here the Amtrak strategic reform initiatives and fiscal
year 2006 grant request, provided by Amtrak. I think it is a
pretty good piece of work. We keep hearing yes, we are going to
reform. In 1997, we were assured by Amtrak's management, Amtrak
is absolutely going to be self-sustaining and profitable by
2005. And we heard right up through--pardon me, 2002. And we
heard right up through 2001 that they were on track to
profitability. And then on 2002, it was well, by the way, we
are nowhere near it and the CEO resigned.
We have got to be serious. So let me ask Mr. Laney and Mr.
Gunn, if you were kings and had a completely free hand, and you
did not have to worry about past contract obligations that you
feel now bind your hands, you could have any kind of work rules
you wanted, you had access to whatever funds you needed for
capital improvements, all of the rest of it. In other words
clean sheet of paper time.
Could you design an intercity passenger system on rails
that made sense and was sustainable over time? With the
assumption that there would be some degree of Federal subsidy?
Because I think we probably would have to have a degree of
Federal subsidy. I do not think you could expect it all to come
out of the fare box. But one would hope it would be a degree of
Federal subsidy substantially less than we are doing now.
Is that a possibility? Forget where you are, in terms of
the straitjackets of the past that are put upon you. Clean
sheet of paper time, you are king. You can devise whatever you
want. Could you, in fact, envision a passenger system that
worked?
REDUCED FEDERAL OPERATING SUBSIDY
Mr. Laney. Senator, let me first say I want to hear from
Mr. Gunn on this, as well, because his perspective may differ
slightly but I do not think much. But let me be king first.
Yes, absolutely. And I think, to a great extent, what we
presented in terms of our strategic reform package does just
that. We have erased the blackboard and started writing on it
again. We have been constrained by some prior decisions by
earlier boards and earlier managements and we bear the burden
of those decisions and they are difficult. There is no question
about it. Whether it is issues with respect to the Acela,
whether it is issues with respect to long-distance trains,
whether it is issues with respect to debt.
But absolutely, there would be different answers and
different responses for our different lines of service. Whether
it is the corridor service, Northeast Corridor, or other State
service corridors, not only could we, we absolutely should,
from a transportation policy standpoint, begin to address in a
serious way State corridor issues. There been references to
congestion, when it is aviation or whether it is highways.
There is a very complementary role for passenger rail service
to play.
You project it 25 years, 50 years, 75 years forward, we
will have made a serious mistake if we do not begin taking
incremental small steps now.
There is also a role for long-distance service.
Senator Bennett. That is where the argument was going to
come.
Mr. Laney. There is also a role, but it would be a
reconfigured long-distance service. And to address some of your
issues, I think we have presented, in effect, a systematic
approach by which we reevaluate and address current routes,
ultimately eliminate some, and may begin to add others over
time. But it cannot happen overnight and it needs to be managed
carefully. But I think long-distance still plays a role. It
just needs to be reconfigured slightly, or significantly.
Mr. Gunn. I basically support what the chairman said, not
just because he is my chairman. I actually agree with him. I
think that the way that you look at this is that in the future
there is no way you get around the fact that the capital is
going to have to come from the government, either a combination
of State and Federal.
I think the operating deficits can be managed and they can
be controlled and reduced, particularly if we have the kind of
freedoms that you mentioned. They cannot be totally eliminated.
And I do not think they will be eliminated except in some very
dense corridors such as the Northeast Corridor. But you have to
have volume.
I think the long-distance trains, the deficits can be--
there is a lot of things we can do if we have freedom to
control those deficits. And I think if you look at our plan,
which you have, we actually give you sort of a vision of what
would happen over 5 years, in terms of the Federal requirement.
You see the operating subsidy dropping--or not going up
certainly--but the capital is absolutely a governmental
responsibility and you cannot avoid that. This is not a
profitable business.
Senator Bennett. I understand that. And if I may, Mr.
Chairman, one last quick question in the spirit of Senator
Murray's question, assume that we do everything you are talking
about here, that Congress gives you the authority you want. We
put in the capital to make the necessary improvements.
Can you give us a ball park as to what the operating
subsidy then would be? Would we still be talking about $1
billion year out of the Congress? Or would it come down? You
talk about long-distance and we can argue about that. That is
$300 million and that is not inconsequential in this situation.
Mr. Laney. You are just talking about an operating subsidy,
Senator, not capital?
Senator Bennett. That is right.
Mr. Gunn. We made a stab at projecting if our reforms were
enacted what the Federal needs would be in fiscal year 2011
which is what, 5 years out. And basically we showed the Amtrak
requirement dropping to about $800 million for the whole
system. And if you look at this, that is capital and operating.
Operating is $220 million.
Right now our operating deficit is about $570 million and
we show that dropping to about $220 million. There is a
combination of things. It is efficiencies brought about by work
rule change, changes in the retirement package and some other
things, but also a shift to the States of responsibility for
their corridor development if they get the Federal capital.
But you can see the Federal piece certainly not rising. It
would drop. We are estimating you can get it as low as $800
million, both capital and operating, if you got the reforms,
the real reforms we are talking about. And those are tough. It
is the Railway Labor Act piece.
Senator Bennett. As I say, I think you ought to stress that
to the Commerce Committee because $800 million is a much easier
pill for the Congress to swallow, particularly in 2015 when it
is an even smaller percentage of the Gross Domestic Product
than it is today, than the amount we are currently paying
today.
Thank you, Mr. Chairman.
Senator Burns. Senator Kohl.
Senator Kohl. Thank you very much, Mr. Chairman and Senator
Murray.
While I share the sentiments of our colleagues regarding
the President's draconian approach to reform, I prefer to use
my time to assess the merits and viability of passenger rail
outside of the Northeast corridor.
Whenever we hear talk of passenger rail, we hear about the
Northeast corridor. Indeed, the administration's fiscal year
2006 budget is no exception, providing funding only to operate
this corridor should Amtrak be forced to cease operations.
As a Senator from the Midwest and Wisconsin, I have to say
I find this approach to be shortsighted and potentially harmful
to our Nation's intermodal transportation system.
In the Midwest, as in many parts of our country, passenger
rail provides, as you know, a critical link for thousands of
travelers. While I understand that increased ridership does not
necessarily equal success for Amtrak, I agree that reform is in
order. However, I would argue that forcing the more than
545,000 Wisconsin riders who used Amtrak last year to find
another means of transportation does not certainly by itself
equal reform.
I do not think that anyone here would argue that shutting
down Amtrak in the Midwest will result in reaching agreement on
plans to reform the system. Putting more cars on congested
roadways and more travelers in overcrowded airports cannot
possibly be the solution and I hope that we can arrive at
better suggestions.
Mr. Gunn, we have heard the administration talk about the
need for reform at Amtrak, and as part of that reform the need
for greater State investment in passenger rail. As you know,
Wisconsin has been a leader in this effort, providing 75
percent of the necessary funding for the highly popular
Hiawatha service between Chicago and Milwaukee. This line has
continued to break all-time ridership records over the past
years. Without the funding that Amtrak is requesting today,
will this line be forced to shut down? And if so, when?
Mr. Mead, I would appreciate a comment from you.
Mr. Gunn. If the administration proposal went through and
it was bankruptcy, the line would cease to operate.
Senator Kohl. It will cease to operate.
Mr. Gunn. It would still run freight and Metra but Amtrak
would cease to operate.
Senator Kohl. Mr. Mead.
Mr. Mead. I would not going to go so far as to say that
Amtrak would totally cease to operate. I would say that there
would be almost certainly very significant cuts in service,
including the route that you mentioned.
Senator Kohl. That Chicago to Milwaukee----
Mr. Gunn. I was referring to if the administration's budget
proposal went through, zero, we would cease to operate.
Mr. Mead. I am sorry, I misspoke. Certainly, $360 million
is just not going to--you are going to have to have a shut
down. I was referring to $1.2 billion, which is the current
year's appropriation. If you just reenacted the 2005
appropriation for 2006, that would give you $1.2 billion, you
are going to have very significant cutbacks in service.
Mr. Gunn. You will have a cash crisis. If you have $1.2
billion, you will have a cash crisis and we will be right back
where we are today very quickly.
Senator Kohl. I think we all recognize, and I am sure you
know, that that particular line is really, really successful
and serves an important purpose.
Mr. Gunn. Since the airport station opened, we have had
ridership growth of 30 percent, 25 percent in the last few
months.
Senator Kohl. Increase.
Mr. Gunn. Yes, because of the airport station, which is
just south of Milwaukee. It has just taken off.
HIGH-SPEED CORRIDORS
Senator Kohl. I worked to get funding for that so I am very
much aware of what you are saying and I cannot imagine a
decision that, in effect, would close down that route.
Yesterday, I met with a group of constituents from La
Crosse, Wisconsin. Currently, La Crosse is only served by the
Empire Builder line with one round-trip stop in the city each
day. My constituents shared with me the potential economic
impact of bringing high-speed rail to the western side of
Wisconsin.
Due in part to the heavy debate over Amtrak's funding
needs, the debate over the merits of high-speed rail seems to
have quieted. I did note, however, that the administration
zeros out funding for the next-generation high-speed rail
program which funds the research needed to determine the
viability of high-speed rail in America.
Mr. Mead, can you provide some insights as to why the
administration would zero out funding for this relatively
modest program? Do you believe that there is any merit in
having high-speed rail outside of the Northeast corridor? And
Mr. Gunn, I would appreciate your view.
Mr. Mead. I think it depends on what your definition of
high-speed rail is. I think the average speeds of some of these
long-distance trains that we have today is around 46 or 48
miles per hour, and that is scheduled. That does not count
whether there is going to be delays. So if you go up to about
80 miles an hour, I think for those people that ride those
trains that are doing 46 miles an hour, that would be
relatively high speed.
Actually, I would just like to, if I might, just take a
moment to point out something that is in the administration's
bill that I think is very important. The administration's bill
proposes capital grants to develop rail corridors such as those
that you are describing. The problem is that the States are
saying well, this is nice. It is a capital grant program. But
how much funding is the Federal Government going to put into
it?
And it becomes a chicken or egg issue, in my judgment, that
the States are not going to buy into a capital grant program
and take on more decisions and take on more responsibility and
authority for making rail decisions that affect their corridors
and agreeing to a capital grant program until such time as they
understand the financial consequences of that.
And I think that is a core element of the debate here, is
the uncertainty over what the funding conundrum is going to
look like. That certainly is what Senator Murray's line of
inquiry was after.
Senator Kohl. Mr. Gunn.
Mr. Gunn. I would only comment that Amtrak's management
position has been that there are a number of corridors outside
the Northeast that should be developed and we worked with the
States for them. For example, the Milwaukee and perhaps onto
Madison, Chicago to Madison, is one of those corridors where
there is real potential. There are also corridors in California
and in the Northwest.
Our view is that they should be done incrementally. In
other words, when you go into these, do not go in trying to go
to 150 to 200 mile an hour trains. What you want is to get up
to the 90 or 100 mile an hour trains, which we can do with
conventional equipment, and have frequent service. That is the
key, good, solid and reliable service. But it does not have to
go 150. And you can do it on a relatively modest budget if you
use existing technology.
But, I think, we have about eight corridors that we think
are really ripe for development if the States get this new
State/Federal partnership where there is capital money
available. But they have to know what that is. But there are
corridors, definitely.
Senator Kohl. Thank you. Thank you, Mr. Chairman.
REDUCING THE OPERATING SUBSIDY
Senator Murray [presiding]. Mr. Laney, let me go back to
you again.
You submitted a grant request seeking $1.82 billion for
next year. That is more than 50 percent above your current
funding level. And you also, of course, submitted a
comprehensive set of reform proposals. As part of that grant
request you said--and I want to read it to you--we believe that
these initiatives will, in time, dramatically reduce the
requirement for ongoing Federal financial support for Amtrak
and reinvigorate intercity passenger rail.
How soon would your subsidy needs dip below the current
level of $1.2 billion if that reform package is enacted?
Mr. Laney. Certainly not during fiscal year 2006. There is
no question about that. Fiscal year 2006 we would stay at the
same level, if not higher. But let me make clear what I said
earlier, and that is the increase from $1.2 billion to $1.85
billion is capital only, our capital investments as well as
working capital. It is not an increase in operating expenses.
The operating expenses are basically flat.
Largely in 2006, it would be an increase, as I mentioned,
in capital. And my guess is that capital expense would stay
flat but higher for the next 4 or 5 years as we rebuild, in
effect, the Northeast Corridor infrastructure and rehabilitate
a bunch of very old and tired equipment. And there is enormous
demand, I think, growing demand for equipment beyond just the
Northeast Corridor.
But I believe perhaps as early--but I do not know, this is
conjecture--as 2007 we will see----
Mr. Gunn. It depends on when the reforms are enacted. In
other words, the ability to start winding down or trending down
some of the cash demands for Amtrak depend upon when you enact
a proper capital grant program for the States, an 80/20
program. And then how long you give the States to adopt, to get
into that program and to begin to assume full responsibility
for the operating deficits for the corridors.
Senator Murray. So the costs of Amtrak are not going to be
reduced. It is just going to be the States who are going to
have to come up with that?
Mr. Gunn. No, actually Senator, there are two pieces to
this. If the reforms that we have in there--if we got our work
rule reform and we got the Social Security reforms and some
other things, there is probably $200 million or $300 million
which we could ultimately, over time, reduce.
Senator Murray. Over time when? From my understanding, at
this point----
Mr. Gunn. We assume, for example, if we got work rule
reform, we would implement it through attrition rather than
just laying people off. That has been our position with our
unions. And so, once you got the reform, it would take a number
of years, 2 or 3 years or 4 years, to attrit out the people
that were surplus.
Senator Murray. To get to the point where you are saving
$200 million to $300 million?
Mr. Gunn. One hundred million dollars on the labor. There
are some internal reforms that we are going to do, or changes
that we want to make in terms of food service and some other
things, that will take place gradually over the next 2 or 3
years.
Senator Murray. But the vast majority of this is just
putting money to the States. It is not like these costs
disappear?
Mr. Gunn. A big part. I would not say vast. It is very
important, if we can get the changes that we are suggesting, if
we can move from railroad retirement to Social Security, if we
can get either through reform of the Railway Labor Act or
through negotiation and get the work rule reform and make the
others, it is probably $200 million or $300 million of
operating subsidy that we can deal with.
But it is also--I do not want to be argumentative. It is
that there is a significant portion of improving the efficiency
of Amtrak.
Senator Murray. Mr. Mead, you are familiar with both of the
reform proposals. Can you tell us whether you think either of
these proposals save any money in the short-term, Federal tax
dollars?
Mr. Mead. Well, they save money in the sense that--some of
them, they save money in the sense that they would avoid cost
that you would other otherwise incur. But the bottom line in
terms of how much money you would need, because of a backlog in
capital inside and outside the Northeast corridor, you are
going to need some money to put the system in a reasonable
state of good repair and to improve performance.
So you are not going to--in my opinion, it is a myth I
think that you are going to save your way somehow out of this.
There are savings. There is no question. This food service one,
for example. I do not mean to get emotional about it, but it is
something that they could have been doing for some time. And it
is about $80 million, $90 million, $100 million. There is no
need to wait for 3 or 4 years to do that.
But I am telling you, I would take the $100 million and I
would pump it into capital. That is what we need to do. We are
talking about several billion dollars in capital.
The other area that I think that we get some savings on is
in this debt service. I think the loan they took out or the
mortgage they took out on Penn Station was about $300 million
at 9.5 percent. Your committee is paying for that at 9.5
percent. And that means the Treasury Department is, too. So I
think there are some savings there.
Senator Murray. Can you tell us what your estimate is of
what the President's reform bill, if it was passed, would cost
us in 2006?
Mr. Mead. I would put it in at about $1.4 billion or $1.5
billion.
Senator Murray. Mr. Gunn, do you have an estimate of what
it would cost to implement?
Mr. Gunn. I approach it a little differently, if I may. If
you look at the administration's reform package, it basically
is internal to Amtrak, restructuring the corporate structure.
And I think it will be a disaster because it is impractical.
And it does not deal with some of the real issues that need to
be addressed that I think the board's reform package deals
with.
Senator Murray. Can you explain that?
Mr. Gunn. If you look at the administration proposal, what
it does, it is based on the assumption that the services we
operate can be privatized and contracted out, which they
cannot. They are not profitable. You can contract them out, but
you have to subsidize them.
Also, the basic proposal is to create three Amtraks instead
of one. You have a residual Amtrak, you have an Amtrak
passenger service operating company, you have an infrastructure
company. And it all has to happen on a fairly tight time frame.
That will be extremely disruptive and expensive. It also has
some operating problems associated with it.
But you will end up with--overhead departments will have to
be replicated. In other words, the way we function now you have
one law department. Well, if you have three separate companies,
you are going to need three. You have one personnel department,
you will have to have three.
And it is all being done in an environment where it is not
clear how it is going to be funded. I think it does not address
any of the real cost issues that are associated with Amtrak.
And what will happen is you will end up with a lot of the
service coming off and you will have an enormous C(2) bill, the
labor protection.
Senator Murray. This committee will not decide the reform
package, the Commerce Committee will.
Mr. Gunn. I am just saying it will cost you money.
Senator Murray. But you are saying to us that if we pass a
reform proposal, we are not going to save money in 2006, which
is what this committee is currently looking at?
Mr. Rosen. Senator, could I suggest that I do not think Mr.
Gunn is actually the best expert you are going to find on the
administration's proposal. And I would say I think his
characterization of it was totally wrong.
AMTRAK FUNDING NEEDS FOR FISCAL YEAR 2006
Senator Murray. Mr. Rosen, again, this committee is not
here to debate the different reform proposals. What this
committee has to do is provide the funds for the expenses for
next year.
So what I am hearing is that zero funding is not going to
do it and, in fact, it is going to cost more no matter which
proposal is put in place in the short term. I think that is
what this committee is concerned with.
Mr. Mead, I do want to ask you, for the last 2 fiscal
years, the subcommittee funded Amtrak at about $1.2 billion. In
fact, the funding level for the current fiscal year is actually
somewhat smaller than the assistance provided last year because
of the across-the-board cut and the fact that Amtrak is now
required to pay back part of its Federal loan.
Even though Amtrak was able to make it through a funding
freeze for 2005, you are now testifying to this committee that
they need a $200 million to $300 million boost simply to
maintain the status quo in fiscal year 2006. Can you explain
why that is the case?
Mr. Mead. It does sound a bit inconsistent, but I can
explain it, I think.
Actually, for this year, Amtrak has $1.4 billion already in
Federal money. And that is because they closed out the last
fiscal year flush with cash. They had $200 million extra, which
they are going to spend this year. And that puts you at $1.4
billion, not withstanding the fact that the appropriated level
is $1.2 billion.
Now, we are not going to end this fiscal year like we did
last fiscal year. I have pointed out in my statement that we
are going to have about $30 million or $32 million in cash as
you roll into the new fiscal year. So it kind of makes the time
pressures on the appropriation process more of a priority.
Senator Murray. Are you certain that Amtrak services would
have to be reduced if we froze Amtrak funding at $1.2 billion?
Mr. Mead. Am I certain?
Senator Murray. That Amtrak services would have to be
reduced if we did $1.2 billion?
Mr. Mead. Senator, I think that--I am concerned about the
capital condition in the Northeast corridor. I do not want to
analogize the situation to the kid at the dike where he is
putting his fingers in the different cracks in the dike. But I
am concerned about the number of go slow orders in the
Northeast corridor. And I think Amtrak would have no choice but
to cut back service in some significant ways.
Senator Murray. Mr. Gunn, what are your views?
Mr. Gunn. To build on what the Inspector General said, I
think that he has explained why the $1.2 billion does not work
because we are spending this year at the rate of $1.4 billion.
But what makes the problem even worse is that we have a number
of very serious infrastructure issues that have to be dealt
with which add up to about $100 million that are not in this
year's budget. So that gets you up to like $1.5 billion.
If you were to drop back to $1.2 million, what would happen
is you would basically have--you would have $350 million
available for capital instead of the $650 million that we are
saying we need.
The problem is that we have already--with the lead times on
materials, the $350 million would be--probably $100 million of
it would be for material which would sit because you would not
have the money to install it. So your actual capital available
for the railroad would be about $200 million or $250 million.
And if you look at our budget right now, just the car
budget for the Northeast Corridor would be $100 million of
that, to repair the Amfleets, to rebuild the Amfleets. You
would have almost no money for infrastructure work. You would
have $100 million for infrastructure.
That is not sufficient to maintain a high-speed railroad.
What will happen, the Inspector General is correct, you
immediately will have slow orders show up. But more
importantly, the operating budget will go through the roof
because you will have emergency repairs all over the place. It
will quickly come unglued.
Senator Murray. To that point, you were required to suspend
all service of Acela, high-speed Acelas, a few weeks ago
because of the brakes. My understanding is that the loss of
revenue from that is requiring you to eat up a lot of your
available cash right now.
Mr. Gunn. Yes.
Senator Murray. What confidence do you have that Amtrak
will be able to finish this year, knowing that, with a cash
positive situation?
Mr. Gunn. I think we will probably limp into next year.
Senator Murray. What is limp?
Mr. Gunn. By limp, I mean we will have like $20 million
left in the bank, something in that neighborhood.
Senator Murray. That takes into account the Acela?
Mr. Gunn. Yes, I think that will be the case. But I
really--the problem we are having is that the ridership is
still moving around. In other words, we have got replacement
service in effect and the riders appear to be coming back. But
we are definitely going to be hurt to the tune of $5 million a
month net. That is an optimistic number. It depends on what
that number actually turns out to be.
Senator Murray. Mr. Rosen, are you and other members of the
Amtrak board monitoring the situation?
Mr. Rosen. Absolutely, and I think that one of the things
that the company is going to need to do is look for ways to
reduce expense and conserve cash.
Mr. Gunn. The reality is at this point we do not have a lot
of options left to conserve cash.
Senator Murray. Mr. Rosen, if it looks like Amtrak is going
to sink into bankruptcy before the end of this current fiscal
year, is the administration looking at a supplemental
appropriation request for Amtrak to keep it out of bankruptcy?
Mr. Rosen. I think that the board is looking carefully, as
is DOT, at what the cash situation is, and that it will be
incumbent on any responsible management to look for ways to
make that situation work. I cannot speak for all of the board
members but I have some confidence that all of the board
members will, in fact, want the company to do that.
Senator Murray. So it is possible that we could see a
supplemental appropriation if we see a bankruptcy occurring?
Mr. Rosen. Senator, I was referring to monitoring the cash
situation and the company taking appropriate steps to ensure
that it is satisfactory.
Senator Murray. Mr. Gunn, let me go back to you. You have
been required to operate a railroad in the midst of all this
debate over proposals by the administration to put Amtrak into
bankruptcy. I am concerned about how the railroad's day-to-day
finances have been impacted by the language in the President's
budget stating the administration's intention to put the
railroad into bankruptcy. And I am curious how that and the
Senate vote that failed to reinstate your subsidies may have
impacted your daily finances?
Have any of railroad's costs, be they borrowing costs or
insurance costs or expense costs been negatively impacted by
the discussions of bankruptcy or the failed vote in the Senate
to restore your subsidy?
Mr. Gunn. Yes.
Senator Murray. Can you be specific?
Mr. Gunn. A number of things have happened. One, on
insurance, we did have an insurance policy that was up for
renewal. And it was an important policy. And I think we
probably ended up spending $500,000 to $1 million more than we
would have. We had our bond rating downgraded. We are beginning
to get from certain--and I do not want to be specific--but we
are beginning to get from certain suppliers requirements for
changes in payment terms. We are pretty current. We pay on a
current basis. We try to be a good neighbor in that sense. But
we have a number of fairly large accounts that are talking
about our escrowing cash or giving them cash in advance.
We have been unable to close our books, and that means the
meter is still running on our accountants. There is nothing
wrong with the books; the issue is the management letter. So
there has been a number of real impacts, and the biggest impact
which could happen, of course, is on the payable side,
commercial payables.
Senator Murray. We are going to have a vote in just a few
minutes so I will end shortly. But Mr. Rosen, I just want to
say that the only funding for passenger rail included in the
President's budget is the $360 million for the Surface
Transportation Board. As a matter of law, those funds can only
be used to continue the operation of commuter rail services
that operate over Amtrak property or by Amtrak employees once
Amtrak ceases to operate. That is what the law says. The funds
can be used once Amtrak ceases operations.
Your formal statement kind of glossed over that fact and
you seemed to imply that this funding provided to the Surface
Transportation Board could actually be used to continue
operations of Amtrak trains on the Northeast corridor.
So Mr. Gunn, I want to ask you to clarify this question. If
this committee adopted the President's budget of providing zero
to Amtrak and $360 million to the Surface Transportation Board,
do you think that the Northeast corridor trains will be able to
operate next year?
Mr. Gunn. Absolutely not. I can give you a real simple
reason why. If you look at the engineering department's
operating budget and capital budget for fiscal 2004, for
example, it was $550 million, $150 million operating and $400
million capital. And basically that is all corridor, 90 percent
of it is corridor.
But on top of that, in order to run the corridor, you have
to have a payroll department, an accounting department, a law
department. You have to have the support. You have to have
procurement.
We gave the IG--actually the FRA Administrator but it was
also to the IG--a report a year or so ago where we calculated
the cost of a stand-alone corridor and it is $1 billion a year
plus.
Senator Murray. So would it be even safe to operate the
commuter trains under these conditions?
Mr. Gunn. I cannot answer that. I do not know how they are
going to spend the money without an organization to spend it.
That is the problem. We are the ones that spend the money, that
know how to fix the wire, the signals, the track. If we are
gone and have been liquidated, I do not know who spends the
money.
Senator Murray. Mr. Mead, do you want to add anything else
before we recess?
Mr. Mead. Just that I do not think anybody really thinks
that the $360 million is the best way to go. It is a road we
have never been down before. I do not think anybody really
wants to go there.
Senator Murray. Thank you very much. Mr. Rosen, you look
very anxious to clarify.
Mr. Rosen. I would like to add a couple comments to that,
if you give me 1 last minute here.
The question as to whether the STB's funding could be used
for Northeast corridor trains would require a legal
determination as to whether those trains, particularly the ones
that make multiple stops, could be deemed to constitute
commuter service. So I think there is a legal question there
that it would have to be resolved. And it is not a given that
it would only be the trains operated by say New Jersey Transit
or SEPTA and others.
Second, one should not forget that the Northeast corridor
trains, on the operating side, operate at something
approximating break even. They do generate cash. It is not a
given that those would need to stop if Amtrak was otherwise in
a problematic financial situation.
Senator Murray. Unfortunately, we have a vote. I have to
say that Mr. Gunn, let me just ask you, how many years have you
spent working in the railroad and transit industry?
Mr. Gunn. Forty-one.
Senator Murray. Mr. Rosen, how many years?
Mr. Rosen. How many years working in the railroad industry?
Senator Murray. I am sure you are a great lawyer but I just
wonder how much time you have spent working in the railroad and
transit industry?
Mr. Rosen. Given that I have been a lawyer my whole career
and have not been a train operator, I think you know the answer
to that.
Senator Murray. I appreciate that. So you cannot blame me
for considering Mr. Gunn's views to be authoritative on this.
Mr. Rosen. I hope you will take my views as the
authoritative ones on the administration's reform proposals,
rather Mr. Gunn's, too.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Any additional questions submitted to your
department should be answered in a timely manner and will be
included in the record.
[The following questions were not asked at the hearing, but
were submitted to the agency for response subsequent to the
hearing:]
Questions Submitted to the Amtrak Board of Directors
Questions Submitted by Senator Conrad Burns
Question. Your proposal for long-distance trains requires the
performance of trains to be measured against a set of undetermined
performance criteria, which would seem to be mostly--if not entirely--
financial. Under such a system, how would the public service value of
Amtrak be measured?
For example, if folks are riding the Empire Builder to go to a
doctor, or to receive long-term medical care, the cost of that service
might not pencil out, but it is certainly valuable. How would that be
considered, under your proposal?
Answer. The clear signal we have received from Congress and the
administration is that financial performance must improve. The Board
agrees with that message. Nonetheless, I anticipate that the criteria
for evaluating the performance of long distance trains will attempt to
factor into account public benefits and not just financial performance.
For example, the route performance criteria might include a measure
that reflects the number or percentage of passengers on a long distance
route traveling to/from communities where alternate public
transportation services are limited or non-existent.
Question. Your proposal also relies heavily on the development of
corridor trains. Do you have a sense of what the real potential for
such service is?
Answer. Despite the absence of a Federal corridor rail program, 13
States are currently partnering with Amtrak to fund the operation of
corridor services in shorter distance markets (less than 500 miles).
Many of these States have also made capital investments with their own
funds. The growth in ridership and service that has resulted from these
investments--on the Amtrak Cascades route in Washington and Oregon, the
Capitol Corridor in California and the Hiawathas route in Wisconsin to
name just three--demonstrates the potential for corridor rail
development in densely populated corridors throughout the country.
Due to the lack of a Federal capital program for States, there is
no data source to indicate the potential for development of corridor
rail service. Knowing this, over the past 2 years, Amtrak has surveyed
States to get an indication as to their plans for existing or future
corridor development. In 2004, 29 States responded to the survey and
provided details about their plans. Many of them also indicated that
lack of a Federal funding match program is a major impediment to
corridor development, and that enactment of such a program would act as
an incentive to more aggressively develop existing passenger rail
corridors or begin developing new ones.
Based upon the information States provided in the 2004 survey, the
Corridor Appendix to Amtrak's fiscal year 2005-2009 Strategic Plan
(transmitted to Congress and available at www.amtrak.com) identified
eight ``Tier I Corridors'' and four ``Tier II Corridors''. These are
corridors where States have ``ready to go'' plans--including capital
investment plans and funding commitments for State matching funds--for
corridor development projects that could provide significant near-term
benefits if Federal dollars were made available to match State
investments.
Question. Can you discuss the recommendation to shift new workers
away from the Railroad Retirement system into Social Security?
Answer. Amtrak's Strategic Reform Initiatives propose that the
provision of intercity passenger rail services be opened to
competition, and that intercity passenger rail be placed on an equal
footing with other transportation modes. Requiring Amtrak and many
potential new operators of interstate passenger rail service to pay
Railroad Retirement taxes places interstate passenger rail at a
disadvantage with respect to other transportation modes. For example,
the airline industry is subject only to Social Security, and a large
portion of its retirement obligations to its employees has been assumed
by the Federal Government as a result of airline bankruptcies. The fact
that some potential operators of intercity passenger rail might not be
subject to Railroad Retirement taxes under existing law also creates
inequities that ultimately must be eliminated to create a truly
competitive market. Conversely, potential interstate passenger
operators are unlikely to attempt to enter the Amtrak market as
competitors if the cost of doing so includes Railroad Retirement taxes.
Amtrak believes that placing all new intercity passenger rail
employees under Social Security is the best way to transition to a
level playing field and reduce Federal subsidy requirements without
impacting the retirement planning or benefits of current Amtrak
employees and retirees.
______
Questions Submitted to Amtrak
Questions Submitted by Senator Byron L. Dorgan
VETERANS ADVANTAGE
Question. Thousands of North Dakotans depend on Amtrak each year
for their transportation needs. However, long distance trains,
including the Empire Builder that serves my State, are under attack by
the Bush Administration. The administration provides no Federal subsidy
in its fiscal year 2006 budget for Amtrak's long distance rail service.
I understand that Amtrak has submitted a sizable request for funding
for next year, and I will do what I can to support it as a member of
this subcommittee.
On a related note, I would like to talk to you about a program to
provide discounted train service to America's veterans. For more than 2
years, Amtrak offered a 50 percent discount for veterans in off peak
periods. I am told that this was a very successful program.
You may recall that this committee included language in the 2004
conference report strongly urging Amtrak to continue the 50 percent
discount for veterans. Would you please let this committee know what
Amtrak intends to do in the future about this program?
Answer. As you know, Veterans Advantage (VA) is a paid membership
program, and the discount associated with this program is only
available to their subscribers. Amtrak currently offers VA members a 15
percent discount.
The 50 percent discount that you refer to was initiated as a
promotional offer, and the promotion had a mutually agreed upon end
date of December 2003. This deep discount offer was never intended as a
permanent fare program. VA was aware of the terms and conditions of the
promotional discount and knew that it would expire in 2003. No other
business partner with Amtrak received as generous an offer as what was
given to VA for this promotion.
Last year, in an effort to work cooperatively with VA, Amtrak
offered a buy one get one free promotion that was rejected by VA.
Amtrak then offered a limited 50 percent off promotional program to VA
members for the fall of 2004 that too was rejected by VA. The Amtrak
offer was from September 14, 2004 through February 8, 2005. VA sent a
letter dated September 16, 2004, declining the Amtrak 50 percent
discount offer. Since then, Amtrak has tried to work reasonably with VA
in the hopes of reaching a mutually beneficial arrangement for
additional temporary promotional offers for its members, yet our offers
have been turned down.
I want to be clear that for the past year we have worked sincerely
to find a mutually beneficial solution to this matter. In fact, Amtrak
not only continues to offer a 15 percent discount to VA members, but
the program is also promoted on Amtrak's website, system timetables and
other marketing materials. In addition, to provide the program with an
incentive to attract new members, Amtrak is also offering 500 free
points in its Guest Rewards program to new Veterans Advantage members.
Amtrak remains committed to continuing to work with VA and its members.
AMTRAK'S IMPACT ON RURAL COMMUNITIES
Question. Do you believe long distance passenger rail routes will
be able to survive if States are left held responsible for making up
the funding? Has any State indicated to you that they would have the
resources to make up such shortfalls?
Is it your expectation that some of the long distance routes would
cease to exist?
Answer. Under Amtrak's Strategic Reform Initiatives, States would
be required to provide operating funding for long distance trains only
if, after efforts to improve performance, a particular train still
fails to meet minimum performance thresholds, and then only to cover
the ``gap'' between the threshold amount and the train's actual
operating losses. While no State has indicated that it is in a position
to bear the full operating losses of multi-State long distance trains,
we believe that it is possible that some States might provide some
``gap closing'' amounts required under this proposal.
Amtrak does not anticipate that long distance routes would survive
if States were responsible for covering all operating losses.
Significant impediments to States assuming such responsibility include
the large number of States (generally 6-12) served by each long
distance route; differences in relative benefits received by individual
States; and variations in States' financial resources, transportation
policies, and constitutional statutory frameworks governing
transportation funding. It bears noting that on no occasion in Amtrak's
34-year history has a group of States offered to provide operating
funds to retain long distance routes slated for discontinuance.
Whether some trains are ultimately added to or subtracted from the
long distance system will depend upon the performance of individual
routes and, for any routes that do not meet minimum performance
thresholds, States' willingness to fund a portion of operating losses
so that those thresholds are met.
AMTRAK AND COMPETITION
Question. Part of the Amtrak reform plan is aimed at promoting
competition. Have other rail operators indicated to you that they wish
to provide passenger rail service for the long distance routes, such as
in my State of North Dakota?
Answer. No other railroad has indicated to Amtrak that it is
interested in operating long distance trains. Some private companies
have expressed very preliminary interest in providing on-board services
(food and beverage/sleeping car) on long distance trains. Amtrak
remains open to other providers assuming additional services, or
ultimately operating entire routes, if legal and contractual
impediments are addressed.
CONCLUSION OF HEARINGS
Senator Murray. The subcommittee stands in recess, subject
to the call of the Chair.
[Whereupon, at 11:32 a.m., Thursday, May 12, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]