Intercity Passenger Rail:

Financial and Operating Conditions Threaten Amtrak's Long-Term Viability

RCED-95-71: Published: Feb 6, 1995. Publicly Released: Feb 6, 1995.

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Pursuant to a legislative requirement, GAO reviewed Amtrak's financial and operating condition, focusing on: (1) whether Amtrak can overcome its financial and operating problems; and (2) alternative actions Amtrak could take to meet its future funding requirements.

GAO found that: (1) Amtrak's financial condition has declined steadily since 1990 and its ability to provide nationwide service is seriously threatened; (2) although Amtrak's funding has increased to almost $1 billion in 1995, the increase has not been sufficient to cover its operating deficiencies and capital investment, equipment, and facility improvement requirements; (3) although Amtrak has assumed debt, deferred maintenance, and reduced staffing to address its capital shortfall, these actions have diminished the quality and reliability of Amtrak's service; (4) it is unlikely that Amtrak can overcome its financing, capital investment, and service quality problems without significant increases in passenger revenues or funding; (5) Amtrak revenues have suffered from an unfavorable operating environment and intense fare competition from airlines; (6) Amtrak faces additional equipment and facility maintenance costs and must negotiate new agreements with freight railroads to access their track; (7) Amtrak could substantially increase its funding by making capital investments and improving service quality to retain current riders and attract new ones, but this approach would be costly and difficult to achieve in the current budget environment; (8) the privatization of Amtrak is not feasible because few private firms would be willing to assume the risks of providing intercity passenger service; and (9) Amtrak could realign or reduce its current route system and retain service in the locations where it could cost-effectively carry the largest number of passengers.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: To assess the public will regarding whether Amtrak should continue as a national system, Senator Trent Lott, Chairman of the Subcommittee on Surface Transportation and Merchant Marine, and Senator Larry Pressler, Chairman of the Committee on Commerce, Science and Transportation directed Amtrak to form a task force of transportation experts. This task force held a number of public forums across the country and reported in August 1995 that the public supports Amtrak.

    Matter: In light of Amtrak's financial and operating problems, Congress should consider whether Amtrak's original mission of providing nationwide intercity passenger rail service at the present level is still appropriate. If Congress decides to reassess the scope of Amtrak's mission, it could direct Amtrak or a temporary commission, similar to the one established to close military bases, to make recommendations and offer options defining and realigning Amtrak's basic route network so that efficient and quality service could be provided within the funding available from all sources. Congress could then make the final decision on Amtrak's future route network.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Amtrak is now performing an exhaustive cost study as it renegotiates its contracts with commuter authorities that use the Northeast Corridor.

    Recommendation: To ensure that Amtrak accurately communicates its operating and financial conditions and its need for federal funds to Congress, the President of Amtrak should undertake a comprehensive review and/or audit of the costs associated with its commuter rail and other ancillary activities, identifying the costs associated with these activities, the way these costs are allocated to individual commuter rail contracts, and the overall profit or loss of each activity as well as assessing the appropriateness of any formulas used to allocate costs.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  2. Status: Closed - Not Implemented

    Comments: Since GAO issued its report, Amtrak has adopted the position that it will not undertake any high-speed rail activities outside the Northeast Corridor that are not fully paid by the states involved. Under this premise, Amtrak's costs would not increase.

    Recommendation: To ensure that Amtrak accurately communicates its operating and financial conditions and its need for federal funds to Congress, the President of Amtrak should develop and present to Congress a plan outlining the costs and benefits of participating in high-speed rail service outside the Northeast Corridor, including the impact on Amtrak's annual grant request.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  3. Status: Closed - Not Implemented

    Comments: In the past, Amtrak officials have said that this information can be presented and intended to do so. However, Amtrak has failed to include this information in its federal grant requests since this recommendation was first made. This performance, in conjunction with Amtrak's general focus on financial survival, makes it unlikely that this recommendation will be implemented.

    Recommendation: To ensure that Amtrak accurately communicates its operating and financial conditions and its need for federal funds to Congress, the President of Amtrak should incorporate into federal grant requests dollar estimates of the costs of future accident and weather-related contingencies.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  4. Status: Closed - Not Implemented

    Comments: Amtrak management has said that this information is available, and intends to include it in the annual federal grant request. However, it has failed to do so since the recommendation was first made. Based on this performance, and Amtrak's more global focus on financial survival, it is unlikely that Amtrak will implement this recommendation.

    Recommendation: To ensure that Amtrak accurately communicates its operating and financial conditions and its need for federal funds to Congress, the President of Amtrak should provide detailed information in federal grant requests on how revenues from intercity passenger service have been estimated.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  5. Status: Closed - Implemented

    Comments: Amtrak's 1996 grant request included a list of proposed legislative changes and a discussion of the impact that each would have on Amtrak's finances and operations.

    Recommendation: To ensure that Amtrak accurately communicates its operating and financial conditions and its need for federal funds to Congress, the President of Amtrak should provide Congress with proposed legislative changes that could improve Amtrak's long-term viability, along with estimates of the expected effect of each proposal on Amtrak's finances and a discussion of the other parties that will likely be affected and to what extent.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

 

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