This is the accessible text file for GAO report number GAO-07-382R 
entitled 'Intercity Passenger Rail: Highlights of GAO report on Need 
for National Policy and Strategies to maximize Public Benefits from 
Federal Expenditures' which was released on January 19, 2007. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
Washington, DC 20548: 

January 18, 2007: 

The Honorable Mary Peters: 
Chairperson: 
National Surface Transportation Policy and Revenue Study Commission: 

Subject: Intercity Passenger Rail: Highlights of GAO Report on Need for 
National Policy and Strategies to Maximize Public Benefits from Federal 
Expenditures: 

Dear Madam Chairperson: 

The future of intercity passenger rail service in the United States has 
come to a critical juncture. The National Railroad Passenger 
Corporation (Amtrak) continues to rely heavily on federal subsidies-- 
over $1 billion annually in recent years--and operating losses have 
remained high. In addition, Amtrak will require billions of dollars to 
address deferred maintenance and achieve a "state of good 
repair."[Footnote 1] These needs for Amtrak come at a time when the 
nation faces long-term fiscal challenges. As we reported in February 
2005, the federal government's financial condition and long-term fiscal 
outlook present enormous challenges to the nation's ability to respond 
to emerging forces reshaping American society, the United States' place 
in the world, and the future role of the federal government.[Footnote 
2] Addressing the projected fiscal gaps will require policy makers to 
examine the affordability and sustainability of all existing programs, 
policies, functions, and activities throughout the federal budget. 

Reexamining the federal role and expenditures on intercity passenger 
rail service will be particularly difficult because opinions differ 
about what this service should be. Some advocate a greatly expanded 
federal role and the expansion of intercity passenger rail to relieve 
growing congestion on highways and airways and (as energy prices 
increase) to provide more fuel-efficient transport; others believe the 
federal role should be scaled back, and that at least some federal 
operating subsidies should be eliminated. Specific proposals vary-- 
while one proposal would keep Amtrak largely intact and provide more 
funding for capital and other improvements, another proposal would 
significantly restructure the management and accountability for 
intercity passenger rail with regional, state, and local entities 
making fundamental decisions about what intercity passenger rail 
services are justified and will receive public financial support. 
Amtrak itself has proposed a new vision for intercity passenger rail 
service that would include a greater role for states in planning and 
developing passenger rail corridors. The former acting president of 
Amtrak told us that, in his view, Amtrak itself is not a substitute for 
a national intercity passenger rail policy and that Congress needs to 
develop such a policy. One of the primary difficulties in reexamining 
the federal role and expenditures on intercity passenger rail service 
and developing a clear national intercity passenger rail policy will be 
reconciling the wide diversity of views about what this service should 
be and what it should achieve. 

On November 13, 2006, we issued our most recent report on intercity 
passenger rail.[Footnote 3] The objectives of this report were to 
determine: (1) the characteristics of the current U.S. intercity 
passenger rail system and the potential benefits obtained from this 
system, (2) foreign experiences with passenger rail reform and 
observations for the United States, (3) how well the United States is 
positioned for reforming[Footnote 4] its intercity passenger rail 
system, (4) challenges the United States faces in overcoming obstacles 
to reform, and (5) potential options for the future of intercity 
passenger rail service. In general, we found that the current system is 
in poor financial condition and does not target federal funds to where 
they provide the greatest public benefits, such as transportation 
congestion relief. We also found that foreign experience with reform 
shows that the United States needs to consider three key elements in 
attempting any reform: (1) defining national policy goals, (2) defining 
the roles of government and other participants, and (3) establishing 
stable funding. The U.S. is currently not well positioned to address 
these reform elements and there are a number of challenges to be 
overcome in addressing the key reform elements, including the wide 
diversity of views in determining the overall goal for passenger rail 
in the United States and the federal role in achieving this goal. There 
are four primary options for the future federal role in intercity 
passenger rail. These are keeping the existing structure and funding of 
intercity passenger rail, making incremental changes within the 
existing structure, discontinuing the federal role in intercity 
passenger rail, and restructuring intercity passenger rail. Our report 
recommends that Congress consider restructuring the approach for 
providing intercity passenger rail service in the United States. 

In light of these findings, you asked us to testify before the National 
Surface Transportation Policy and Revenue Study Commission on January 
17, 2007, about issues in our recent report. The enclosure is my 
presentation to the Commission. A copy of our November 13, 2006, report 
(GAO-07-15) can be found at www.gao.gov. 

Sincerely yours, 

Signed by: 

JayEtta Z. Hecker: 
Director, Physical Infrastructure Issues: 

Enclosure: 

Intercity Passenger Rail: Highlights of GAO Report on Need for National 
Policy and Strategies to Maximize Public Benefits from Federal 
Expenditures: 

National Surface Transportation Policy and Revenue Study Commission: 
January 17, 2007: 

Statement of JayEtta Z. Hecker: 
Director, Physical Infrastructure Issues: 

Overview: 

Background: Long Term Fiscal Challenges: 

Objectives: 

Scope and Methodology: 

Findings: 

Options for Reform: 

Conclusions: 

Background: Long Term Fiscal Challenges: 

Imprudent and unsustainable fiscal path: 

Known demographic trends and rising health care costs: 

Unsustainable deficits and debt: 

Long Term Fiscal Challenges: 

Composition of Spending as a Share of GDP: 

Assuming Discretionary Spending Grows with GDP after 2005 and All 
Expiring Tax Provisions are Extended: 

[See PDF for Image] 

Source: GAO analysis (August 2006). 

[End of figure] 

Reexamining the base GAO's 21st Century Challenges report: 

A strategy for reexamining the base of government: 

21st Century Challenges Reexamining the Base of the Federal Government: 

Reexamining the base: Generic reexamination questions: 

Does the program. 

1. have a clear federal role and mission? 

2. have outcome-based performance measures? 

3. target areas with the greatest needs and least capacity? 

4. encourage S/L governments and private sector to invest their own 
resources? 

5. employ the best tools and approaches?  

6. appear affordable and sustainable in the long-term? 

Objectives of IPR Review: 

Identify the characteristics of the U.S. intercity passenger rail (IPR) 
system and the potential benefits provided by this system. 

Identify foreign experiences with passenger rail reform and lessons 
learned for the United States. 

Assess how well the U.S. is positioned to reform IPR service. 

Identify the challenges that must be addressed in any reform efforts. 

Identify potential options for the future federal role in IPR service. 

Scope and Methodology: 

Examined characteristics of current U.S. IPR system, including 
ridership and financial characteristics of Amtrak's routes. 

Collected and analyzed data on restructuring from Canada, France, 
Germany, Japan, and the United Kingdom: 

Interviewed Amtrak, Federal Railroad Administration, state, rail labor 
unions, freight railroad officials, and others. 

Reviewed studies on passenger rail reform and consulted with 
international rail experts. 

Findings: Characteristics and Value of Current IPR Structure: 

Current structure remains in poor financial condition with deferred 
capital and maintenance projects. 

Amtrak route structure exists largely as it did when it began over 35 
years ago. 

Federal resources are being devoted to areas of comparative 
disadvantage, such as long distance routes. 

Corridor services are a comparative strength and hold the most promise 
for financial viability and potential public benefits. 

Amtrak Route Maps, 1971 and 2005: 

[See PDF for image] 

Sources: National Association of Rail Passengers; GAO; Coral (map). 

Source, GAO, Coral (map). 

[End of figure] 

Amtrak's Market Share Compared to Air Services - Selected Origins and 
Destinations: 

[See PDF for Image]  

Source: McKinsey and Company. 

[End of figure] 

Trip Distance on Amtrak's Long Distance Routes, Fiscal Year 2005: 

[See PDF for image] 

Source: GAO analysis of Amtrak data. 

[End of figure] 

Findings: Foreign Experiences: 

Foreign countries have employed a variety of approaches in reforming 
IPR, including: 

* Shifting from service operator to service regulator or customer and, 
in some cases, devolving decision-making authority to local and 
regional governments. 

* Restructuring existing IPR organizational structure and introducing 
competition and privatization. 

* Changing the public funding structure. 

Reform Approaches Used by Site Visit Countries: 

Approach: Clearly establishing the roles and responsibilities of 
intercity passenger rail stakeholders: Shift from service operator to 
service regulator/oversight; 
Canada: [Empty]; 
France: [Empty]; 
Germany: Check; 
Japan: Check; 
United Kingdom: Check. 

Approach: Clearly establishing the roles and responsibilities of 
intercity passenger rail stakeholders: Shift away from infrastructure 
manager, yet remaining full owner; 
Canada: [Empty]; 
France: Check; 
Germany: Check; 
Japan: [Empty]; 
United Kingdom: [Empty]. 

Approach: Clearly establishing the roles and responsibilities of 
intercity passenger rail stakeholders: Devolving decision-making 
authority to local and regional governments; 
Canada: [Empty]; 
France: Check; 
Germany: Check; 
Japan: [Empty]; 
United Kingdom: [Empty]. 

Approach: Clearly establishing the roles and responsibilities of 
intercity passenger rail stakeholders: Shift from service operator to 
customer; 
Canada: Check; 
France: Check; 
Germany: Check; 
Japan: [Empty]; 
United Kingdom: Check. 

Approach: Changing the public funding structure used to support 
intercity passenger rail: Changes in government commitment to funding; 
Canada: Check; 
France: Check; 
Germany: Check; 
Japan: Check; 
United Kingdom: Check. 

Approach: Changing the public funding structure used to support 
intercity passenger rail: Changes to infrastructure funding mechanisms; 
Canada: [Empty]; 
France: Check; 
Germany: Check; 
Japan: [Empty]; 
United Kingdom: Check. 

Approach: Changing the public funding structure used to support 
intercity passenger rail: Changes to funding dissemination; 
Canada: [Empty]; 
France: Check; 
Germany: Check; 
Japan: Check; 
United Kingdom: Check. 

Approach: Restructuring existing passenger rail organizational 
structure;  
Canada: Check; 
France: Check; 
Germany: Check; 
Japan: Check; 
United Kingdom: Check. 

Approach: Introducing competition/privatization in intercity passenger 
rail operations; 
Canada: [Empty]; 
France: [Empty]; 
Germany: Check; 
Japan: Check; 
United Kingdom: Check. 

Source: GAO analysis of foreign data. 

[End of table] 

Findings: Foreign Experiences: 

Foreign countries addressed key reform elements in implementing new 
approaches: 

* Established clearly defined national policy goals. 

* Clearly defined government and stakeholder roles. 

* Established consistent; committed funding. 

Findings: How Well U.S. is Positioned for Reform: 

U.S. not well positioned to reform IPR: 

* Goals and expected outcomes of current passenger rail policy are 
ambiguous. 

* Stakeholder roles are unclear. 

* Funding difficulties due to other priorities or lack of consensus. 

Amtrak can and has taken action to reduce costs but is not positioned 
to address broader goals, roles, and funding issues. 

Findings: Challenges That Must be Addressed: 

Federal role: What should it be? Federal government has policy and 
ownership interests: 

Federal-state partnerships: Role of state participation/Use of 
financial leveraging/Mechanisms for interstate cooperation: 

Freight railroad issues: Defining Infrastructure access and cost 
issues: 

Workforce issues: Availability of expertise, flexibility and 
productivity of the workforce/Potential labor protection payments/ 
Status of labor-management laws: 

Private sector issues: Availability of private sector operators/Costs 
of private operators/Incentives needed for participation: 

Funding issues: Availability of funds/Aligning decisionmaking with 
beneficiaries/Development of Incentives for stakeholder participation 
and cost sharing: 

Response to IPR funding challenges are more complex than providing 
comparable funding to other transport modes: 

* Other modes, like highways and airports, receive funds from explicit 
taxes and user fees. 

* Commitments made to some user-fee based transport modes (e.g., 
highways) is not sustainable. 

* The magnitude of federal funding for IPR needs to be based on the 
role IPR does (or could) play in national mobility relative to other 
transport modes and their public benefits. 

Issues associated with adopting a "user pays" principle: 

* "User pays" concept would have the full range of system users (e.g., 
states, public) pay the costs to build and maintain the rail 
infrastructure. 

* If adopted, a better matching of fees paid to costs incurred by 
diverse users could provide incentives to make modal choices and select 
options based on true costs. 

* Amtrak is currently unable to define "true costs" of IPR service due 
to accounting practices and multiple information systems. 

Options for Reform: Components for Defining Federal Involvement in IPR: 

Component: Set national goals for the system; 
Description: 
* establish what federal participation in the system is designed to 
accomplish; 
* should be specific, measurable, achievable, and outcome-based. 

Component: Establishing and clearly defining stakeholder roles; 
Description: 
* state and local governments; 
* private participation; 
* ensure that the federal role does not negatively affect the 
participation or transportation role of other stakeholders. 

Component: Determine effective funding approaches; 
Description: 
*federal funding for future projects involving intercity passenger rail 
service will require a high level of justification; 
* cost sharing for investment in new infrastructure will maximize the 
impact of any federal expenditures and investment. 

Source: GAO analysis. 20: 

[End of Table] 

Options for Reform: 

Potential Options for Reform: 

1. Keep existing structure and funding of IPR. 

2. Incremental changes within existing structure of IPR. 

3. Discontinue federal role in IPR. 

4. Restructure IPR. 

Framework for Deciding the Future of Federal Involvement in Intercity 
Passenger Rail: 

[See PDF for Image] 

Source: GAO. 

[End of Figure] 

Options for Reform: 

Each option has advantages, disadvantages, and challenges. 

* Status Quo: Foregoes benefits from improving the system and could 
lead to deteriorating infrastructure and aging equipment that would 
increase costs. 

* Incremental Change: Does not address fundamental flaws in the system. 

* Discontinue: May reduce services; would require detailed planning; 
substantial federal expenditures: 

* Restructure: Allows opportunities for increased transportation and 
public benefits. 

Conclusions: 

Long term fiscal challenges require reexamination of base of 
government: 

Effective integration of IPR into the national transportation system 
and targeting federal support to assure performance, results, and 
accountability, calls for a change to the current structure of and 
federal role in IPR. 

Development of a national IPR policy should have: 

(1) clearly defined federal role, 
(2) outcome-based policy goals, 
(3) financing that stimulates investment by others, and 
(4) appropriate accountability mechanisms. 

The current IPR structure meets none of these goals. 

Matter for Congressional Consideration (from November 13, 2006 report): 

Restructure the approach for the provision of IPR service in the United 
States. 

Solicit input from all stakeholders, particularly the Department of 
Transportation (DOT) and the Federal Railroad Administration. 

Consider the relationship between passenger and freight railroads and 
the national freight transportation policy being developed by DOT. 

Intercity Passenger Rail: 

Need for National Policy and Strategies to Maximize Public Benefits 
from Federal Expenditures: 

GAO-07-15: 

Statement of JayEtta Z. Hecker: 
Director, Physical Infrastructure Issues: 
January 17, 2007: 

[End of Section] 

(544135): 

FOOTNOTES 

[1] "State of good repair" is the outcome expected from the capital 
investment needed to restore Amtrak's right-of-way (track, signals, and 
auxiliary structures), other infrastructure (e.g., stations), and 
equipment to a condition that requires only routine maintenance. 

[2] GAO, 21ST Century Challenges: Reexamining the Base of the Federal 
Government, GAO-05-325SP (Washington, D.C.: Feb. 2005). 

[3] GAO, Intercity Passenger Rail: National Policy and Strategies 
Needed to Maximize Public Benefits from Federal Expenditures, GAO-07-15 
(Washington, D.C.: Nov. 13, 2006). 

[4] For purposes of this report, the word reform is intended to cover 
both incremental changes that might be made within the current 
structure of intercity passenger rail, as well as more significant 
changes that could be made, including wholesale restructuring in how 
intercity passenger rail service is provided. 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site (www.gao.gov). Each weekday, GAO posts 
newly released reports, testimony, and correspondence on its Web site. 
To have GAO e-mail you a list of newly posted products every afternoon, 
go to www.gao.gov and select "Subscribe to Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office 441 G Street NW, Room LM 
Washington, D.C. 20548: 

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202) 
512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 U.S. 
Government Accountability Office, 441 G Street NW, Room 7125 
Washington, D.C. 20548: 

Public Affairs: 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, D.C. 20548: