Analysis of Proposal To Reduce Amtrak's Federal Subsidy

CED-81-93: Published: Apr 9, 1981. Publicly Released: Jul 28, 1981.

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GAO inquired into AMTRAK's estimate that it can provide intercity rail passenger service only if the Northeast corridor of the federal subsidy is limited to $613 million in fiscal year (FY) 1982. GAO met with AMTRAK and Federal Railroad Administration (FRA) officials to obtain their comments and analysis of AMTRAK's estimate. Some of the data used in making the estimate were taken from AMTRAK's financial reporting systems. Other parts of the estimate are based on AMTRAK's subjective judgment of factors such as the number of employees who would be adversely affected by route cutbacks and the number of affected employees who are likely to receive labor protection payments in FY 1982.

AMTRAK estimated that it would need $1,006.3 million in FY 1982. It did not include likely costs for interest and state and local real estate and personal property taxes because it assumed that legislation would be enacted to eliminate these obligations. It also assumed that five of its least cost-effective trains would be discontinued and one other marginal train would be restructured. It estimated that the restructured system would produce revenues of $623.4 million in FY 1982. AMTRAK prepared a detailed financial analysis to determine what services it could provide if its subsidy were limited to $613 million. It does not believe that costs allocated to the Northeast corridor could be reduced to $67.5 million in a Northeast corridor-only operation. Irreducible commitments for capital acquisitions would cost $136 million, and closing down all services outside the Northeast corridor would probably cost $25 million. Resulting statutory and contractual obligations for labor protection payments would cost about $200 million. AMTRAK believed that it would need a total federal subsidy of $621 million for a Northeast corridor-only operation. The proposed $613 million appropriation would shut down all service outside the corridor. FRA believes AMTRAK should be able to provide service outside the corridor within the budget. It estimates that all costs of operating service outside the corridor would be covered by $150 million.

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