Intercity Passenger Rail:

Amtrak Faces Challenges in Improving Its Financial Condition

T-RCED-00-30: Published: Oct 28, 1999. Publicly Released: Oct 28, 1999.

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Pursuant to a congressional request, GAO discussed Amtrak's overall financial condition, its progress in becoming free of operating subsidies, its use of the Taxpayer Relief Act (TRA) of 1997 funds, and its need for capital investment to improve quality of service.

GAO noted that: (1) Amtrak's overall financial condition improved in fiscal year (FY) 1999; (2) its net loss--revenues less expenses--was $907 million in FY 1999; (3) this loss is $23 million less than Amtrak's net loss of $930 million in FY 1998; (4) Amtrak estimates that its net loss for FY 2000 will decrease to $828 million; (5) the administration and Congress have directed Amtrak to be free of federal operating subsidies by the end of 2002; (6) Amtrak reduced its budget gap--the gap that it needs to close to be free of federal operating subsidies--by $18 million in FY 1999; (7) however, it must reduce the gap by an additional $291 million in the next 3 years; (8) this needed reduction is nearly four times greater than the reduction Amtrak has been able to achieve in the previous 5 years; (9) finally, Amtrak faces many challenges in meeting its business plan goals to achieve operational self-sufficiency; (10) TRA provided Amtrak with about $2.2 billion to acquire capital improvements and maintain existing equipment in intercity passenger rail service, among other things; (11) Amtrak reports spending over $1.2 billion of these funds, as of May 31, 1999; (12) Amtrak has spent over half of this money--or $756 million--on capital improvements; (13) Amtrak has also applied $427 million, or about one-third of its TRA expenditures, to a pool of expenses for maintenance of equipment through May 1999; (14) however, because of the way that Amtrak applies TRA funds to maintenance of equipment expenses, it has not identified specific expenses that TRA funds were used to cover; (15) capital investments are critical to supporting Amtrak's business plans and maintaining its viability; (16) such investments are needed to help Amtrak improve its quality of service and attract revenues; (17) however, Amtrak does not have a comprehensive 5-year plan; (18) further, it has significant unmet capital needs over the next 20 years; and (19) as a result, it is unclear at this time what Amtrak's total capital needs are and how Amtrak plans to fund these needs.

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