Intercity Passenger Rail:

Outlook for Improving Amtrak's Financial Health

T-RCED-98-134: Published: Mar 24, 1998. Publicly Released: Mar 24, 1998.

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GAO discussed: (1) Amtrak's financial performance during fiscal year (FY) 1997 and during the first quarter of FY 1998; (2) challenges Amtrak will face in improving its financial health; and (3) the potential impact that recently enacted legislation may have on Amtrak's financial condition.

GAO noted that: (1) Amtrak's financial condition continues to deteriorate; (2) although Amtrak has been able to reduce its net losses (total expenses less total revenues) from about $892 million in FY 1994 to about $762 million in FY 1997, the 1997 loss would have been $63 million higher were it not for one-time increases in revenue from the sales of real estate and access rights for telecommunications; (3) in March 1998, Amtrak projected that its net loss for FY 1998 could be about $845 million--about $56 million more than planned; (4) Amtrak will continue to face challenges in improving its financial health; (5) Amtrak hopes to improve its financial health by increasing revenues through such actions as expanding mail and express service (delivery of higher-value, time-sensitive goods) and instituting high-speed rail service between New York City and Boston; (6) however, Amtrak has had to substantially scale back its net revenue projections for express business, and positive net income from the high-speed rail program will not occur for another 2 years; (7) Amtrak does not currently plan to reduce routes, even though one of its routes--the Metroliner service between Washington, D.C., and New York City--makes money; (8) instead it plans to fine-tune its route network and conduct a comprehensive market analysis; (9) federal funding and recently enacted reforms will not solve Amtrak's financial problems; (10) although the Taxpayer Relief Act of 1997, FY 1998 capital appropriations, and the President's proposed FY 1999 budget, if enacted, will provide Amtrak with historic levels of capital support, this support will fall short of Amtrak's identified capital needs by about $500 million; (11) in addition, Amtrak plans to use $1.8 billion of the $2.8 billion in requested federal capital grant funds to pay maintenance expenses between FY 1999 and FY 2003; (12) the use of funds for this purpose would substantially reduce the remaining level of funds available to acquire new equipment or make the capital improvements necessary to reduce Amtrak's cost and/or increase revenues; (13) therefore, such use will have a negative impact over the long term; and (14) furthermore, the Amtrak Reform and Accountability Act of 1997 significantly changed Amtrak's operations, but these reforms will provide few, if any, immediate financial benefits.

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