[Senate Hearing 109-369]
[From the U.S. Government Publishing Office]
S. Hrg. 109-369
REAUTHORIZATION OF AMTRAK
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 21, 2005
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMint, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
David Russell, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director
------
SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
TRENT LOTT, Mississippi, Chairman
TED STEVENS, Alaska DANIEL K. INOUYE, Hawaii, Ranking
JOHN McCAIN, Arizona JOHN D. ROCKEFELLER IV, West
CONRAD BURNS, Montana Virginia
KAY BAILEY HUTCHISON, Texas BYRON L. DORGAN, North Dakota
OLYMPIA J. SNOWE, Maine BARBARA BOXER, California
GORDON H. SMITH, Oregon MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia FRANK R. LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire E. BENJAMIN NELSON, Nebraska
DAVID VITTER, Louisiana MARK PRYOR, Arkansas
C O N T E N T S
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Page
Hearing held on April 21, 2005................................... 1
Statement of Senator Burns....................................... 44
Statement of Senator Dorgan...................................... 41
Statement of Senator Lautenberg.................................. 3
Statement of Senator Lott........................................ 1
Statement of Senator Pryor....................................... 39
Statement of Senator Stevens..................................... 49
Statement of Senator Sununu...................................... 46
Witnesses
Gunn, David L., President and CEO, Amtrak........................ 22
Laney, ESQ., David M., Chairman of the Board, Amtrak............. 17
Prepared statement........................................... 20
Mead, Hon. Kenneth M., Inspector General, Department of
Transportation................................................. 23
Prepared statement........................................... 27
Rosen, Hon. Jeffrey A., General Counsel, Department of
Transportation................................................. 4
Prepared statement........................................... 6
Appendix
Response to Written Questions Submitted to Kenneth M. Mead by:
Hon. Daniel K. Inouye........................................ 71
Hon. Olympia J. Snowe........................................ 64
Hon. Frank R. Lautenberg..................................... 73
Response to Written Questions Submitted to Hon. Jeffrey A. Rosen
by:
Hon. Daniel K. Inouye........................................ 72
Hon. Frank R. Lautenberg..................................... 73
Response to Written Questions Submitted to David M. Laney, ESQ.
by:
Hon. Daniel K. Inouye........................................ 69
Hon. Frank R. Lautenberg..................................... 71
Hon. Gordon H. Smith......................................... 67
Response to Written Questions Submitted to David L. Gunn by:
Hon. Daniel K. Inouye........................................ 68
Hon. Frank R. Lautenberg..................................... 71
Hon. Gordon H. Smith......................................... 66
Hon. Olympia J. Snowe........................................ 65
Smith, Hon. Gordon H., U.S. Senator from Oregon, prepared
statement...................................................... 64
Snowe, Hon. Olympia J., U.S. Senator from Maine, prepared
statement...................................................... 63
REAUTHORIZATION OF AMTRAK
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THURSDAY, APRIL 21, 2005
U.S. Senate,
Subcommittee on Surface Transportation and Merchant
Marine,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:30 a.m. in
room SR-253, Russell Senate Office Building. Hon. Trent Lott,
Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. TRENT LOTT,
U.S. SENATOR FROM MISSISSIPPI
Senator Lott. If the hearing will come to order, we will go
ahead and get started with my opening statement and then we
will move to the witness testimony, we're going to have a
number of Senators that will be joining us this morning, we
expect eight or ten, but we work on Senate time, which is about
15 minutes late. But we'll get started anyway, so we can sort
of set the parameters on this hearing.
I want to thank the witnesses for being here, I'm looking
forward to hearing your testimony, and I'm also looking forward
to having the chance for the Committee to ask some questions,
and try to begin to get a vision of where we really want to go.
This morning the Subcommittee on Surface Transportation and
Merchant Marine will be receiving testimony on the policy
issues surrounding the reauthorization of Amtrak. As Chairman
of this Subcommittee, enacting legislation to reform Amtrak is
one of my top priorities for this session of Congress. I am
willing to work hard on developing consensus, bipartisan
legislation, but only if the legislation truly improves the
situation and makes some sense for the future.
Ten years ago, when I also served as Chairman of this
Subcommittee, I helped write the legislation which eventually
became the Amtrak Reform Act of 1997. Unfortunately, for a
variety of reasons, I'm sure, many of the Act's provisions
intended to improve Amtrak's performance were never used.
Despite assurances from Amtrak management at the time that the
railroad was on a ``glide path to self-sufficiency,'' Amtrak
still requires large Federal operating subsidies. One of my
goals for today's hearing is to determine why we didn't use
more of the 1997 legislation, what was wrong with the way we
wrote it, and make sure that we don't repeat those mistakes,
come up with some new and different ideas.
I also think that it's important we are honest with
ourselves about what are the prospects for Amtrak or whatever
we have in its place to actually ever make a profit, or to be
self-sufficient. If that's not going to happen, we need to
acknowledge it, if it's not going to happen, but if we want to
keep it or some form of it, how are we going to fund it?
We put that decision off long enough. This is the year
where we have to make the cut, make the decision. Today we will
basically hear three proposals on how to proceed with intercity
rail. First we'll hear from the Administration. The President
proposed zero funding for Amtrak--as I understand it, not to
kill it, but to send Congress a wake-up call that the time to
reform Amtrak is now. I hope that was their thinking, and I
hope that we get the message without actually killing it. In a
way it could happen, we didn't get the legislation last year
for a variety of reasons, no use trying to re-hash that, we're
going to get something this year, one way or the other, we're
going to make a decision.
Now last week the Administration re-submitted its
legislation proposal for reforming Amtrak, I'm sure we'll hear
about that today, and while I think some of its provisions are
totally unrealistic, some of them maybe can be used, and we'll
try to decide which is which.
Second, the Amtrak Board and David Gunn, the Amtrak
President and CEO, have put together a Strategic Reform
Initiative including some legislative proposals. I think the
Board should be commended for its hard work in developing this
initiative, which in many ways is a departure from some of the
past thinking that we've had from the Board.
Finally, we'll hear from the Department of Transportation's
Inspector General, who has worked on these Amtrak issues for
many years, both at the Department of Transportation and at the
General Accounting Office. His testimony proposes an outline
for a new model of intercity passenger rail. I've found his
testimony in the past to be very helpful, our private
discussions have been giving me some ideas of what we need to
do, and so I look forward to hearing from all the witnesses.
It is my intent to, after this hearing, after consultation
with the Chairman of the full Committee, to begin to actually
develop a bill. It is my intent that it consider all the
aspects of where we need to go, where we can go, it's my intent
for it to be bipartisan, I want the Administration to be
involved. Among other things, I've already met with management,
with the Secretary of Transportation, the Inspector General,
Mr. Gunn, labor, and have talked to a number of Senators on
both sides of the aisle, including Senator Lautenberg.
We're going to get this done, and we're going to have
something ready to go to the floor this summer. We're going to
beat the deadline of having to get something done before the
end of this fiscal year. We'll have to get the votes, but we're
going to come up with something, and I hope it's something
worth having.
Senator Lautenberg?
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Mr. Chairman, you're an inspiration
this morning and I'm glad to see that energy and vitality
focused on what we do about Amtrak and what we do about making
sure that we have a transportation system that reflects the
needs of the country. And I am appreciative of the fact that
you're holding this hearing on the reauthorization of Amtrak.
It's been 8 years since we last authorized Amtrak. At that
time I was, I look back with some envy, I was Ranking Member of
the Transportation Appropriations Subcommittee, sabbaticals
aren't all that they're cracked up to be, Mr. Chairman.
I can't overstate how important it is for our country, as I
see it, to have a balanced, national transportation system.
We've got an interstate highway system, we have a national
system of airports to facilitate air travel, but passenger rail
has fallen by the wayside in our country, and even if you want
to take the train, service is limited. And in many parts of the
country it isn't an option at all, and we can do better, and we
must.
Providing another transportation choice isn't just a matter
of convenience--I see it as a matter of national security, to
ensure that we don't depend entirely on one mode of travel if a
problem strikes. Many Americans would choose to take a train if
they could, and many already do. Thousands of senior citizens
use Amtrak service to Florida rather than brave the traffic and
the large trucks on I-95.
Now, I understand that there are many ideas about how to
run passenger rail service in our country. There are some facts
that we must consider. First, it's going to take money to do
it. Zero will not cut it. No passenger system in the world
makes money, not even Japan's.
Second, the states cannot afford at this time to simply
pick up the Federal contribution to Amtrak. Expecting them to
do so would be yet another unfunded mandate, and it would sink
state budgets into a sea of red ink.
Thirdly, we need to heed the lessons of other countries
that embarked on flights of fancy by privatizing their
railroads. They risked the safety of their operations, and they
ended up paying more in the end. Every organization needs
strong leadership. And Amtrak, I'm pleased to say, has that.
And under President and CEO David Gunn, Amtrak has overhauled
its financial accounting system, trimmed its workforce by 20
percent, while adding 20 percent more trains.
Last year, Amtrak achieved record ridership of 25 million
riders nationwide. I remind you, the equivalent of 125,000
fully loaded 757 airplanes. Amtrak works, and Americans depend
on Amtrak every day, we sure can tell by some of the protests
that have arisen about removing sellers from the line. But we
needed it most, Amtrak, when our Nation was attacked on
September 11, 2001.
When our commercial aviation system was shut down on 9/11,
stranded passengers turned to Amtrak to reunite themselves with
their families. And thank goodness they had that choice. That
terrible day reminded us that our Nation cannot depend entirely
on one mode of transportation, no matter how attractive it
looks. And since the Federal Government created Amtrak 34 years
ago, we've invested an average of less than $1 billion a year
in rail infrastructure and operations, not nearly enough for a
world class system.
Germany has a modern high-speed rail system. They invested
$9 billion in passenger rail service in 2003 alone, and instead
of trying to kill Amtrak, we've got to find a way to build a
passenger rail system that's as good as any in the world. And I
thank you, Mr. Chairman, once again, for calling the hearing
and for your vitality and promise that we're going to get a
railroad bill, that Amtrak go out of here, and I plan to work
with you on it, and hope that we come up with something that
really spells out not only the problems, but how we're going to
do it long term.
Senator Lott. Thank you, Senator Lautenberg. Our witnesses
today are the Honorable Jeffrey L. Rosen, General Counsel, and
Secretary's representative to the Amtrak Board at the
Department of Transportation; David Laney, Esquire, Chairman of
the Board, National Railroad Passenger Corporation or Amtrak;
David Gunn, the President and CEO of the National Railroad
Passenger Corporation--Amtrak; and the Honorable Kenneth Mead,
Inspector General of the U.S. Department of Transportation. We
will call on you in that order. Mr. Mead, we're saving you for
clean up and for comments on many of the things that you will
hear before your testimony, so get prepared, take notes. And,
we'll begin, then, with Mr. Rosen.
STATEMENT OF HON. JEFFREY A. ROSEN, GENERAL COUNSEL, DEPARTMENT
OF TRANSPORTATION
Mr. Rosen. Thank you. Mr. Chairman, Senator Lautenberg,
thank you for giving me the opportunity to talk to you today
about reforming Amtrak. The Department of Transportation has
previously submitted my written testimony, which I hope you
will include in the record.
Senator Lott. It will be included in the record. I might
say that all of your prepared statements will be included in
the record, we'd appreciate it if you'd summarize it in as
close to 5 minutes as you can.
Mr. Rosen. Absolutely, thank you, Mr. Chairman. I'll be
relatively brief in my oral remarks. I wanted to cover just
three points.
First, it is now clear that we have arrived at a moment
when true reform of intercity passenger rail is necessary, is
possible and should be achieved. Amtrak itself now agrees that
reform is needed because Amtrak is not sustainable as currently
structured or funded. Over the last several months, Secretary
Mineta has traveled the Nation, meeting with railroad workers,
state governors and transportation officials, weekday
commuters, city mayors and just about anyone else who would
listen to his message that the 1970's approach to Amtrak can't
survive, and has shared with them the Administration's new
vision for intercity passenger rail. Members of this
Subcommittee and others in Congress have also expressed both
interest and concern about the future of intercity passenger
rail, and of course the President's budget proposal for Amtrak
is itself a call to action.
So, the actions taken by President Bush and Secretary
Mineta have helped us lead the way and it is a welcome and
perhaps an unprecedented development to have Amtrak itself
ready to embrace genuine reform. I have had the privilege of
serving as Secretary Mineta's designee to the Amtrak Board, so
I am respectful of the extraordinary efforts of Amtrak's highly
committed management and staff, and have observed how closely
they worked with a Board of Directors, who themselves added a
reservoir of business experience and insight to Amtrak's
strategic planning process. This hearing comes at an opportune
time, and hopefully will enable the Congress to capitalize on
this historic opportunity for reform as you outlined, Mr.
Chairman.
Second, as we talk about specific reform measures, the
fundamentals of what needs to be done to save intercity
passenger rail are, in my view, clear. With, perhaps, the
potential for a new consensus on some key items that both the
Administration and Amtrak are agreed upon, if you compare the
two sets of proposals.
Last week, Secretary Mineta re-transmitted the
Administration's proposed reform legislation to Congress, while
again reiterating his five key principles for intercity
passenger rail reform. Amtrak's own newly announced strategic
initiatives adapt and endorse many of the same concepts and
proposals. Agreement exists on such things as transitioning to
competition, empowering the states to make infrastructure
decisions and to receive support from a State/Federal funding
partnership, providing for state involvement in infrastructure
decisions affecting the Northeast Corridor, introduction of
sound economics to eliminate train operating subsidies and
reduced expenses, improved financial reporting and
transparency, and enabling the separation of Amtrak's train
operations from the infrastructure role.
The areas of commonality and overlap between the
Administration bill and the Amtrak plan provide at least a
common baseline that can be a starting point for a
reauthorization process that can help us save intercity
passenger rail travel.
Third and last, however, I nonetheless want to underscore
that reform, to be meaningful and long-lasting, requires both
implementation and legislation. Implementation involves the
detailed specifics in the followup. And the legislative effort
will continue to involve some hard choices. Because
notwithstanding the many areas of commonality that are
emerging, there are, of course, other areas of divergence that
will require careful consideration by the Congress.
One example that needs to be highlighted is the question of
what to do with approximately $3.8 billion of Amtrak's existing
debt, the repayment of which amounts to nearly $280 million per
year. The Administration proposal differs from some others, in
that we have not endorsed absolving Amtrak and its lenders of
responsibility for those privately made loans. This issue, as
well as some others, remain to be worked out. However, we hope
to work closely with the Congress to achieve the ultimate goal
of finding a total package that will save intercity passenger
rail, introduce a new State/Federal partnership for rail
infrastructure, enable competition for the selection of train
operators, and provide the rail passengers in this country with
the high quality service they need and they deserve.
So, I want to thank the Subcommittee for holding this very
timely hearing, and I would be pleased to respond to any
questions.
[The prepared statement of Mr. Rosen follows:]
Prepared Statement of Hon. Jeffrey A. Rosen, General Counsel,
Department of Transportation
Chairman Lott, Senator Inouye, and Members of the Committee, I
appreciate the opportunity to appear before you today to represent
Secretary of Transportation Norman Y. Mineta and the Administration as
this Congress takes up the very important issue of reform of intercity
passenger rail service. If my testimony today accomplishes one thing, I
hope it is to convince you that fundamental change in the way we
support intercity passenger rail service is not only necessary but
inevitable. And that change needs to happen this year, before we spend
one more taxpayer dollar to prop up a fundamentally broken system.
The passenger rail service model created by the Federal Government
in 1970 is not viable in 2005. The model created in 1970 was a single
national monopoly set up to be a private corporation but it has instead
become like a government agency relying on Federal support to survive,
with a legacy system of routes incapable of adapting to market forces
and demographic changes. It has little in common with our other modes
of transportation and the deregulatory and market-oriented changes
other modes have experienced in the last three decades. America's
transportation system as a whole--our system of roads, airports,
waterways, transit lines, and the mostly private operators who use
them--provides excellent mobility, connectivity, and efficiency that
have undergirded our economic growth. Sadly, intercity passenger rail
has been a different story. The supposedly private for-profit
corporation set up in 1970 to provide all intercity passenger rail
nationally has never once covered its own costs, much less made a
profit. And the Federal taxpayers have infused more than $29 billion
during the last 34 years as Amtrak has lurched from crisis to crisis
without ever achieving a stable and viable business model. Whatever one
thinks of Amtrak or passenger rail more generally, this situation has
been good for no one.
To some, perhaps this is old news. Congress looked for change in
the Amtrak Reform and Accountability Act of 1997, and actually
indicated that ``Federal financial assistance to cover operating losses
incurred by Amtrak should be eliminated by the year 2002.'' In fact,
the notion that Amtrak should operate free from Federal operating
subsidies is codified in the United States Code. 49 U.S.C.
Sec. 24101(d) states that ``Commencing no later than the fiscal year
following the fifth anniversary of the Amtrak Reform and Accountability
Act of 1997, Amtrak shall operate without Federal operating grant funds
appropriated for its benefit.'' In the 1997 Act, Amtrak was afforded
new flexibility to get its own house in order. But by 2002, Amtrak's
situation was no better; to the contrary, it had grown worse, with
massive increases in Amtrak's debt, continuing operating problems, and
financial crises in both 2001 and 2002. Amtrak's response once again
was to turn to the Federal Government for even greater Federal
financial assistance. In no other functioning service market would
rising costs and declining revenues be defined as a ``success'' if this
produced a small increase in the number of customers. Yet, that is
exactly what the defenders of the 1970 approach now say, as if the loss
for each rider were ``made up in volume.'' In 2004, Amtrak increased
its ridership by approximately 4 percent to a record 25 million
passengers, asked for a record $1.8 billion Federal subsidy, and
recorded a financial loss of more than $1.3 billion, of which
approximately $635 million was a cash loss. \1\
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\1\ These are unaudited numbers.
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Things do not have to be this way. The Administration has made
clear that there is an important role for intercity passenger rail in
our transportation system, with a new model that will be responsive to
the needs of the traveling public. But we can only get there by
reforming the failed model of 1970, and committing to a new approach.
Happily, Amtrak itself now recognizes the need for reform, and we have
reached a time when a new approach may now be possible. It is from this
standpoint that I am pleased to be here today to discuss the future of
intercity rail.
In my testimony today I will cover three things. First, I will
provide a summary of the historical trends and current state of
Amtrak's provision of passenger rail service. Second, I will briefly
review some recent history of Amtrak efforts to sustain itself and the
events leading up to the near-crisis situation we face today in
intercity passenger rail service. And finally, I will outline the
Administration's approach to saving intercity passenger rail and
setting the platform for its viability in the future.
I. Riding the Rails: Amtrak's Past and Present
Amtrak was created in 1970 as a private corporation in a major
restructuring of the larger rail industry, which was in a state of
major financial distress. In that restructuring, freight railroads
ceased providing passenger service altogether. Instead, for the first
time, there would be a single national provider of intercity passenger
rail service to replace the multiple regional systems that reflected
the areas covered by each of the freight railroads' route systems. The
intent was that the national monopoly would reinvigorate passenger rail
by permitting Amtrak to consolidate operations and achieve efficiencies
that, after a very brief period of Federal assistance, would preserve
and expand intercity passenger rail service as a for-profit company.
By now we know that the hopes of Amtrak's creators have never been
realized. Intercity passenger rail service has not been reinvigorated.
The Department of Transportation (DOT) expects that each and every one
of Amtrak's 15 long-distance trains will this year lose money on a
fully allocated cost basis, even excluding depreciation and interest.
On a per passenger basis, with depreciation and interest, the loss for
long-distance trains ranges from $47 per passenger to $466 per
passenger. But the long-distance trains are not alone: with
depreciation and interest included, every one of Amtrak's 43 regularly
scheduled routes loses money. After 34 years and $29 billion in Federal
subsidies, intercity passenger rail's financial performance has not
improved, service and on-time performance are below expectations, and
passenger rail's market share relative to other modes has continued to
erode. Last year's so-called ``record'' Amtrak ridership amounted to a
one-half of one percent share of the total intercity passenger
transportation market. Airlines alone carry more U.S. passengers in
three weeks than Amtrak does in a year.
That also belies one of the frequent arguments of today's defenders
of the 1970 model--that the Federal Government supposedly subsidizes
other modes of transportation at a much greater rate than Amtrak. In
fact, FY 2005's appropriated subsidy of $1.207 billion represented
approximately 9 percent of the total discretionary Federal funds for
the Department--9 percent of the subsidy goes for one-half of one
percent of the market. The argument also passes quickly over another
important fact: highways, transit and aviation are, unlike rail, funded
substantially by true user fees and also by state investments. (Even
the most ardent rail proponents evince little interest in a new Federal
passenger rail ticket tax.)
Perhaps most importantly, however, the argument overlooks that
Federal financial support for roads, airports, and transit goes to
infrastructure and not to operations. In other modes of transportation,
Federal aid goes to highway and airport infrastructure, for example,
but Federal taxpayers are not regularly asked to write annual billion
dollar checks to private trucking companies, private bus companies,
private automobile commuters and vacationers, nor even to private
airlines, although the taxpayers have regularly done so with regard to
Amtrak.
In considering where we are with Amtrak, it is useful to consider
the varied things that Amtrak presently does. Generally, these can be
grouped into activities relating to rail infrastructure, corridor train
operations, and long-distance train service.
Rail Infrastructure
Amtrak owns its own right of way and infrastructure along most of
the Northeast Corridor (NEC), except in Massachusetts and part of
Connecticut, where the infrastructure is owned by those states. Amtrak
also owns some infrastructure in Michigan, as well as train stations in
a number of states. Otherwise, Amtrak mostly operates trains on
infrastructure owned by others.
Within the Northeast Corridor, Amtrak controls the infrastructure
not only for its own use, but for use by numerous other railroads and
transit agencies.
List of Users of the NEC Other than Amtrak
Canadian Pacific
Consolidated Rail Corporation
CSX
Delaware DOT
Long Island Rail Road
Maryland Rail Commuter Service
Massachusetts Bay Transportation Authority
Metro-North Commuter Railroad
New Jersey Transit
Norfolk Southern
Providence and Worcester Railroad
Rhode Island DOT
Shore Line East (Connecticut)
Southeastern Pennsylvania Transportation Authority
Virginia Railway Express
These other users of the NEC pay Amtrak for access and associated
services, such as train dispatching. In total, trains operated by other
users on the NEC actually exceed the number of trains operated by
Amtrak itself on the NEC.
Because of the way the 1970 model of intercity passenger rail was
organized, maintenance and development of infrastructure for passenger
rail has been left to Amtrak.
In FY05, Amtrak plans to spend $215 million on fixed facility
infrastructure projects, most of which will come from the $1.2 billion
of Federal appropriations to be provided to Amtrak. \2\ None of those
funds will be allocated to states, or to infrastructure in locations
where Amtrak does not presently operate.
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\2\ The total Federal capital grant for FY 2005 is $492 million, of
which approximately one-third will go toward fixed facilities, one
third to mechanical (car and locomotive) projects, and one third to
debt principal repayment, environmental remediation, information
systems, and other purposes.
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Corridor Services
When viewed from the perspective of moving passengers, and the
distance they are moved (passenger-miles), Amtrak can be seen as
providing two types of services: corridor services of approximately
100-500 miles and frequently under contract to states in which these
corridors are located; and long-distance, primarily leisure travel
services. Within the category of corridor services, there are two
different types: services on the NE corridor, where Amtrak operates on
its own infrastructure, and services on other state corridors, where
Amtrak operates on infrastructure owned and controlled by others.
Corridor services, which are trips of five hours or less, have seen
an increase in ridership of 50 percent over the last ten years. Rail
corridor service of three hours or less is very competitive with air
service on the same corridors. Approximately 20 million people, or 80
percent of all Amtrak riders in 2004, traveled on a corridor service.
The NEC. The largest portion of Amtrak corridor trips are on the
Washington-New York City-Boston Northeast Corridor. This is not
surprising since this corridor has a long history of rail travel, a
large and mobile population base, and significant public investment has
gone into the infrastructure. NEC travel accounts for almost half of
all the people who travel on Amtrak. If one looks at NEC train
operations, separate from the NEC infrastructure, this is the one area
where Amtrak operates at something close to a breakeven basis.
Other Corridors. In addition to the NEC main line, Amtrak operates
trains for corridor service in fifteen other states.
List of States with Corridor Service
Note: States listed are the primary states served by each corridor.
California New York
Pacific Surfliner Empire/Maple Leaf
Capitols Adirondack
San Joaquins North Carolina
Connecticut/Massachusetts Carolinian (Extended corridor)
Inland Route (New Haven- Piedmont
Springfield)
Illinois Oklahoma
Chicago-St. Louis Heartland Flyer
Illini Oregon
Illinois Zephyr Cascades (with Washington)
Hiawatha (with Wisconsin) Pennsylvania
Maine Keystone Service
The Downeaster Pennsylvanian (Extended
corridor)
Michigan Washington
Wolverines Cascades (with Oregon)
Blue Water Wisconsin
Pere Marquette Hiawathas (with Illinois)
Missouri Vermont
Kansas City-St.Louis Ethan Allen Express
Vermonter (Extended corridor)
------------------------------------------------------------------------
As shown in the chart below, there are several corridors in which
the train service has been able to attract a very significant share of
intercity passengers. In 2004, a total of approximately 8 million
people (i.e., approximately one-third of the total Amtrak ridership)
traveled on these corridor routes. In many instances, these corridors
are subsidized in part by states. State operating subsidies for these
trains totaled ten percent of the combined Federal and State funding of
Amtrak. However, States have not borne the full cost of these routes,
and some states that have corridor trains have not paid anything at
all, thereby producing issues of equity among the states, as well as
market uncertainties about how travelers value the services.
Long-Distance Services
Contrary to the trend line for ridership on corridor services,
extended trips have seen declining revenues and ridership--and
increasing costs--over the last ten years. DOT refers to these services
as Transcontinental (more than one night), Overnight (one night) or
extended corridor (greater than 500 miles, but with no sleeping
accommodations). Amtrak presently operates 15 such trains. \3\ Amtrak
has continued to lose extended trip customers to an airline industry
that is offering a low cost, high quality service, and to automobile
drivers who choose to use the highways rather than rail. Amtrak has had
little or no success responding to this competition. As Amtrak's
presence in this segment of the intercity transportation market has
dwindled, Federal subsidies per passenger have continued to grow. In FY
2004, the average passenger on a long-distance train received a subsidy
of approximately $214 per trip on a fully-allocated basis, \4\ up from
$158 in the year 2000--a 35 percent increase quintupling the modest 7
percent inflation over the same period.
---------------------------------------------------------------------------
\3\ The long-distance routes are as follows: Vermonter, Silver
Service, Cardinal, Empire Builder, Capitol Limited, California Zephyr,
Southwest Chief, City of New Orleans, Texas Eagle, Sunset Limited,
Coast Starlight, Lake Shore Limited, Crescent, Pennsylvanian and
Carolinian. The Auto-Train, a specialized service, also operates over a
long-distance route but with completely different characteristics. The
Three Rivers (New York-Pittsburgh-Akron-Chicago) was discontinued in
March 2005.
\4\ Fully allocated costs include depreciation and interest.
Moreover, these long-distance trains have had considerable
difficulty with regard to on-time departures and arrivals:
On-Time Performance of Long-Distance Trains, FY 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent On-Time Average Minutes Average Minutes
Train Name Service type Between --And (Zero Tolerance) Late per Train Late per Late
(All Trains) Train
--------------------------------------------------------------------------------------------------------------------------------------------------------
California Zephyr Transcon Chicago Bay Area 14.2 136 159
Capitol Ltd. Overnight Chicago Washington 13.8 101 118
Cardinal Overnight Chicago New York via 33.1 48 74
Cincinnati
Carolinian Extended Corridor New York Charlotte 26.9 38 51
City of New Orleans Overnight Chicago New Orleans 47.7 26 50
Coast Starlight Overnight Seattle Los Angeles 10.8 139 157
Crescent Overnight New York New Orleans 41.6 34 58
Empire Builder Transcon Chicago Seattle 68.3 11 36
Lake Shore Ltd. Overnight Chicago New York 8.2 123 134
Pennsylvanian Extended Corridor New York Pittsburgh 17.2 32 39
Silver Meteor Overnight New York Miami 25.6 84 113
Southwest Chief Transcon Chicago Los Angeles 28.5 68 96
Sunset Limited Transcon Orlando Los Angeles 1.6 359 366
Texas Eagle Overnight Chicago San Antonio 41.9 57 98
Vermonter Extended Corridor Washington St. Albans, VT 32.1 21 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Overall, the picture of where things stand in intercity passenger
rail service is far from what was hoped for when Amtrak was created in
1970.
II. Recent History and the Call to Change
During the 1990s, there was an increasing recognition that the 1970
model of intercity passenger rail had developed some very serious
problems. Congress sought to redress some of those in the 1997 Amtrak
Reform Act. Unfortunately, the reforms embodied in the 1997 Act did not
prove sufficient to solve the problems.
Many of the reforms in the 1997 Act empowered Amtrak to improve its
own performance, and removed impediments to its doing so. After passage
of the 1997 Act, Amtrak's then-management repeatedly reported that it
was on a ``glide path'' to self-sufficiency by 2002. That did not
happen. The problems worsened, and it became increasingly clear that
they were not solely the result of business misjudgments, but also
involved inherent flaws in the 1970 model.
Instead of a successful ``glide path,'' Secretary Mineta was
greeted with some unwelcome surprises in his initial experiences with
Amtrak during the current Administration. Early in 2001, instead of
Amtrak being months from self-sufficiency as reported, Amtrak's then-
management advised that Amtrak would be insolvent within two weeks
unless DOT subordinated the interest of U.S. taxpayers to a foreign
bank so that Amtrak could mortgage its rights to use Pennsylvania
Station in New York City. Within a year, Amtrak had lurched to yet
another financial crisis, informing the Secretary that if the
Department and Congress did not provide the company another $300
million, it would be insolvent within two weeks and would also shut
down commuter and intercity services. In response, to obtain time to
assess and identify more long term reforms, DOT provided Amtrak a $100
million loan under the Railroad Rehabilitation and Improvement
Financing Program, and Congress provided the remaining $205 million
through a supplemental appropriation.
These crises highlighted fundamental problems, some of which needed
immediate action by Amtrak, and some of which were revealed to be
inherent to the 1970 business model and in need of legislative change.
Among the most urgent for Amtrak itself was the state of its financial
books and records. Indeed, it took independent auditors almost all of
FY 2002 to close their audit of Amtrak's FY 2001 financial performance.
That audit required $200 million in net audit adjustments and found 5
material weaknesses and 12 reportable conditions that needed to be
addressed to fix the problems with Amtrak's accounting practices. It
also revealed that Amtrak had taken on almost $3 billion in new debt in
order to pay for (1) costly overruns of poorly managed capital
improvements, (2) an unsuccessful foray into the express package
business, and (3) day-to-day operational expenses.
Since 2002, Amtrak's record-keeping has improved. In 2005, the
independent audit was completed in March instead of September and no
material weaknesses were found. While Amtrak's auditors still find
significant areas for improvement, they comment favorably on
developments over the last three years.
Through participation on the Amtrak Board, and through changes to
the appropriations process that enabled stronger FRA oversight of the
grant process to Amtrak, Secretary Mineta and DOT have sought a variety
of improvements that Amtrak could make on its own. That process
continues and is ongoing. Because I anticipate that the improvements
instituted since David Gunn assumed leadership of Amtrak will be
covered in the testimony to be supplied by Amtrak itself, I will not
detail them here, but it should suffice for me to say that Amtrak
operates in a more efficient and better way than it did three years
ago.
But notwithstanding the very significant management improvements
and a much-enhanced and valuable involvement of the Amtrak Board,
fundamental difficulties continue to confront Amtrak, because the 1970
model of intercity passenger rail is a framework that is flawed. Amtrak
continues to spend dramatically more money than the revenues it
generates, and this year is spending at a pace greater than the
appropriation from Congress. Amtrak estimates that by the end of FY
2005 it will have only $75 to $100 million of cash remaining, with its
costs continuing to far exceed its ticket sales.
As shown by the two charts below, the structural problem in
Amtrak's condition is long-term, and is getting worse, not better.
Further adding to Amtrak's deterioration is that the company's debt
increased massively in the late 1990's, from $1.7 billion in 1997 to
$4.8 billion in 2002, without adequately increased passenger revenues
to pay the debt service. Because of this increased debt, Amtrak's
repayment requirements (principal and interest) are forecasted to be
approximately $273 million in FY 2005 (up from $111 million in 1997).
The FY 2005 appropriation for Amtrak of $1.2 billion represents a
134 percent increase over the appropriation for FY 2001. Amtrak's
President has said that as presently configured, Amtrak cannot
successfully operate through FY 2006 without much larger amounts of
taxpayer funds being allocated to this private company. Indeed, the
increase sought by Amtrak--256 percent above the 2001 appropriation--
would far outstrip the 22 percent increase in domestic discretionary
spending over the same time period. For the Federal taxpayers, that is
a spiral in the wrong direction.
Passenger rail is already by far the most heavily subsidized form
of intercity passenger transportation. When viewed on a per passenger-
mile basis, analysis by the Bureau of Transportation Statistics
indicates that the aggregate Federal expenditure for intercity
passenger rail is 30 times greater than for commercial aviation.
Likewise, the intercity bus industry, where there are no comprehensive
or dedicated Federal operating subsidies, carries as many as 350
million passengers annually (according to Eno Foundation estimates)--14
times Amtrak's ridership. So continually increased operating subsidies
is not the right answer.
What is more clear now than ever is that the basic business model
through which we provide intercity passenger rail service in this
country--a single national entity called Amtrak--is unworkable and is
not adequately positioned to respond to the changing transportation
needs of this country. Massive increases in funding to merely slow a
downward spiral are neither sustainable nor justifiable. At the same
time, doing nothing at all will eventually result in a business failure
and a lost opportunity for intercity passenger rail for this country. A
change is needed.
III. The Administration's Plan for Reform and Preservation of Intercity
Passenger Rail
As a matter of transportation policy, the Administration supports
the availability of intercity passenger rail, but with a very different
vision than the failed model of the past. Secretary Mineta has
repeatedly set out the fundamental principles needed to reform
intercity passenger rail and place this form of transportation on a
sound footing. These principles are:
Establish a long-term partnership between States and the Federal
Government to support intercity passenger rail: Partnerships between
the States and the Federal Government for the planning, decision-making
and capital investment in transportation have been one valuable element
in the success of Federal programs for highways and transit to date.
The States, through their multi-modal planning mechanisms, are in a
much better position to determine their intercity mobility needs and
which form of investment makes the most sense in meeting these needs
than a sole supplier company in Washington, D.C. State-supported
intercity passenger rail services in places like the States of
Washington, North Carolina, California, and Wisconsin have been one of
the bright spots for intercity passenger rail ridership. The
Administration wants to build upon these successes through a new
program of Federal/State capital funding partnerships in which the
Federal Government would provide matching grants.
Require that Amtrak transition to a pure operating company: Amtrak
today is both an operating company and the owner and maintainer of
significant infrastructure that forms a key component of the intercity
and commuter transportation systems of eight states in the Northeast,
as well as many stations and other facilities that have local or
regional transportation importance. These are two very different
functions. By having them both reside in the same entity, the company
is faced with conflicting priorities, which the company has found
difficult, if not impossible, to balance. Infrastructure decisions have
depended on Amtrak decisions, rather than those of the states and
localities who are largely responsible for such planning in other
transportation modes such as highways, airports, and transit. Amtrak,
and the nation's transportation system, would be better off with Amtrak
able to focus on one thing--operating trains--and doing it well.
Create a system driven by sound economics: One of the flaws of the
1970 model is that intercity passenger rail has sometimes been defined
by politics, habit and fear of change. That is one reason that some
routes have stunningly high subsidies, such as the $466 per passenger
subsidy in FY 2004 on the Los Angeles to Orlando Sunset Limited.
Intercity passenger rail needs to serve the markets where there is an
identifiable demand that intercity passenger rail can meet. It cannot
and should not try to serve every market regardless of the cost and
regardless of the revenue. Just as with other transportation modes and
other successful businesses in general, intercity passenger rail needs
to have the dexterity to recognize changing business patterns and
demand, and that sometimes the services of yesterday are not needed or
justified today or tomorrow. Intercity passenger rail service needs to
be designed to cost-effectively meet and support the transportation
needs of the traveling public and sponsoring public authorities.
Introduce carefully managed competition to provide higher quality
rail services at reasonable prices: For the last 34 years under the
1970 model, intercity passenger rail service has not been subject to
the discipline of the marketplace. On corridor services, for example,
states do not have any alternative but to have Amtrak operate the
intercity service. This has resulted in a service that is more costly
than one would expect in a competitive situation, and which often has
not been responsive to changing transportation patterns, demands or
expectations. In a free market economy, competition leads to improved
cost effectiveness, higher quality and innovation, elements that have
been sorely lacking in intercity passenger rail for the past
generation. Transition to competition is never easy, but it is
necessary for the public to get the service it demands and deserves.
Create an effective public partnership, after a reasonable
transition, to manage the capital assets of the Northeast Corridor: The
Washington-New York City-Boston Northeast Corridor main line is the
most heavily utilized rail route in the country, forming an essential
link for intercity passenger and freight transportation and commuter
access to the major cities of the Northeast. By some measures, such as
the number of persons per day that use this infrastructure, Amtrak is a
minority user of this infrastructure--particularly in urban areas.
Transportation services on this corridor need to be insulated from the
unpredictable consequences of Amtrak's own finances and needs at any
given time. At least initially, the ownership of these assets should be
in the public sector, and management and control of this asset should
reflect significant input from the states that depend on the Northeast
Corridor for passenger and freight mobility.
Last week the Administration's Passenger Rail Investment Reform Act
(PRIRA) was transmitted to the 109th Congress. It sets out and details
the Administration's proposals on specific ways to achieve these
objectives. After a deliberate transition period, intercity passenger
rail would become an economically viable and strategically effective
mode of transportation, supporting numerous successful rail corridors
nationwide. The Federal role in passenger rail would, however, be
revised and strengthened to mirror much more closely the current
Federal program supporting mass transit. As set out in Secretary
Mineta's transmittal letter accompanying PRIRA, we look forward to
working with the Congress to discuss and fashion the specifics of
legislation in ways that will successfully reform intercity passenger
rail for the future.
In addition, this week Amtrak's own Board of Directors and its
Management are releasing strategic initiatives crafted by Amtrak to
begin the process of reform within the company itself. That is a timely
development, with many positive elements. Amtrak's own recognition of
the need for reform is a welcome response to Secretary Mineta's
steadfast resolve to address the problems of intercity passenger rail,
and create a viable future. It is encouraging that Amtrak's own plan
adopts many of the Administration's proposals, though it lacks some
provisions and our legislation will still be necessary. It is critical
that we continue to pursue all avenues for reform, including
legislation, if we are to avoid a collapse of Amtrak.
Conclusion
My own experience with Amtrak's Board persuades me that Amtrak
itself recognizes the necessity for reform and that time is critical.
Without reform, Amtrak is not sustainable at its current level of
funding or at any level Amtrak is likely to receive in these difficult
budgetary times. Moreover, history tells us that merely throwing money
at the 1970 model of intercity passenger rail without addressing the
problems that have been identified in the subsequent years does not
result in any long-term improvements in Amtrak's finances or quality of
service.
The Administration has been clear that it cannot support the failed
model of the past, nor support putting more funding into that failed
approach. We have been equally clear that IF meaningful reform is
accomplished and implemented, the Administration would support funding
of infrastructure and transition needs for train operations and related
costs.
Secretary Mineta has repeatedly expressed the Administration's
support for intercity passenger rail service as an integral part of our
overall national transportation system. Congress, the Administration,
and Amtrak itself have a brief window in which to adopt and implement
meaningful reform. If this does not occur, discussions over reforming
intercity passenger rail service will be taking place in a severe
crisis situation in the not too distant future. In that unwelcome
scenario, no options could be ruled out. The company faces a depleted
cash balance, and a failed 1970 business model. It is for this reason
that we urgently need Congress to address our legislative reform
proposal this year.
As you can see, there is much work ahead for all of us as Congress
considers these issues. Secretary Mineta and his team look forward to
working with the Congress to assess and implement long-term solutions
to the recurrent crisis that plagues the old model of intercity
passenger rail. Thank you for the opportunity to share these
observations on Amtrak and intercity passenger rail. I will be pleased
to respond to any questions you may have.
STATEMENT OF DAVID M. LANEY, ESQ., CHAIRMAN OF THE BOARD,
AMTRAK
Mr. Laney. Mr. Chairman, Senator Lautenberg, thank you for
the opportunity to appear before you today. My name is David
Laney, I'm Chairman of the Amtrak Board of Directors. I have a
prepared statement that I would like entered into the record,
and I'm going to give a brief statement outlining the major
elements of the Strategic Reform Initiatives Package which
we're releasing today, and I believe each of you has a copy of.
And, needless to say, joining me--as all of you are aware, and
are probably familiar with--is David Gunn, sitting to my left.
For the past several months, the Board and senior
management at Amtrak have been working on an approach to reform
Amtrak, and to revitalize rail passenger service in the United
States. The reform initiatives we offer you today are the
results of our efforts, drawing upon expertise in and outside
of Amtrak, and on a considerable body of legislative
initiatives and reform recommendations that has preceded our
own planning.
What you have before you is a detailed set of initiatives,
some of which Amtrak can do on its own, and others of which
will require government action. Taken together, we believe that
Amtrak's strategic reform initiatives can revitalize intercity
passenger rail transportation.
Our proposal advances four essential objectives: First, the
development of passenger rail quarters based on an 80/20
Federal/State capital match program, with states assuming the
initiative as developers and purchasers of competitively bid
corridor services.
Second, return of the Northeast Corridor infrastructure to
a state of good repair and operational reliability, with all
users gradually assuming financial responsibility for their
proportionate share of operating and capital needs.
Third, continuation and possible addition and elimination
of certain national long distance routes that meet established
performance thresholds, with a phase-in period to allow for
performance improvement, and state financial contribution, if
needed, to meet performance thresholds.
Finally, fourth, the opening of markets for virtually all
functions and services involved in intercity passenger rail to
competition and private commercial participation.
We've identified three sets of reform initiatives to
achieve the objectives that I just mentioned. They include--in
general terms--structural, operating and legislative changes.
The operating initiatives identified in our plan highlight a
range of actions intended to improve the performance of each
business line, in order to provide better service, to achieve
savings and to enhance revenues. Our recommendations for
changes in legislation hinge directly on creation of a Federal
capital matching program, and they will help us establish a
platform for open competition for intercity passenger services.
The lynchpin of this plan is the establishment of a Federal
capital match attractive enough to attract increased state
financial involvement in existing and emerging corridors.
Continued development of rail quarters is critical to the
future of rail passenger service in this country. And the pace
of development will increase with the Federal Government as a
reliable financial partner, just as it has for decades with
highways, transit and aviation.
On this point we agree with the Administration and every
other responsible proposal for passenger rail reform. The
demand and the desire to do so exists today, ridership on
corridor trains has increased over 22 percent in the last 5
years. However, to fully begin to realize the value of
intercity passenger rail in addressing transportation
challenges will require positioning it on comparable footing
with other modes. Only then will states begin assuming the
lead, and only then will we begin to see the emergence of real
competition in the passenger rail industry.
Returning the Northeast Corridor's infrastructure to a
state of good repair is an essential part of our reform
proposal. In compiling this plan, we studied various proposals
and received and reviewed models that other countries have
pursued, for separating the maintenance and operations of busy
rail corridors, and that concluded--for now--that the
complexities and risks associated with such a segregation
outweigh any benefits.
Amtrak owns most of the NEC, it is the only end-to-end user
of the corridor, and in terms of train miles operated, it is
also the majority user. Amtrak NEC trains operate at the
highest speeds in North America, and there are still segments
of the NEC where we are the only entity operating trains. Our
immediate challenge is to restore the infrastructure to a state
of good repair, which we're doing, and is detailed in our
proposal.
The next set of challenges is to increase capacity for all
users of the corridor to address growing ridership demands. We
believe that Amtrak is in the best position at the moment to
oversee, and coordinate this work. Our plan outlines a number
of short-term and long-term initiatives to address these
issues.
Amtrak is committed to operating a national system of rail
service. Rightly or wrongly, long distance trains have become a
focal point in the debate over reform of passenger rail
service. While we believe their continued operation is amenable
to the many communities they serve, they also present the basis
for any future expansion of rail quarters. We're confident that
we will reduce their operating losses through a series of steps
that we outline in our proposal. We will not eliminate,
however, the need for financial support for long distance
operations.
Central to this is the establishment of a phased-in
performance improvement program that will couple cost-saving
efficiencies with revenue-enhancement initiatives, so that over
time these trains will achieve financial performance
thresholds, or be discontinued. Our proposal outlines a series
of specific steps that we would take in evaluating our various
long distance routes.
The first job is to set fair and clear performance
standards for long distance trains, and establish a minimum
performance threshold. We would then rank each route so that we
can determine early on which trains meet the threshold or fall
short. For all long distance trains, we will work aggressively
to improve their performance so that they will more likely
achieve the desired goal. During this process, we will be
providing clear reports to the states reflecting the level of
support each state, each particular route will require, in
order to continue service on that route. We'll make every
reasonable effort to improve the performance, and close the
operating gap, but ultimately, states along the routes will be
required to cover any recurring gap in order to continue train
service on those routes.
If a train continues to fall below the established
performance threshold, then we will notify the states involved
and begin the process of discontinuing the service on that
route. We do believe that there are many opportunities for
competition in the rail passenger service industry. In some
cases, having a single provider such as Amtrak allows for
economies of scale and certain cost efficiencies, but we can
assure you that in some areas, we are not--and never will be--
the most efficient provider of rail-related services.
There are actions that Amtrak can do on its own, and others
that will depend on Federal legislative action. Some of the
legislative decisions in this area will be difficult, and no
doubt will encounter stiff resistance from a number of
entrenched interests. Any discussion of competition will
involve making decisions about access rights to the freight
rail infrastructure, tort liability limitations, and limited
changes to certain labor, and labor/retirement laws. We have
provided a discussion of each of these matters in our proposal.
Also, and perhaps most important, included in our report is
our funding request for Fiscal Year 2006. Typically, Congress
receives that grant request from us in February. Since we were
well into this planning exercise, we elected to hold off making
the request until we had completed our work, which we have now
done.
The last dozen pages of the proposal details our Fiscal
Year 2006 budget requirement, which is $1.82 billion, or $1.645
billion if our working capital needs are covered by a short-
term credit facility instead of a grant. We think that's the
appropriate approach.
Finally, it's worth emphasizing that Amtrak's Board and
management have concluded that the company cannot continue to
operate at Amtrak's current funding level of $1.2 billion,
significantly--if at all--beyond Fiscal Year 2005. The negative
financial impact--which we still haven't fully quantified, and
won't be able to do for some time--of the recent problems,
could very well exhaust our working capital and leave us
without available cash by fiscal year end.
We've taken, and will continue to take, aggressive steps to
achieve short-term savings, but we have very little
maneuverability in our operating budget and cannot responsibly
make material reductions in capital expenditures, which are
critically tied to critical projects on the Northeast Corridor
infrastructure, and its state of good repair. Over time,
significant savings will be achieved only through an
aggressive, continued and systematic multi-year transition
process with legislative assistance. It's for this reason that
we have brought forward our Strategic Reform Initiatives to
help you in your decisionmaking process for Fiscal Year 2006
and beyond.
In closing, both David Gunn, his management team, my fellow
Board members and I, look forward to working closely and
cooperatively with you in the weeks and months ahead as we
develop our plan, and move this debate forward--hopefully to
some conclusion. The current funding model of unpredictable
annual appropriations levels is unsustainable, there is
absolutely a better way to do this. We have no choice on our
own but to start, but we will ultimately need your support.
David Gunn and I look forward to your questions, and Mr.
Chairman, thank you very much.
[The prepared statement of Mr. Laney follows:]
Prepared Statement of David M. Laney, ESQ., Chairman of the Board,
Amtrak
Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear before you today. My name is David Laney, and I
am Chairman of the Amtrak Board of Directors. Joining me is David Gunn,
the President and Chief Executive Officer of Amtrak.
For the past several months, the Board and senior management at
Amtrak have been working on an approach to reform Amtrak and revitalize
rail passenger service in the United States. The reform initiatives we
offer you today are the results of our efforts, drawing upon expertise
in and outside of Amtrak and on the considerable body of legislative
initiatives and ``reform'' recommendations that has preceded our own
planning. It is by no means the final word on this discussion, nor does
it answer every question. However, we believe it does advance and
inform the discussion about what to do with Amtrak and what will need
to be done to make rail passenger service a viable and vital part of
our Nation's transportation system. What you have before you is a
detailed set of initiatives, some of which Amtrak can do on its own and
others which will require government action. Taken together, we believe
that Amtrak's Strategic Reform Initiatives can revitalize intercity
rail transportation.
Our proposal advances four essential objectives:
1. Development of passenger rail corridors based on an 80-20
Federal/State capital matching program, with states assuming
the initiative as the developers and ``purchasers'' of
competitively bid corridor services.
2. Return of the Northeast Corridor infrastructure to a state
of good repair and operational reliability, with all users
gradually assuming financial responsibility for their
proportionate share of operating and capital needs.
3. Continuation and possible addition and elimination of
certain national long-distance routes that meet established
performance thresholds, with a phase-in period to allow for
performance improvement and state financial contribution if
needed to meet the performance thresholds.
4. Finally, the opening of markets for virtually all functions
and services involved in intercity passenger rail to
competition and private commercial participation.
We have identified three sets of reform initiatives to achieve the
objectives that I just mentioned. They include, in general terms,
structural, operating and legislative changes. Amtrak has already made
substantial progress in establishing an organizational structure and
creating management controls which have resulted in cost savings and
better management; but we have considerable room for further
improvement. We will, of course, continue to implement these types of
changes and refine those already in place. To build on such
improvements, this plan outlines a new focus on providing planning,
budgeting, accounting and reporting of financial activity and
performance along our distinct business lines--infrastructure
management, NEC rail operations, state corridor operations and long-
distance operations. This type of change we feel will improve our own
planning and performance capabilities, and enhance the financial
clarity of our operations.
Separately, operating initiatives identified in our plan highlight
a range of actions intended to improve the performance of each business
line in order to provide better service, achieve savings and enhance
revenues. Our recommendations for changes in legislation hinge directly
on creation of a Federal capital matching program. Other
recommendations in our view, if implemented, will help to establish a
platform for open competition for intercity rail passenger services.
The lynchpin of this plan is the establishment of a Federal
matching program attractive enough to attract increased state financial
involvement in existing and emerging corridors. Continued development
of rail corridors is critical to the future of rail passenger service,
and the pace of development will increase with the Federal Government
as a reliable financial partner, just as it has been for decades with
highways, transit and aviation. On this point, we agree with the
administration and every other responsible proposal for passenger rail
``reform.'' The demand and desire to do this exists today. A number of
states have already begun developing rail corridors, essentially on
their own nickel. They have recognized the need, the value of passenger
rail capacity in responding to increasing congestion, and the
popularity of rail service when it is adequately supported. (Ridership
on corridor trains has grown 22 percent over the last five years.)
However, to fully begin to realize the value of intercity passenger
rail in addressing transportation challenges will require positioning
it on comparable footing with other modes. Only then will states begin
assuming the lead, and only then will we begin to see the emergence of
real competition in the industry.
Returning the Northeast Corridor's infrastructure to a state-of-
good repair is an essential part of our ``reform'' proposal. In
compiling this plan, we studied various proposals and reviewed models
that other countries have pursued for separating the maintenance and
operations of busy rail corridors and have concluded for now that the
complexities and risks associated with such a split outweigh any
benefits.
Amtrak owns most of the NEC, it is the only end-to-end user of the
Corridor and, in terms of train miles operated, it is also the majority
user. Amtrak NEC trains operate at the highest speeds in North America,
and there are still segments of the NEC where we are the only entity
operating trains. Our immediate challenge is to restore the
infrastructure to a state of good repair, which we are doing and is
detailed in our proposal. The next set of challenges is to increase
capacity for all users of the corridor to address growing ridership
demands. We believe that Amtrak is in the best position, at the moment,
to oversee and coordinate this work. There is very little disagreement
about the importance of the NEC, both as a national transportation
asset and its economic importance to the region it serves. While the
Corridor does come close to covering its operating costs, it will never
cover its capital needs. Our plan outlines a number of short term and
long-term initiatives to address these issues.
Amtrak is committed to operating a national system of rail service.
We believe that many of the communities served by long-distance trains
lack real transportation choices and rely on these services. Amtrak
operates 15 long-distance trains and for more than half of the states
we serve, they are the only Amtrak service. Rightly or wrongly, long-
distance trains have become a focal point in the debate over ``reform''
of passenger rail service. While we believe their continued operation
is integral to the many communities they serve, they also represent the
basis for any future expansion of rail corridors. It is important to
note that we are confident that we will reduce their operating losses
through a series of steps that we outline in our proposal, and we
believe those reductions will be substantial; however, we will not
eliminate the need for financial support for long-distance operations.
Central to this is the establishment of a phased-in performance
improvement program that will couple cost-saving efficiencies with
revenue enhancement initiatives, so that over time these trains will
achieve financial performance thresholds or be discontinued.
I understand how important the question of what we do with long-
distance trains is to this debate. Our proposal outlines a series of
specific steps that we would take in evaluating our various long-
distance services. As I said a moment ago, the first job is to set fair
and clear performance standards for long-distance trains, and establish
a minimum performance threshold. Once that is accomplished we would
rank each route so that we can determine early on which trains meet the
threshold or fall short. For all long-distance trains, we will work
aggressively to improve their performance so that they will more likely
achieve the desired goal. During this process, we will be providing
clear remarks to the states reflecting the level of support each
particular route will require in order to continue service on that
route. As stated earlier, we will make every reasonable effort to
improve the performance and close the operating ``gap,'' but ultimately
states along the routes will be required to cover any recurring ``gap''
in order to continue train service on such routes. If a train continues
to fall below the established performance threshold, then we will
notify the states involved and begin the process of discontinuing
service on that route.
We do believe that there are many opportunities for competition in
the rail passenger service industry. It is true that in some cases,
having a single provider such as Amtrak might allow for economies of
scale and certain cost efficiencies. We can assure you, however, that
in some areas we are not the most efficient provider of rail-related
services. A key goal that all of us should share is the development of
a vibrant passenger rail service with a competitive supply industry and
multiple service delivery options. This does not exist today. In this
regard, there are actions that Amtrak can do on its own and others that
will depend on Federal legislative action. Some of the legislative
decisions in this area will be difficult and will no doubt encounter
stiff resistance from a number of entrenched interests. Any discussion
of competition will involve making decisions about access rights to the
freight rail infrastructure, tort liability limitations and limited
changes to certain labor and labor retirement laws. We have provided a
discussion of these matters in our proposal.
Also included in our report is our funding request for FY06.
Typically, Congress receives our grant request in February. Since we
were well into this planning exercise, we elected to hold off making a
request until we had completed our work. In so doing, we felt that we
could give you a more comprehensive and accurate request for FY06 in
the context of our reform package. The last dozen pages of the proposal
details our FY06 budget requirement, which is $1.82 billion, or $1.645
billion if our working capital needs are covered by a short-term credit
facility instead of a grant. We have also included a preview of how we
would go about reporting Amtrak's financial information by business
line.
Finally, it is worth emphasizing that Amtrak's Board and management
have concluded that the company cannot continue to operate at Amtrak's
current funding level of $1.2 billion significantly, if at all, beyond
FY05. The negative financial impact of the recent Acela problems could
very well exhaust our working capital and leave us without available
cash by fiscal year-end. We have taken and will continue to take
aggressive steps to achieve short-term savings, but we have very little
maneuverability in our operating budget and cannot responsibly make
material reductions in capital expenditures (principally tied to NEC
infrastructure, and its state of good repair). Over time, significant
savings will be achieved only through an aggressive and systematic,
multi-year transition process with legislative assistance. It is for
this reason that we have brought forward our Strategic Reform
Initiatives to help inform your decision-making for FY06 and beyond.
In closing, both David Gunn, his management team, my fellow Board
members and I look forward to working with you in the weeks and months
ahead as we develop our plan and move this debate forward. In many
ways, the relative financial stability the company has achieved in the
last two years, as well as the enormous amount of work that has been
done to improve our infrastructure and operations, has afforded us the
opportunity to develop a vision for Amtrak and intercity rail passenger
service. The current funding model of unpredictable annual
appropriation levels is unsustainable. There is a better way to do
this. We have no choice but to start now, but we will need your
support. David Gunn and I look forward to your questions.
Senator Lott. Thank you, Mr. Chairman, and now, President
David Gunn, thank you for your service over a difficult time,
and I think you've been the only salvation we've had, in some
respects, at Amtrak, but I think you know we're going to have
to make some changes, and I think you're the right guy to try
to help us decide what they are, and move in that direction.
And we'll be glad to hear your testimony.
STATEMENT OF DAVID L. GUNN, PRESIDENT AND CEO, AMTRAK
Mr. Gunn. Thank you, Senator. I'll keep my remarks very
short, since I think the Chairman, obviously he speaks for all
of us, but I think it's important to congratulate the Chairman
and the Board for what they've done in a very difficult process
here. This has not been an easy task, to come up with a reform
package, and I think it's a good plan that we've put forward,
and I look forward to working with you to turn this into a
reality.
I'd like to make just one brief comment about the reform
package, and just remind you that it really is a package, and
that it's interrelated, so one has to be careful if you pick
and choose pieces out of it. Obviously the most important--I
think--piece is the funding piece, for the state of good repair
projects, and for working capital, and getting the states in a
position where they can access Federal capital through a
transit-style program, we'll say on an 80/20 match.
The proposals that we've made on the Railway Labor Act are
designed to overcome some real difficulties we have in terms of
productivity, and they'll be controversial, but what we're
asking for is to be treated as any other company outside the
railroad industry would be treated. In terms of the moving
toward, transitioning out of, railroad retirement and gradually
converting to social security, it's important for costs, it's
also important if you want to open up competition. Since
railroad retirement is a rather unique, and unfortunately, a
very troubled system, I think the next step is developing a
realistic implementation plan and timetables, once we know
where we're headed on this reform journey. But I think that the
future of intercity passenger rail, if we can pull this off,
will be much brighter than it has been for years, but the key
to it is to give the states the ability to be the purchaser of
services and to access capital.
Senator Lott. I was still meditating on that last comment,
I thought you had more to say. He did, he pulled the train up
to a stop, the brakes are working fine. Mr. Mead?
STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR GENERAL,
DEPARTMENT OF TRANSPORTATION
Mr. Mead. Thank you, Mr. Chairman. First, you had a hearing
a couple of weeks ago on surface safety, I wanted to compliment
the Committee for having that hearing, and especially the
majority/minority staffs for the prompt followup to it. The
followup was of very high quality, and I just wanted to mention
that before we start talking about Amtrak here.
Congress has provided direction in piecemeal fashion
through appropriations bills since the last authorization
expired in 2002. And we've testified several times since then
on Amtrak's high debt load, unsustainably large operating
losses, poor on-time performance, levels of deferred
infrastructure and fleet investment. And each time I come up
here, it seems that Amtrak is perpetually one, two or three
steps from the edge of collapse, and I'm really encouraged by
your words, Mr. Chairman, that the Committee plans to move on
reauthorization in a timely way this session.
So, we're testifying again today on these same subjects,
but I've got to say, testifying with a greater sense of urgency
than in the past. As time goes on, this limp-along, status quo
system that we have comes closer and closer to a major failure.
The problem is, no one really knows where or when such a
failure is going to occur.
We reported last year that the current model is broken, and
there seems to be a fair amount of agreement on that point. But
the reason it's broken goes beyond just persistent budgetary
shortfalls, and extends to matters like who decides on the type
and amount of service, who provides the service, and who
selects the providers. Right now, other than the threat of
budget cuts, there's really very little in the current model
that provides incentives for cost control.
Mr. Chairman, Amtrak is quite literally coming to the end
of its rope. And for several reasons, the bankruptcy option
would be a complex and risky undertaking, and in our opinion,
one not to relied on if the objective is to promote a more
rational and reliable national passenger rail system. In short,
a comprehensive reauthorization that provides new direction and
adequate funding is needed, and it's needed this year.
Now, what should this reauthorization contain? The
reauthorization, in our opinion, ought to focus on improving
mobility in short distance corridors around the country, not
just in the Northeast Corridor, and in restructuring long
distance services to complement those corridor services. That's
going to require new relationships between the Federal
Government and the states, and among the states, Amtrak and the
freight railroads. And it's going to require giving the states
greater authority over passenger rail decisions that
immediately and directly affect them, and it isn't going to
happen overnight.
But in order for this to work, a considerably more robust
Federal funding program for capital, with a reasonable state
match, is going to be required, along with additional state
contributions. It's going to cost some money. The
Administration's proposal, I think, recognizes well that the
current model is broken, and it confronts several key issues in
a straightforward way, while leaving others unanswered or
unaddressed. We concur with the emphasis on corridor
development, within and outside the Northeast Corridor. These
are the places where the demand is, and we concur as well with
the greater decision making powers given the states.
Also, we think the authorization ought to leave open the
door to competition. Amtrak is currently the sole provider, and
as such it has few incentives, other than the threat of funding
cuts, to operate more efficiently. We're not in a position to
say, though, if or how many competitors are going to step up.
I'm not assuming that there's going to be a lot of competition,
but I think we should leave the door open. And there will need
to be a level playing field, because there are some privileges
that Amtrak has right now that others do not have.
Consideration is also going to have to be given to the very
legitimate interests of the freight railroads who--it so
happens, outside the Northeast Corridor--own the rail
infrastructure. Left unanswered, though, by the
Administration's proposal, is a very central issue, most
notably the amount of Federal funding it supports. This has
fostered, in our judgment, a perception that while the states
would be given more authority and responsibility under the
Administration's proposal, the funding burden for operating
losses would fall largely on them, with no corresponding
commitment to significantly expanded Federal capital funding.
We think the debate on reauthorization would be much better
informed if the Administration spelled out its proposed Federal
funding levels with greater clarity.
Now, I fully recognize that there are problems with this
model that go well beyond money, but the funding levels are
going to be an integral part of any solution, and in reaching
consensus, particularly if we're going to ask the states to
contribute more funds than they're currently providing. Our own
take on the funding issue--this is the IG's take, it's not the
Administration's take, necessarily--for 2005, the appropriation
for Amtrak ended up at about $1.2 billion. In addition, Amtrak
is estimating in 2005 that it's going to get about $140 million
from states for operating losses, and another $200 million in
capital. So, that puts Amtrak, effectively, at $1.5 billion for
their current system. That level of funding is not sufficient
to make progress toward achieving a state of good repair, in
the Northeast Corridor or elsewhere.
Now, if Amtrak receives $1.2 billion again next year, even
combined with the contributions expected for 2005--in other
words, that they were just carried over to 2006--we think
what's going to happen is that Amtrak will, first of all, have
to defer major capital projects they already have on the
drawing board, and two, they will need to cut services, almost
certainly in significant ways. I wouldn't go so far as to say
the railroad will stop operating, but you almost certainly will
see very significant cuts in service, and your capital program
will be right on the edge of a high risk.
For 2006, passenger rail is going to need Federal funding
between $1.4 billion and $1.5 billion plus the existing state
contributions, just in order to maintain the status quo as we
know it today. That level of funding, the $1.4 billion to $1.5
billion level, even with the state contributions, won't be
sufficient to move the system to a state of good repair, let
alone permit the corridor development that we're all talking
about.
And I'm focusing on 2006 because I'm assuming that you will
pass the reauthorization, but you're not going to effectively
transition to a new system overnight, so I'm trying to outline
for the Committee what's going to happen in 2006. Now, for 2007
and beyond, Federal funding levels between $1.7 billion and $2
billion would put us on a road to bringing the existing
infrastructure and fleet to a state of good repair, and better
position states to use the Federal funds, plus their own
revenues, to invest in rail corridors.
Now what does that mean, about the states use their own
funds? Now, that assumes that the states would provide a
reasonable match of between 15 and 30 percent for capital
grants. That compares with what we've used in other modes of
transportation. It is different from what the Administration's
proposing, at the end of the reauthorization, I think the
Administration ends up at 50/50, I think that a more reasonable
state match would be in the 15 to 30 percent area. And that
would be for capital grants.
It also assumes that the states would cover a larger
portion of operating losses, and I'm going to deal with that in
a minute, because I don't think it's reasonable to just say,
``Here, start covering all operating losses.'' It also assumes
that Amtrak's going to implement cost saving measures, some of
them they can do in short order, like the food and beverage
system, which is probably somewhere between $80 million and $90
million that could be saved.
Now, there are other key elements of the reauthorization
package that I'd like to outline briefly for you, that extend
beyond just a level and mix of funding. First is the Northeast
Corridor. Two points that I know about this corridor, you've
got to bring this corridor to a state of good repair, and one
reason why--look at the on-time performance, the on-time
performance is going down, down, down--and the other problem in
the Northeast Corridor is go-slow orders. The way they deal
with this in rail is a little different than they do in
aviation. Aviation, when you have a problem at 30,000 feet, you
can't say, ``Oh, let's deal with this problem by slowing
down.'' In rail, that's one of the things they do, they put on
go-slow orders. And that affects how quickly you can get
through the Northeast Corridor, so the state of good repair is
very important.
But there's a second issue with this Northeast Corridor.
There are some proposals that would separate the operator of
the Northeast Corridor from the infrastructure. In other words,
the infrastructure would be handled by some separate business
than the operator. Great Britain has tried that. Now, we don't
feel--I'm speaking for the IG now--we don't feel that we have
enough experience in this country to say you ought to separate
the two. We think that's too risky right now, you need to know
more, and I can't recommend that step today.
Debt: Amtrak has about $3.8 billion in long-term debt. We
can sit and argue about whether they should have accrued that
or not, I think in my own judgment that it was bad judgment to
borrow that much money--it created a picture, it made it look
like Amtrak was really meeting the goals of the last
reauthorization, but one of the reasons was because they were
borrowing all this money--so their debt really increased. Well,
the fact of the matter is that the Federal Government, in
annual appropriations, is paying that debt. We're actually
paying this debt in the annual subsidy. And we think a good
case could be made for the Federal Government not writing a
check to Amtrak anymore to pay off this debt, but to just pay
it off.
One reason is, remember when they mortgaged Penn Station? I
think you probably remember, a few years ago they mortgaged
Penn Station. That's a 9.5 percent loan that we're paying off.
The U.S. Treasury can borrow the money cheaper than that, so
since we're paying it, basically, anyway, we think a good case
could be made that some consideration be given to discharging
it. As far as future borrowing, their ability to borrow more
money ought to be frozen, unless the Secretary of
Transportation on a stack of Bibles certifies that would be OK.
Long distance trains: Amtrak provides long-distance service
in 41 states. It so happens that in 23 states, long distance
trains are the only rail service in the states. Of the 23,
there's probably five or six that have potential for corridor
development, that is, between city pairs. But that leaves about
16 states. The trains incur heavy losses, you've all heard
about it, you know how controversial these long-distance trains
are, and I'm not going to sit here and make up the policy, do a
policy call on whether you should keep them or not, but they do
serve a transportation need for people, they do incur heavy
losses. But, I've got to tell the Committee--as unpopular as it
is to say this--getting rid of all your long-distance trains is
not going to solve the funding problem.
The math looks like this, Mr. Chairman. The operating
losses are around $600 million a year from the long distance
trains. Get rid of them, and eventually we might be saving $300
million. So you say, what happens to the other $300 million?
Well, the other $300 million would be re-allocated, probably,
to facilities that our long-distance trains share with the
corridor trains. So, it wouldn't just be a case of, ``OK, let's
stop these trains, and we'll save $600 million, like that.'' In
addition, there's a thing called a C-2 payments, these are
required by existing labor rules, and the C-2 payments, in
2006, would actually exceed cost savings. It would actually
cost us more in 2006 if we were to stop the long-distance
trains. So that's the math.
Now, what about the states, what do we do with the states
that don't have any potential for corridor development, and
have these long-distance trains? Well, one thing I would
suggest for the Subcommittee's consideration is that you
construct a formula grant program--no match required--that goes
to the states who don't have any potential for corridor
development, but do have long-distance trains, to cover a
reasonable percentage of the losses that they're now incurring.
Rather than just saying, ``You should pick that all up.'' We
have some ideas on how you might construct such a formula, but
I do think the needs of those 16 or 17 states also need to be
considered.
Thank you, Mr. Chairman, that concludes my statement.
[The prepared statement of Mr. Mead follows:]
Prepared Statement of Hon. Kenneth M. Mead, Inspector General,
Department of Transportation
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to testify on reauthorization of
intercity passenger rail and Amtrak. Intercity passenger rail is an
important component of a balanced transportation system. Amtrak's
authorization expired in 2002. In the interim, Congress has provided
direction in piecemeal fashion in the appropriations process. We have
testified several times since then on Amtrak's unsustainably large
operating losses, poor on-time performance, and increasing levels of
deferred infrastructure and fleet investment. We find ourselves
testifying again today on these same subjects, but with greater
urgency. As time goes on, the current limp-along status quo system
comes closer to a major failure, but no one knows where or when such a
failure may occur.
We reported in November 2004, that the current model for intercity
passenger rail is broken. And the reason it is broken goes beyond
persistent budgetary shortfalls and extends to matters like who decides
on the type and amount of service, who provides service, and who
selects the providers. Other than budget cuts or the threat of budget
cuts, the current model provides few incentives for cost control or
delivery of services in a cost-effective way.
Amtrak is quite literally coming to the end of its rope and, for
several reasons, the bankruptcy option would be an extraordinarily
complex and risky undertaking--in our opinion, one not to be relied
upon if the objective is to promote a more rational and reliable
national passenger rail system. In short, a comprehensive
reauthorization that provides new direction and adequate funding is
needed and needed this year.
The reauthorization, in our opinion, should focus on improving
mobility in short distance corridors around the country--not just in
the Northeast Corridor--and in restructuring long-distance services to
complement corridor services. This will require new relationships or
partnerships between the Federal Government and the states and among
the states, Amtrak, and the freight railroads, and give the states much
greater authority and control over intercity passenger rail decisions.
But, in order for this to work, a considerably more robust Federal
funding program for capital, with a reasonable state match, will be
required along with additional state contributions.
The Administration's proposal recognizes that the current model is
broken and confronts several key issues in a straightforward way, while
leaving others less clear or unanswered. We concur with the emphasis on
corridor development within and outside the Northeast Corridor--these
are the places where the demand is--and we concur as well with the
greater decision-making powers given the states.
Also, reauthorization should leave open the door to competition.
Amtrak is currently the sole provider of intercity passenger rail
service and, as such, has few incentives, other than the threat of
funding cuts, to operate more efficiently. While we are not in a
position to say how many, if any, potential competitors there might be,
there needs to be a level playing field to promote competition, and
consideration must be given as well to the legitimate interests of the
freight railroads who own the rail infrastructure outside the Northeast
Corridor.
Left unanswered by the Administration's proposal, however, is a
central issue, most notably the approximate level of funding it
supports. This has fostered a perception that while the states would be
given more authority, the funding burden for operating losses would
fall largely on them, with no corresponding commitment to significantly
expand Federal capital funding. The debate on reauthorization would be
much better informed if the Administration's bill spelled out Federal
funding levels with greater clarity. We fully recognize that the
problems of the current model extend beyond matters of money, but
funding levels are an integral part of any solution and in reaching
consensus.
Our own take on the funding issue is as follows. In Fiscal Year
(FY) 2005 Amtrak received a Federal appropriation of $1.2 billion. In
addition, Amtrak anticipates $140 million in state contributions for
operating costs and $200 million for capital projects. In effect,
Amtrak had access to funds of about $1.45 million. This level of
funding is not sufficient to make progress toward achieving a state of
good repair.
If Amtrak receives only $1.2 billion in Federal funding in FY 2006,
even combined with expected state operating and capital contributions,
they will likely continue to defer needed capital investment and may
need to cut services. Amtrak needs Federal funding between $1.4 billion
and $1.5 billion, plus existing state contributions, in order to
maintain the status quo as we know it today. However, this level of
funding would not be sufficient to move the system to a state-of-good-
repair, let alone permit investment in new corridor development.
For 2007 and beyond, Federal funding levels between $1.7 billion
and $2.0 billion would put us on the road to bringing the existing
infrastructure and fleet to a state-of-good-repair and better position
states to use Federal funds plus their own revenues to invest in rail
corridors. This assumes that states would provide a reasonable match of
15 to 30 percent for capital grants and would cover a larger portion of
operating subsidies and that Amtrak would implement cost saving
measures in such areas as food and beverage service.
Current Model Is Broken, Resulting in Severe Financial Instability and
Declining Service Quality
Despite multiple efforts over the years to change Amtrak's
structure and funding, we have a system that limps along, never in a
state-of-good-repair, awash in debt, and perpetually on the edge of
collapse. In the end, Amtrak has been tasked to be all things to all
people, but the model under which it operates leaves many unsatisfied.
Consider the following:
Amtrak is in a precarious financial condition. Its system
continues to suffer operating losses on all but a handful of
routes. Losses on some longdistance trains (excluding
depreciation and interest) exceed $400 per passenger. For the
last 6 years the average annual cash losses have exceeded $600
million. The growth in cash losses since FY 2000 is primarily
attributable to rising interest expense.
Amtrak is carrying a large debt burden. Its total debt grew
178 percent between FY 1997 and FY 2002, although it has
declined slightly in the past 2 years. For the foreseeable
future, Amtrak's annual debt service payments will approach
$300 million.
While ridership increased to 25.1 million in FY 2004,
passenger revenues were $1,304 million, below the $1,341
million achieved in 2002, due primarily to fare pressures. For
the first 5 months of FY 2005, passenger revenues were $3
million lower than the same period in FY 2004.
Amtrak has an estimated $5 billion backlog of state-of-good-
repair investments, and underinvestment is becoming
increasingly visible in its effects on service quality and
reliability. Deferred capital investment has led to several
system failures in recent years, including a failure of a key
12-kilovolt electric cable during the August 2003 northeast
power blackout; fallen overhead power lines (catenary) on the
line between New York and New Rochelle; and broken bolts on the
Thames River bridge in Connecticut. No one knows where or when
a critical failure will occur, but continued deferral of needed
investment increases the risk that it may not be too far away.
Further, on-time performance fell from 74 percent in FY 2003
to 71 percent in FY 2004, with even Amtrak's premier service--
Acela Express--achieving on-time performance of only 74
percent. On-time performance for long-distance trains averaged
less than 50 percent. Last year, the poorest performing train,
in this regard, was the Sunset Limited, with an on-time
performance of only 4 percent.
Today, Amtrak's corridor trains outside the Northeast Corridor,
based on current schedules, average 48-mph speeds and long-distance
trains average only 46-mph. These speeds reflect scheduled time and
overstate the lower actual speeds due to delays. Deteriorating
infrastructure and increasing freight and commuter rail congestion will
continue to impact on-time performance.
Bankruptcy Is No Substitute for Reauthorization
A rail bankruptcy is an extraordinarily complex and risky
procedure, and we cannot predict how the passenger rail system would
emerge from bankruptcy. An Amtrak bankruptcy is no substitute for
reauthorization. In our opinion, this is not an option to be relied
upon if the objective is to promote a more rational and reliable
national passenger rail system.
Labor Costs. Labor negotiations are outside the bankruptcy process.
In a non-railroad bankruptcy, the bankruptcy court can cancel or change
collective bargaining agreements, which some airlines successfully used
as leverage when renegotiating with their unions. In a rail bankruptcy,
the Trustee would have to negotiate with Amtrak's unions under the
Railway Labor Act.
Cash Crunch and Infrastructure Needs. Amtrak's cash crunch would be
exacerbated in bankruptcy. Once in bankruptcy, vendors often demand
cash or provide credit under stringent terms. As a result, absent a
Federal cash infusion, there is a possibility that major assets such as
Penn Station and the Northeast Corridor would need to be sold or
remortgaged to raise cash to sustain operations. Meanwhile, the value
of the Federal Government's mortgages on these properties would be
diluted, and the infrastructure would continue to deteriorate.
Public Interest. Once in bankruptcy, a federally appointed Trustee
would direct and manage Amtrak. The trustee must consider the ``public
interest,'' which has generally been broadly interpreted as continued
operations of the railroad, but in what fashion would clearly be left
up to the Trustee and it might not be the best solution or a solution
that the reauthorizers would prefer (or what the states would prefer).
For example, in order to continue operations, the Trustee may need to
shut down various state corridors or long-distance service to stop the
bleeding of cash and operating losses.
Eliminating Long-Distance Service Will Not Solve the Funding Problem
Long-distance service has sparked widespread controversy, in part,
because of its heavy subsidies. In 2004, long-distance trains
cumulatively incurred operating losses of more than $600 million
(excluding interest and depreciation). In fact, the loss per passenger
exceeded $400 on two of these trains--Sunset Limited and Southwest
Chief. Eliminating long-distance service reduces operating losses
associated with long-distance trains by about half (or $300 million)
but will not make Amtrak profitable.
Because long-distance trains share stations and facilities with
corridor trains, eliminating the long-distance trains would not
eliminate the shared costs. In addition, Amtrak allocates a share of
overhead and infrastructure maintenance to the long-distance trains--
some of these costs will be reallocated to all remaining trains. For
example, we estimate that $300 million or more in shared and system
costs would be shifted to other corridor trains. Thus, the expected net
savings are only about $300 million. However, these savings would not
be immediate--in fact, in the first year, it may cost Amtrak more to
eliminate the service than to operate it because of its labor severance
payouts (commonly called C-2).
Long-distance trains represent about 15 percent of total intercity
rail ridership. However, many of long-distance riders do not really
travel long distances. In fact, long-distance trains carry only a small
number of end-to-end riders. Of the 3.9 million long-distance riders in
FY 2004, only 527,000 rode the entire length of the route and another
403,000 rode between city pairs also served by existing corridor
service. The remaining 3 million riders traveled along portions of the
route. These trips mostly ranged from 500 miles to 700 miles--slightly
longer trip lengths than corridor riders.
While eliminating long-distance service may seem appealing from a
Federal budgetary standpoint, especially with the large deficits, it
ignores the mobility needs of rural areas of the country and the
benefits passenger rail provides. Amtrak provides long-distance service
in 41 states and is the only intercity passenger rail service in 23 of
those states. The questions of whether to provide long-distance
service, who makes those decisions, and who funds the losses are
critical policy decisions that will need to be made.
Where Do We Go From Here? Reauthorization Guidance Is Essential
The ``limp along'' approach is costly and leaves many unsatisfied.
The current model for providing intercity passenger service does not
leave the states in a position to decide upon the best mix of service
for their needs--what cities are served, schedules and frequency of
service, and service amenities. The model provides little balance
between the national goals of an integrated network and regional and
state transportation needs. How much funding and who provides the
funding--Federal, State, or a combination--are also critical questions
that need to be addressed. In providing reauthorization guidance, some
core elements need to be considered in determining how passenger rail
is funded and delivered. Specifically, deciding the levels and mix of
Federal and State funding, achieving a state-of-good repair in the
Northeast Corridor, determining the appropriate framework to integrate
competing demands of infrastructure and operations in the Northeast
Corridor, and paying off Amtrak's legacy debt.
In our opinion, a new model for intercity passenger rail should
also include several important aspects. The first is that funding and
governance build in incentives for cost cutting. Specifically,
eliminating direct subsidies to Amtrak, or any other operator, and
channeling funds through the states will likely promote more cost
control because an operator will need to better justify costs in order
to retain an operating contract. In addition, it will encourage states
to maximize efficiency by keeping their own costs to a minimum. Second,
the introduction of private competition into the management and
operation of intercity passenger rail services will exert additional
market pressures on operators to provide cost-effective, higher quality
service.
Adequate Federal and State Funding Should Be Provided in Order To
Restore the Intercity Passenger Rail System and Invest
Meaningfully in Corridor Development
Federal funding levels, along with state contributions, have not
been sufficient to subsidize operations, address deferred capital
needs, and significantly improve service along the existing rail
network. In the last 2 years, Amtrak has received annual Federal
funding of $1.2 billion. These amounts were supplemented by operating
and capital contributions from state and local sources--in FY 2004
these were $135 million and $114 million, respectively. In effect,
Amtrak received about $1.45 billion in public funds.
It will require at least $2 billion in funding from all sources to
begin any meaningful corridor development. The policy challenge is
determining who pays for what portions of the system. Federal funding
of $1.4 billion to $1.5 billion would not provide sufficient funding to
maintain a 5-year program toward restoring the system to a state-of-
good-repair. Projects in both the Northeast Corridor and in the
corridors and long-distance routes outside the Northeast Corridor would
continue to be deferred. This simply maintains the limp-along status
quo.
One approach to promote adequate Federal and state funding could be
to use a variety of grant programs similar to those used in aviation,
transit, and highways that place funds in the hands of states. These
programs are based on a combination of Federal/State matches and
formula grants. More specifically,
Capital Grants With a Reasonable Match. Like the Administration's
proposal, this approach would provide capital grants on a competitively
determined basis and would be administered by the Department of
Transportation (DOT). States that desire to improve existing intercity
rail service and/or develop new corridor services would apply to DOT
for a matching grant, similar to the Federal Transit Administration's
New Starts Capital Program. The Administration's proposal also suggests
such a program but provides a 50/50 capital match rate by the end of
the reauthorization period. Our view is that a lower state match rate
requirement would provide incentives for states to take an
``ownership'' role in developing rail corridors on a more competitive
basis with other transportation modes (historically, highways and
transit have used an 80/20 match rate).
To accommodate the need for different types of capital investments,
two types of capital matches could be established. For investments that
qualify as traditional capital investment, such as track or purchases
of passenger equipment, the Federal share could go up to 80 to 85
percent. On the other hand, for investments that qualify as capital
maintenance (for example, those under the transit definition) the
Federal share might be 70 to 75 percent.
Formula Grants With No Match Required. This approach provides funds
to states outside the Northeast Corridor that do not have corridor
development potential and that rely on long-distance trains for
substantially all intercity passenger rail service. By discussing this
approach, we are not taking a position on the ultimate policy of
whether long-distance service should be retained or eliminated but
merely presenting it as an approach for funding states that do not have
the population densities to support corridor development.
This approach could initially include sufficient funds to subsidize
existing long-distance and corridor services. Over the reauthorization
period the funds associated with corridor services would be reduced and
then eliminated at the end of the period. Further, we expect the level
of Federal funds subsidizing the long-distance services would be
reduced to reflect greater operating efficiencies resulting from
capital investments as well as other savings resulting from food and
beverage service changes, improved labor productivity, and efficiencies
that may be introduced by competitive service providers.
As determined by the states, funds could be used to defray the cost
of operating subsidies, capital investment, or both, with no match
required. The amount of the formula grant could be calculated on the
basis of Amtrak's Fiscal Year 2005 operating loss allocable per
embarking/disembarking passengers in the affected state or some other
formula that provides an equitable allocation.
Restore Northeast Corridor to a State-of-Good-Repair. The Northeast
Corridor presents a difficult challenge. The funding priority for the
Northeast Corridor reflects the accumulated deferral of investments
which has resulted in an estimated $5 billion backlog of capital
projects, threatening current and future service reliability. The
effects of the deteriorating infrastructure are readily evident. For
example, Amtrak's reported on-time performance in the Northeast
Corridor as a whole between 1994 and 2002 ranged from 82 to 89 percent.
In FY 2003, it dropped to about 80 percent. For FY 2004, even Amtrak's
premiere Acela service posted an on-time performance of only 74
percent, far short of Amtrak's stated goal of 94 percent. If the
decision were made to keep the current Northeast Corridor intact, we
estimate Amtrak would need to spend about $575 million annually for an
extended period on infrastructure and rolling stock to eliminate the
backlog of capital investment in the Northeast Corridor.
However, bringing the eight Northeast Corridor states and the
District of Columbia together in a short period of time to direct and
manage this effort is incredibly complex but may be achievable by the
end of the reauthorization period. Recognizing this challenge, one
option during the reauthorization period could be for the Federal
Government to fully fund the Northeast Corridor's capital requirements
until a state-of-good-repair is achieved. This would also address
states' reluctance to inherit a legacy system they did not create. We
suggest that the DOT distribute funds directly to the Northeast
Corridor infrastructure manager separately from the competitive grant
process.
Construct for 5-Year Reauthorization Funding. Congress and the
Administration have a difficult decision to make in determining the
appropriate level of funding for intercity passenger rail. The level of
funding can obviously vary. We have been giving this some thought and
would like to present a construct for consideration. We recognize that
many assumptions need to be made about who pays for what and how to
balance national, regional, and state transportation needs. Those are
decisions for Congress and the Administration to make.
In building this construct, we made several assumptions for
purposes of illustration. These include:
Formula grants will not fully cover train operating losses.
Amtrak's forecast net cash operating needs (excluding interest)
were used as the starting point. The levels of funding
represent imputed cost savings of 10 percent per year from a
combination of revenue growth and operating cost savings.
Over the 5-year reauthorization period, Federal subsidies
decline for long-distance trains and corridor operating
subsidies shift to the states. We expect states to place higher
performance and efficiency demands on the service provider to
lower operating costs to more affordable levels.
Debt service is based on Amtrak's projected debt service
payments through FY 2009, adjusted for installment payments on
their RRIF loan and possible early buyout options on leased
equipment.
Capital requirements to restore the system to a state-of-
good-repair are based on Amtrak's Strategic Plan for FY 2005-FY
2009 and on assumptions we made on allocating capital needs
between the Northeast Corridor and the rest of the system. The
funding allocation assumes a capital need of $575 million for
infrastructure and fleet in the Northeast Corridor and $250
million for infrastructure and fleet outside the Northeast
Corridor.
Funds available for capital match represent funds remaining
after state-of-good-repair funding requirements are met.
Construct for 5-Year Reauthorization Funding
($ in Millions)
----------------------------------------------------------------------------------------------------------------
After
State-of-
Federal Contributions FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Good-
Repair
----------------------------------------------------------------------------------------------------------------
Formula Grants (Capital and/or Operating $570 $513 $462 $416 $374 $337
Subsidy)
Debt Service 276 361 314 298 298 298
Capital to Restore System State-of-Good-Repair 754 776 825 825 825
NEC Infrastructure+Fleet 575 575 575 575 575
Non-NEC Infrastructure+Fleet 179 201 250 250 250
Available Capital for Match 97 261 503 1,365
----------------------------------------------------------------------------------------------------------------
Total Federal Contribution $1,600 $1,650 $1,700 $1,800 $2,000 $2,000
----------------------------------------------------------------------------------------------------------------
NEC: Northeast Corridor
New Federal capital available for state match does not become
available until annual Federal funding levels reach $1.7 billion. This
construct highlights the policy choice that needs to be made between
restoring the system to a state-of-good-repair and investment in new
corridor development. At $2 billion, we would expect about $500 million
to be available to states to match for use in new and/or improved
corridor development, and after a state-of-good-repair has been
achieved this Federal funding level would provide over $1.3 billion for
state capital matches.
Too Premature to Separate Management of Northeast Corridor
Infrastructure From Operations
Proposals to separate the Northeast Corridor infrastructure
management and operations into two independent companies present a
level of complexity and risk that needs a more thorough examination. At
some point down the road, this split might be feasible and may prove a
better way of controlling costs. However, at this juncture, not enough
is known about the benefits and risks of this proposal. As we witnessed
in Great Britain's experience, there are risks associated with
establishing a commercial, for-profit entity to operate the
infrastructure. Allowing an infrastructure company to operate ``like a
business'' may mean relinquishing control over how certain expenses are
cut or which capital investments are made. An infrastructure company
focused on its bottom line has incentives to make decisions that are in
its financial best interest but may not be in the best interest from a
safety or efficiency perspective for the operator. The result could be,
at best, disruption to service and a decline in on-time performance
and, at worst, compromised safety conditions.
Aside from the risks of separating the infrastructure from
operations in the Northeast Corridor, there are benefits to the
integration. In particular, an integrated Northeast Corridor provider
of track maintenance, capital programs, operations, and dispatching is
likely to be more efficient and less costly than two providers, each
having a separate organizational support structure. In addition, a
bifurcated approach would require a fully functional oversight and
control organization at the outset lodged in the Northeast Corridor
compact or the DOT to coordinate between operations and infrastructure.
If formation of the Northeast Corridor compact is delayed, there could
be disruptions to the operation of the corridor.
It may be possible at some point down the road to develop a model
where all interests are best served, but a more thorough review and
understanding of lessons learned from other similar attempts would be a
valuable precursor to such a division in the Northeast Corridor.
Pay Off Legacy Debt and Restrict Future Borrowings
As of September 30, 2004, Amtrak had long-term debt and lease
obligations of about $3.8 billion with amortization periods extending
beyond 20 years. Under the current model, these obligations are paid
for with Federal appropriations. Because portions of Amtrak's debt were
financed at higher interest rates than what the Federal Government can
borrow, Congress and the Administration should consider a one-time
appropriation for the specific purpose of discharging any debt that can
benefit from the Federal Government's borrowing power, producing
longterm Federal savings. For example, Amtrak pays 9.5 percent interest
on its mortgage obligation for Penn Station, New York, whereas recent
10-year Treasury notes issued by the Federal Government are yielding a
little over 4 percent. In addition, Amtrak's ability to incur long-term
debt should be restricted, except for refinancing opportunities that
lower interest expense and do not increase the outstanding principal,
and no commitments should be made without advance approval by the
Secretary of Transportation.
Mr. Chairman, that concludes my statement. I would be happy to
answer any questions at this time.
Senator Lott. Thank you, Mr. Mead. Senator Snowe, thank you
for coming, if you've got any questions you would like to
submit for the record, and your statement will be included in
the record. We've been joined by Senator Pryor and Senator
Dorgan, also.
Let me, I don't want to take up all the time asking
questions of each one of you, but I'll just get started and try
to go 5 minutes or so, and I'll yield to the other Senators,
and then we can get a second round, but let me begin with you,
Mr. Rosen.
From the Administration's standpoint, the Administration's
proposal calls for the states to pick up 50 percent of the
costs, is that right?
Mr. Rosen. On infrastructure matching grants, that's
correct.
Senator Lott. And does the Administration really think the
states could or would do that?
Mr. Rosen. Well, Senator, right now there are a number of
states that pick up 100 percent of the cost, and so for, at
least those states, it would certainly be advantageous. For
other states, they already put in something comparable to that
when they want to improve transit infrastructure, so I think it
is likely that there would be states that would be interested.
Senator Lott. Is it true that the President's budget
proposal provided zero funds for Amtrak?
Mr. Rosen. Yes, with the caveat that there was funding of
$360 million in the event directive service was needed if there
were an Amtrak shutdown.
Senator Lott. Did the Administration contemplate the
seriousness of such a ridiculous proposal? I mean, what in
heck? What if we don't act? Congress is not a swift operation,
what if we don't do another authorization bill, what if we just
balled up in the Senate or in conference, we don't produce an
authorization, and the Appropriations Committee says, ``Well,
sorry, we just don't have the money,'' or the Administration
opposes it, I guess there was some reason for that, but I
frankly was extremely stunned and disappointed that such a
proposal would be sent up here by this Administration.
Mr. Rosen. Well, Senator, what I think I can say about that
is that the course we were on, all of us on this panel has said
in one fashion or another, that the course we are on is
unsustainable, and so Secretary Mineta has made plain in a
number of contexts that the point of the President's budget
request was to be a call to action, because the course we're on
is unsustainable. I think it's heartening that you've scheduled
this hearing and that you've made the very hopeful remarks that
you have about the intention of this Committee and hopefully
the Congress.
Senator Lott. Well, obviously with my record and all, I
want to work with the Administration, but I need your genuine
real involvement and help to get this done, and I hope the
Administration, the Transportation Department will remember
that one of the critical components of economic development in
America is the transportation system. If we don't have well-
funded proposals for highways and for airways and for railways
and ports and harbors, we're not going to be able to grow
economically, because we won't have the capacity. And, quite
frankly, I don't think the Administration is stepping up
adequately to the transportation area, in general. Would you
like to respond to that?
Mr. Rosen. I would, Senator. I think there are two aspects.
One is that the Administration proposal does call for a major
role of both the Federal and State Governments in a partnership
for infrastructure development and I think that that would be
more comparable to what we have done with airports, highways,
transit. I think we do regard infrastructure development as an
important underpinning of economic growth. So, I think there's
an area of concurrence there that transportation infrastructure
is an important activity, and that's why our proposal moves to
a model that will enable that.
As to the question of--I'm sorry, I lost the other part of
the question.
Senator Lott. That's all right. I'm sure you were a little
surprised at my reticence here, but I care a whole lot about
the transportation area in general, and I really want us to do
a better job of thinking about the future, and it's more than
just a budget item, it's about our kids and our future, and I
get excited about that.
Mr. Mead, you and others, and again, I appreciate your
thoughtfulness, but maybe it's because I come from a truly poor
state, but I don't quite understand--I realize maybe Illinois
does a lot on its own, in some states they do 100 percent--but
it feels to me like we're trying to say, ``Well, we can't
figure it out, so we're going to kick this ball over to you
guys in the states.'' This is a national rail passenger system.
This is interstate commerce, we have interstate highways, what
the heck are we doing here? States can't come up with 50
percent, in most instances. At the very most, like what you
proposed, I think something where the states would come up
with, I think you said 15 and 30, that's what we do--I think--
with highways, 20 percent. But this is an interstate activity,
the Federal Government should have the principal lead here, and
not try to say, ``OK, Mississippi, Alabama, Texas--figure this
thing out.'' What are we supposed to do?
Mr. Mead. I concur mostly with that view. I do think that
those three states that you named, they ought to have a major
decision-making role, if you're going to adopt a corridor in
those states between population areas, that ought to be a call
that a state can make, and the states need a robust Federal
capital contribution. The comments I made, I think a lot of
thought has gone into the Administration's bill, but I was
trying to point out in my comments about the funding, that
funding--let's face it--funding is a key issue in the problem
we're facing here. It's not the only problem, but what I hear
in my travels is the states saying, ``Well, this is all very
nice, that we get this decisionmaking power, and more
responsibility, but what's in this bag that you're giving us?''
And that's why I would urge that the Administration reflect on
what they're willing to support in the way of Federal funding.
Senator Lott. Mr. Gunn, I do think we've really got to find
a way to fund Amtrak adequately or give you access to some
reliable, steady stream of money, or give it up. But we can't,
if we're going to continue to appropriate money or provide you
some other opportunity, like bond authority, we also have to
expect you to make some tough decisions that involve management
and labor, you're going to have to take some actions to save
money, we've got to make sure, we've got to be diligent in
making sure that people's money is spent well. I realize that a
route that affects my state could be eliminated, I do think
we'll have to belly up to the bar and recognize some of these
long distance routes are just not going to make it. So, that is
the other side of the equation. And I assume that your proposal
that you're offering here today, the initiatives, I believe the
Chairman did point out that you are calling for some belt-
tightening and some changes in the way you conduct business.
Would you like to respond to that?
Mr. Gunn. From the management's point of view, what we want
to try to do is to reduce the deficits as much as possible on
these trains, and there are a number of proposals that are
detailed in the reform package as to the types of things that
we're going to do that we think will improve productivity. We
obviously want to, I mentioned the Railway Labor Act and the
need to properly size train crews and to restructure our
maintenance functions from a craft basis to an industrial
basis. These are all things that we're fully prepared to try to
undertake, and that we will undertake to the extent that we
have the authority to do it, but I would just caution you
that--and I think the DOT Inspector General talked about this--
there's not a lot of savings eliminating a single train,
because what happens is, you have to take out large swathes of
service to get at the overhead, or the shared costs of these
routes. But, we have already taken off, I think it's three or
four trains since I've been here, we did the Three Rivers just
recently, we truncated the Palmetto, we took off the Kentucky
Cardinal, a series of trains that we've removed, so we think
that there should be standards applied to these trains, and
we'd like the opportunity to make them as efficient as
possible. Because we have actually made progress in the deficit
per train mile, so we think, we can't make money with these
trains, but we can make them better, and that makes the
political decision a lot easier, because you don't have as much
funding to go into it. But we support--your point of view is
supported.
Senator Lott. We'll have another round, I'll come back to
you, Mr. Laney. Senator Lautenberg?
Senator Lautenberg. Thank you, Mr. Chairman. And, in answer
to your question about what happens if the budget goes through
as the President's proposed it for Amtrak, you asked what would
be the outcomes--there would be very long waits at the
platforms, I can tell you that, and it's just outrageous when
you think about that 25 million people used Amtrak last year.
Twenty five million people. And everybody knows that we have
something called essential air service, but there are places
where we had essential train service, because it's the only
mode for lots of people, as Mr. Mead suggested.
Mr. Rosen, the President essentially proposed zero for
Amtrak in his budget, and now the Administration plan says such
sums as may be necessary. So, does the Administration feel that
zero is necessary for Fiscal Year 2006?
Mr. Rosen. Well, Senator, you're talking about two
different models. The Administration budget calls for zero
under the old 1971 model of Amtrak, the ``such sums as
necessary'' is in the Administration proposal for a new
approach to intercity passenger rail.
Senator Lautenberg. And the new approach invites
competition and we talked about Amtrak's bottom line being so
disastrous. So, will we have a rush of competitors come in
there and take over these lines that don't make any money?
Mr. Rosen. Well, Senator, the Administration proposal
envisions a 6-year transition period, during which time,
financial benchmarks would be applied to the trains, the State/
Federal partnership would be established, the opportunity for
states to participate in the planning of rail, the way they do
for other transportation would be established, and in that
period, as we move from a single national provider, Amtrak, to
a decentralized system, where states have a major role in the
transportation planning process, and where competition was
enabled by leveling the playing field on some of the items, I
think we believe that there will be companies that would be
interested in competing to be train operators. We have other
people that are train operators in commuter rail, we know that
there are people, other people that know how to operate trains,
how many of them? Will they rush? The question when you
transition to competition is that markets are dynamic, you
can't fully----
Senator Lautenberg. Mr. Rosen, thank you very much for the
extended answer.
Mr. Gunn, what do you think about competitors coming in
there, anxious to take over, and by the way, they'd have to
maintain some reasonable degree of cost, because there's no way
to drive people away from transportation opportunities than
high costs, but what do you think about the possibility of
competition coming in here and doing it better, especially
coming from the private side?
Mr. Gunn. Well, I think, if you look at the Board's reform
proposal, and this is sort of awkward because Mr. Rosen is on
our Board, but he's also speaking for the Secretary, but our
proposal, it says that if you want competition, you need to
level the playing field, and it's not clear how many people
will show up to be full service operators, but to do that, you
need to level the playing field. There are people out there,
but you'd have to change some of the ground rules for how we
operate, you'd have to deal with the access to the freight
railroads.
I personally think competition, you should also look at
competition in a different way, as well, and I'm not against
what you're talking about, but I think that the easiest way to
get competition going is providing services. Whether it's food
service, whether it's selling tickets, whether it's certain
maintenance services--we already contract out, and use
contracting a lot to try to control costs. But, I think if you
want to have full-service operators show up on interstate
services, you're going to have to make some changes in the
rules, which is, I think the Board's reform package--and the
Chairman mentioned that in his testimony--that the goal, you
have to level the playing field. Because we have an advantage,
right now. We have an advantage on the insurance, the liability
insurance, we have an advantage on access to the freight
railroads, we have the advantage of having size on our side,
the economies of scale, so this is not something you want to do
casually. I'm not against it, but I think if you're going to
have other operators show up, it's important that you have, it
be very well thought out. They won't appear out of the ether to
run the Southwest cheap.
Senator Lautenberg. Do we have examples of countries where,
I'm talking about the more advanced, the more developed
countries, where they've had private operators come in and do
it successfully, and do it within budgets and good quality of
service?
Mr. Gunn. Well, probably the poster child, or boy for this
type of organization is Britain. Now, where they've set up
private--they broke their railroads, they destroyed vertical
integration, and they set up a separate infrastructure company,
separate rolling stock company, and separate operating
companies. And they actually had a lot of private companies
that have shown up to do it, because the amount of subsidy has
just skyrocketed. There's a lot of money to be made, if you
continue to subsidize it. And that's what's happened. The
quality of service has not improved. The cost of service has
deteriorated, and they've lost a lot of the control they used
to have when it was a unified----
Senator Lautenberg. The quality of the service also has
deteriorated.
Mr. Gunn. Yes, it has.
Senator Lautenberg. Is safety on the British--?
Mr. Gunn. I don't have the entire history of the British
railways, but they've certainly have had some unfortunate
incidences that came about. I think it's more of a factor,
rather than privatization versus government, it's the function
of destroying the vertical integration. I mean, I think it's,
you can have a private company, or you can have a quasi-
government operation like Amtrak, as long as it's vertically
integrated, you can get a pretty efficient operation. If you
destroy that, I think you really, it will be very expensive.
And that's what's happened to Britain. I mean, they're now
spending like $12 billion a year subsidizing their rail system,
up from about two.
Senator Lautenberg. So, that's a highly undesirable
competitive position. Thank you, Mr. Chairman.
Senator Lott. Thank you, Senator Lautenberg. Let's see
here, Senator Pryor.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman, and thank you for
your leadership and attention to this, along with Senator
Lautenberg, and certainly Senator Inouye. I'd like to, if I
could, with the panel's attention, focus your attention on long
distance service. Arkansas has a long distance line called the
Texas Eagle, approximately 20,000 people ride it each year,
services mostly rural towns, also stops in Little Rock, kind of
cuts right through the state, pretty much northeast through
southwest. And, a lot of people enjoy that service, certainly
we don't have nearly the ridership, say, like New Jersey or
some of the more densely populated states, but we just don't
have that population density, so I understand the challenge
that you all have.
I think I'd like to focus on two things. One is this idea
of state funding, Mr. Rosen, you were talking about that a few
moments ago, and others have as well, and also this concept of
evaluating, somehow coming up with an evaluation of long
distance service, and you all have referred to that as well.
So, Mr. Rosen, let me start with you, if I can. You talked
about a 50/50 matching on infrastructure grants, where the
states would match 50 percent. The first question I have is,
let's say that, again with the Texas Eagle, let's just say it
goes through four or five states, and one of those states is
Arkansas and let's just say, not to pick on anybody, but the
State of Missouri decides they're not going to pay, but the
other four states do, how will that work?
Mr. Rosen. Well, the way we envision it working is that the
states would have to find a mechanism to talk to one another, a
bill enables, as actually the 1997 Reform Act, states to form
compacts with one another, and they could agree on their own
ground rules on that, which is to say that if somebody doesn't
participate, what happens next? Do others have to kick in, what
happens to the service? But the precise mechanism depends, to a
great extent, on what the states decided to do about that.
Senator Pryor. So, in other words, you'd leave it up to the
states, and I can just see the issues boiling up on that
already about what factors do you consider for each state's
contribution, do you consider the number of miles in the state,
which certainly is something that we can understand, the number
of passengers that utilize the service, the number of stops
that are made, I mean, I can see a big fight there, but as I
understand it, what you're saying is, that's not Amtrak's
headache? You think the states need to resolve that?
Mr. Rosen. Yes, sir, that's right, in essence, the
purchasers, and in this instance the states would be
functioning as proxies for the consumers, they would have to
develop a mechanism to resolve that. Now, as is, I think,
always the case, we at the Department of Transportation would
assist and enable, and if necessary, perhaps we could
participate in regulations or guidelines or other mechanisms
gained from best practices and experience, but I think in the
first instance, we would look to the states to work that out.
Senator Pryor. Mr. Laney, do you or others on the panel, do
you all have any comments on that, and how we should resolve
this?
Mr. Laney. Senator, let me add to what Mr. Rosen's comments
were. First of all, the entire process, start to finish, has
not been fully designed, but we all are of the mind that the
process does need to be clear, in terms of understanding, and
ultimately evaluating and then ranking trains. What you heard
from Mr. Mead was an interesting proposal, and it's an
interesting comment, the fact that in about half--it's not
exactly half--in about half of the states that we provide
service, the only service we provide is long distance service.
And, if there is a concentrated investment in a combination of
Northeast Corridor and other corridor services throughout the
states, whether it's matched at whatever level, states like
yours, and a number of other states, are going to say, ``What's
in it for us?''
The evaluation process, the establishing a threshold, the
deciding, ultimately, what trains--if they are not, if there's
a gap in terms of operating deficit, if it's not close, and
then not supported by the states--the question becomes, is
there still a continued role for the Federal Government. And I
think Mr. Mead was suggesting that there is. So, there may be a
balance between pure state coverage, and a combined Federal/
State coverage that still fits into that construct.
Mr. Mead. I'd like to just add to that, I think there are
two issues that are implicit in the question that you pose. The
first one is the service you have now. What I was suggesting
was that at least for the period of the reauthorization, that
your state, along with the other states that have this long
distance service, you would get a formula grant--I haven't
exactly figured out how it would be calculated--but it would be
for the purpose of paying the operator a percentage of the
operating loss. And it would be no match required. Because I
feel that you have to, the states that don't have corridor
development potential, that they're still states, and they
still have transportation needs in the rail area.
Then the second part of the question you posed, I think has
to do with capital development. Maybe an analogy isn't apt, but
I think of Chicago O'Hare Airport. Chicago O'Hare Airport would
not be expanded unilaterally because the Federal Government
decided that there should be an expansion program at Chicago
O'Hare. That is directly and immediately a decision for the
State of Illinois. Then the Federal Government has to provide
some capital, to assist in the development of that. And I guess
what I'm trying to say is--and I think all of us are to one
degree or another--that you also need a capital program to make
things better than they are now, and that is the one where the
match issue comes into play. The Administration's proposal
right now is for a 50 percent match. I think you need a more
reasonable one of somewhere between 15 and 30 percent, that's
more compatible with what we've done in aviation, highways,
transit, for new projects.
Senator Pryor. Thank you, Mr. Chairman.
Senator Lott. Senator Dorgan?
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much. I think
that the responsibility for part of the mess that we have here
is a responsibility that goes to the doorstep of the
Administration and the Congress. I mean, think about this just
a little bit, and the message that we've been moving around
here in recent years, start it up, shut it down, slow it down,
keep it open, get rid of long distance trains, bring in
competitors, and by the way, don't adequately fund capital
investment or infrastructure, and also run it as a business. I
mean, what a terrible way to run a railroad, what on earth are
we thinking about? I've always known you need a glossary of
terms to understand what's being said in this town, but I'm
reminded of it again this morning, Mr. Rosen, ``zero funding is
a call to action.'' I come from a small town, but you know, I
recognize a big hoax here. Zero funding is not a call to
anything, it's zero funding, it means you want to shut the
place down. And I agree with my colleague, Senator Lott, I
think that's an absurd proposition.
Look, 34 years ago this started because there was nobody
interested in running passenger service. The railroads had shut
it down, and so we created passenger service. We created it,
there was no competition, there was no one interested in doing
it. And, let me also say, just as I finish the comment, I'd be
glad to have you respond, we've seen decisions based on bad
intelligence in this town, in very significant ways, let me
describe another decision based on bad intelligence.
Secretary Mineta was in Detroit, this was last month, and
he was asked about a previous comment he'd made when he said,
``Amtrak runs routes that nobody wants to ride,'' he said,
``The problem is,'' now this is quoting the Secretary, ``The
Empire Builder is going from Seattle to Chicago and it's going
through, let's say, Montana, but there are only 53 people a day
using that train service. Can I really justify pouring that
kind of subsidy into the Empire Builder for that segment of
service?'' Well, unaccustomed as I am to speak up for Montana,
let me just say--and they're good neighbors of ours, but my
colleague speaks up for them daily--in fact, the Empire Builder
in 2004 handled 437,000 passengers, that's the Empire Builder,
1,195 per day, one eastbound, one westbound train, and I have
the boardings and so on for Montana, but if you miss the mark
by this much, in order to make your case, you don't like long
distance trains, speaking for the Administration, what's left?
You all probably want to respond to some of this, except I
just want to say this: I think it is worthy of this country to
continue to make investments for a national rail passenger
service system. No, not Boston to Florida only, because I
expect that route only can probably justify itself based on
market conditions. Although you get competitors in there and
cherry pick and then we wonder, but I think a national rail
passenger system is worthy, I'm perfectly willing to subsidize
it, I want it to run well, I want it to invest in capital
equipment and infrastructure so that we have a rail passenger
system that works, but Mr. Gunn cannot run a system under these
conditions, it is impossible to do. This Congress and this
Administration ought to decide--do we want a national rail
passenger service, or not? But let's not zero fund it and say
it's a call to action, that's not a call to action.
If you want to respond to that, it felt good to say it.
Mr. Rosen. May I respond to that?
Senator Dorgan. Yes, of course.
Mr. Rosen. It is a call to action, and the reason it is, is
that as the Secretary said repeatedly--if you and the
Administration wanted to kill Amtrak, the easy way to do that
would be to do nothing. The very fact that we came forward with
our own reform proposal, with a different model for passenger
rail is a demonstration that it's a call to action. It is
saying we don't want to put money into a failed model, into a
failed approach, and let's remember--Amtrak is a private
corporation. It is somewhat unique in terms of how we do
transportation in this country that it does both infrastructure
and operations. We don't have, we have Federal support for
airports and for highways, but we don't provide an annual
Federal grant or an authorization for trucking companies or
airlines, and so we have an unusual model there that has
produced tremendous difficulties as you alluded to, year to
year and over the long term, $29 billion in the last 34 years,
and everyone on this panel has agreed that there is a need for
change. So, I would suggest, respectfully, that the zero budget
is both a call to action, and a recognition that the old model
doesn't work.
Now, with regard to the issue of the subsidies on long
distance trains, let me just quickly say the Secretary's point
on that is that the subsidies per rider are extremely high----
Senator Dorgan. That's not what he was saying, go ahead and
defend him, but defend him based on what he said.
Mr. Rosen. Let me make the point. The subsidies in the
aggregate for a per passenger mile, for passenger rail, exceed
any other mode of transportation. And that takes me to the
bottom line point that I want to just get to, in terms of long
distance. We have to think of our national transportation
system as a multi-modal system, that we have buses, we have
cars, we have airplanes, we have rail. And for different
locations, there's a mix of what are the best solutions, and in
the end, we have to be looking for what's cost effective for
different parts of the country.
Senator Dorgan. Please understand, there's a difference
between cost and value, and in North Dakota, 90,000 people get
on and off Amtrak, many of them elderly, it is a very important
part of our transportation system.
Mr. Rosen. And I don't minimize that at all, sir, I think
we want to work with you on those kinds of issues.
Senator Dorgan. What I'm saying is, though, the Secretary
of Transportation apparently has an involvement in
recommendations of what to do with Amtrak, and he certainly has
a profound misunderstanding about the Empire Builder. That
train goes from Chicago to Seattle, carries a lot of people
from Montana and North Dakota, is a wonderful train, and I'm
just asking you to straighten him out on the numbers, because
he's profoundly misunderstanding what's happening there.
And I want to make one final comment. There isn't any
question that rather than a call to action, you, Mr. Rosen, and
the Administration want to shut down long distance trains. I
understand that, but why don't you just say it, rather than use
words that seem to mean something else. If you don't like long
distance trains, try to shut them down, we'll have a fight
about that, but in the end, I think we should keep Amtrak, we
ought to provide the funding necessary for capital investment,
the funding necessary for infrastructure, and then ask Mr. Gunn
to run a railroad based on business principles, but I sure
think at this point we're moving in the wrong direction, I
couldn't agree more with my colleague, Senator Lott's comments
at the start of this, and that may have been surprising to some
of you, but I know that he's cared a lot about Amtrak for a
long, long time, as have many of us on this Committee.
So, I appreciate the contribution, I'm sorry I was a bit
late to the hearing, but I have read all of the testimony, I
appreciate the contributions that you've made today.
Mr. Mead. Senator Dorgan? I just want to make a quick
comment. I thought you really described well the
responsibilities on the Congress and the Administration, and
for each of the last 3 years, on the Appropriations Committee,
we do this annual Death Dance, and we fight over the
appropriate funding level. And I have made a point, in each of
the last 3 years that it is time for a reauthorization, that's
the only way of government in handling programs. And, what
we've really been doing is we've been running the authorization
process through the appropriations process for each of the last
3 years, and the piecemeal fashion is not a good one.
Senator Lott. Good point, Senator Burns?
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Thank you very much, Mr. Chairman, thank you
for this hearing this morning, and I guess I'm with my
colleague in North Dakota, we have the same concerns that he
does, and there's a lot of misinformation, I think, that is
sent out to the public, and why we have a big misunderstanding.
I, on this particular subject, I learned a long time ago, Mr.
Rosen, Mr. Mead, and Mr. Laney and Gunn, Top Gunn, that
anything that's really done to benefit a community is seldom
done with the blessings of a majority. And later on it's found
that your worst critics are the biggest fans of the idea 20
years later. We're dealing in a national transportation system
here that I think would be awfully hard for it ever to break
even, under any model. Even with the grant program, and here I
live in a state that's 148,000 square miles, from up there in
the northwest corner to the southeast corner is further than
from Chicago to Washington, D.C., with 900,000 people, and
we're expected to make the match. That's going to be tough. In
the airline industry, we're regarded as one of those ``fly
over'' states. And with Amtrak, it is definitely not a fly
through, because it's just not passenger. There is cargo. We
have people along that system that use it daily, in their
freight business, because that's the only way they can get it
in there out of Chicago or Minneapolis, or the other way from
Spokane or Seattle. We are isolated. And the same worry that
Senator Pryor had for his state, what if some state falls out
of that thing, and you lose the service because one state does
not choose to participate in your grant program.
The Chairman, we're working with the Chairman very hard on
reauthorization, and to come up with a new plan on how, but I
don't think the American people should be lulled into the idea
that this will make money and stand on its own. I don't think
that you can come up with a model that's going to do that. But,
anyway, why should we be any different than in any other mode
of transportation, than to provide the scantiest of rail
transportation systems here and just call it what it is, we're
going to have to subsidize it. I don't know of a bus service in
any city that pays for itself. I don't know of any kind of
transportation that's intercity or intracity that pays for
itself. Light rail or anything, that pays for itself. This is
something that the American people say, ``We need this, and
it's going to cost some taxpayer dollars in order to make it
operate.'' And we should face that point, give the true
figures, and the ridership and all of this, instead of going
through this thing every year, and we're going to go through
the appropriations process, and we'll do the right thing, I'm
sure of that, but let's tell the American people that this is
an essential service, it is a service that the American people
have chosen to have, and that a certain amount of taxpayer
dollars is going take to make it work. And that's all I have to
say.
Mr. Rosen. I didn't mean to interrupt you.
Senator Burns. No, no, you can respond if you'd like.
Mr. Rosen. Well, what I'd like to say is a couple of
things, Senator, because I think that you raise some important
points, and I think they're points that are worth thinking
through a lot. You have a multi-modal system that's always, for
me at least, the starting point as to how we're going to get
people where they need to go, it's never one answer, it's
never, ``We just need a rail system, or we just need
something,'' it's what's cost effective, what's going to work.
Now, we talk about the long distance trains, they perform a
slightly different function than the corridor trains, the
corridor trains have a heavy business-type function, a lot of
people, they are just trying to get from one city to the next,
much like on the Northeast Corridor. The long distance trains
are more mixed, there's a lot of people that it's a leisure
trip. And, you have to think of it a little differently,
sometimes. And I'm not, myself, persuaded, that it's true to
say that no long distance train can every operate without a
subsidy. I mean, you're talking about an area of the country
where you're from, Senator, very attractive and scenic, and it
depends whether you could make the trains more attractive, so
that people that aren't currently using them, and if we're
separating infrastructure, because your point is, that it's
hard to make things profitable when you have to cover major
capital costs, but if you separate out the infrastructure, and
you say there are matching grants for that, so then we're
talking about, are you subsidizing the operations, we generally
in this country don't subsidize operations.
And, harkening back, then, to the question I think Senator
Lautenberg had raised on the U.K., the World Bank released a
study on the U.K. system last September, and what the U.K. has
done was create 25 operating companies, which was separate from
who runs the infrastructure, and they had them as franchises.
Eight of those require no subsidies, and the World Bank
concluded that the system of competing operating companies in
the U.K. was actually, produced more traffic, more passengers,
more than economic growth alone would have called for, and that
the safety record was better than the old British rail
monopoly.
So, all these things, it ultimately comes down to, let's
take a careful look at what the facts are and try to do
something that will work for the people in your state and other
states that will improve intercity passenger rail.
Senator Burns. I would agree with you on some of those
assumptions, and some of those are fact, and I look forward to
working with you on this, but we--I'll tell you what we board,
we board 140,000 people at White Fish, Montana, now that's
summertime, that's Glacier Park, that's skiing in the
wintertime at Big Mountain, you're probably familiar with that
area up there, and then the rest of that is kind of what we
call train over, to get to there. But it's very, very important
in those stops along the way on the Hi-Line, because we
subsidize a little air for them, but that doesn't take the
place of that train and people who like to ride that train. So,
we'll be working very hard on this reauthorization. We have
some ideas, the Chairman has some ideas, we look forward to
working with you so that we've got some sort of consistency,
and a program that we can move forward with, that doesn't just
scare everybody to death in Montana, or North Dakota, or Idaho
and Washington every time appropriations or the budget comes
up, because this just makes it a political football, it makes
it doubly tough to solve. So we're trying to work right now on
a plan that would allow us to move forward, knowing what the
numbers and the figures are, and if there's someplace that we
can privatize it or whatever, I'm sure we'll explore those
avenues. I look forward to working with you, but in the
meantime, it's pretty important to us, and you can see why we
get very, very nervous about it. But there has to be some sort
of common sense to the approach of what we do. And I thank you
for your testimony today.
Thank you, Mr. Chairman.
Senator Lott. Senator Sununu?
STATEMENT OF HON. JOHN E. SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Sununu. I think I'll take a crack at what zero
funding really means. I think zero funding means that, and I
think Mr. Mead alluded to this, the current process of
allocating funds and to a significant extent, the current use
of funding, is unacceptable. When you look at the way money is
being used, and you say, `` This system, this process, this
allocation is not acceptable,'' then you obviously pull back
until you can reorganize the way that the funds are being
allocated. I think more than anything, that's what zero funding
means, or zero funding is trying to convey, and I think that's
what the sentiments were when someone said zero funding is
meant to be a wakeup call. We can argue about exactly what the
intentions of a given individual is when they say, `` This is a
wakeup call,'' or ``We need to change the process,'' or `` We
need to make modifications,'' but my concern is that we're
going to go through a lot of discussion about authorization and
rail transportation and people in the economy, and we're going
to end up in exactly the same place, and I may be alone in the
opinion that a $200 per person subsidy for a train ride is
excessive, I may be alone in thinking that $500 million
operating losses in perpetuity to operate 12 or 14 or 15 routes
is unacceptable, but I don't think it's a very good use of
taxpayers money. In New Hampshire, $500 million is a lot of
money. That isn't to say that every route operated by Amtrak
needs to show a per passenger profit, but we really do need to
inject a little bit of fiscal reality into this debate. I won't
say there's been no such reality in the discussions, but I
haven't heard a great deal.
A few specific points. First, a point was made, and I think
it's worth repeating, because I don't know that it really sank
in, but the subsidies, per mile, in these endeavors are higher
than the per mile subsidies in any other form of
transportation. Even those that we may all support, intercity
bus or intercity transit, even those involving the subsidies
that we all know are provided at some level to aviation, and
even to highways, in the way we collect and levy taxes. But the
subsidies here are dramatically higher than any other area of
transportation.
Second, the suggestion that every bus line in the company
requires a subsidy isn't the case. There are possibly bus lines
that are connecting the cities in these long-distance routes
operating without a subsidy, or to the extent that we might
define a tax, or the money we put into the highways as a
subsidy, at a per passenger subsidy that isn't even in the same
zip code as the ones we're talking about here. And while they
may have been touched on very briefly at the beginning of this
hearing, I'd like to get in a little bit of questioning to
clarify for me what the size of these operating losses are.
Why don't we begin with Mr. Gunn? What were the operating
losses on long distance trains in 2004?
Mr. Gunn. If you use the FRA cost, which is the direct
cost, long distance trains lose about $300 million a year.
Senator Sununu. What does FRA stand for?
Mr. Gunn. That's Federal Railroad Administration. That's
the amount of money you would save if you eliminated those
trains.
Senator Sununu. I would argue that those are really two
different questions. The operating loss is not the same as a
cost avoidance, if you eliminate the trains. Because your point
is, you may be losing $500 million a year in operating losses,
and you've made this argument before, that because of your
labor agreements you would have to continue with some payments
of moneys, even if you terminated the lines, and so, you don't
want to include that in calculating operating loss. And I would
argue that's probably not how most corporations would view an
operating loss.
Mr. Gunn. If we eliminated all of the long distance trains,
you would save something in the neighborhood of, but kept
everything else, you'd save something like $300 million plus
some capital, say $350 million. But, to save that money, you
would have to spend over a billion dollars in labor protection,
that's the point we've made. I'm not----
Senator Sununu. What was the calculated operating loss in
2004?
Mr. Gunn. I said, using the incremental loss, the amount of
money you would save by eliminating the trains is about $300
million. And then you'd save some capital.
Senator Sununu. What was the operating loss in 2003?
Mr. Gunn. Actually, our operating loss has been constant.
Senator Sununu. As far as long distance trains.
Mr. Gunn. I don't, I can't remember, but it's basically
been constant. Our operating losses have been, since I've been
here, we've basically been able to control it, and it's been
constant. But, I don't remember the loss, the specific loss in
2003.
Mr. Rosen. Senator, I might be able to just help slightly,
what I think you're asking, on a fully allocated basis, if all
costs, both the direct costs and then attributed cost for
overhead and support are included, in Fiscal Year 2004, the
subsidy was approximately $214 per trip on the long distance
trains, and that was up from $158 in Fiscal Year 2000. In the
aggregate, that would amount to, order of magnitude of a little
in excess of $600 million a year.
Mr. Gunn. That's fully allocated, however. The trap we can
get in here, is if you're talking about, we're going to
eliminate those trains, what does it do to Amtrak's cash
requirement, and I think that's the relevant question, it is
$300-$350 million after you pay C-2.
Senator Sununu. Well, I would say $350 million is also real
money.
Mr. Gunn. I'm not arguing that point, Senator.
Senator Sununu. I find it somewhat problematic that when
any Member of Congress or any member of the public tries to get
a clear assessment of these operating losses, we get
generalities--`` We would save about $300 million, and it
depends on how you allocate it,'' and that we get one set of
numbers for the allocated operating loss, and we talked about
the opportunity costs of the contract, but I just find it
problematic that we cannot agree on, and I don't have a
preferred methodology, but we cannot agree on a methodology for
giving the public an honest assessment of what the operating
losses are, and what the magnitude of the subsidy is. I think
that does a disservice to the Members of the Committee who are
working very hard to make decisions. We may disagree, Senator
Lautenberg may say, `` This is important, we should provide a
subsidy to maintain operation in a particular way,'' and he may
value that subsidy at a particular level, and I may say, ``
That's not an acceptable subsidy, but it would be great if we
could at least agree on the set of facts before us.''
Mr. Gunn. I don't mean to argue with you, Senator, but
every month we produce an income statement, a set of financials
which include an income statement, a performance statement by
train. Now, for example, I have the February results. I have
March results, but I don't have the detailed train sheets yet.
But, we produce, and we use, we show the deficit by different
costing, in other words, the FRA-defined costs, which are
really the incremental costs, then we have other overhead costs
which would go away if you could get at them, which means all
the trains would go away, but we produce, every month, there's
no shortage of routine data, and it's according to GAP, it's
auditable and we've done this since I've been here.
Senator Sununu. And the aggregate operating loss shown by
those statements for 2004----
Mr. Gunn. I have, for example, through February, the long
distance trains, which is what we're talking about, the FRA-
defined loss was $100 million, and that's for 5 months.
Senator Lott. Mr. Gunn, I hope you work with Senator
Sununu, and all of us, to get the data.
Mr. Gunn. But the data is here, my only point is, we have
the data----
Senator Sununu. It's just frustrating to hear different
ways of presenting the question about the subsidy and the
operating losses. I know--to be clear--that you have received a
lot of credit for improving the reporting and for improving the
accounting, but we're making policy decisions.
Mr. Gunn. The results, I can't improve.
Senator Lott. Senator Stevens, the Chairman of the full
Committee is here and I know he may have some comments and some
questions.
STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
The Chairman. Well, first, Mr. Mead, I know that Amtrak's
carrying a $3.2 billion debt, the interest rate's about 10
percent.
Mr. Mead. Now, on part of that, sir, it is about 9.5
percent, they mortgaged Penn Station a few years ago to Credit
Lyonnais, I think.
The Chairman. Did you ever make the recommendation that it
be made tax free? Let them issue tax free bonds?
Mr. Mead. No, we didn't make that recommendation, but we
are recommending that the reauthorization have the Treasury
discharge that debt, because you're paying it anyway at a
higher interest rate, so if you're going to pay it anyway, you
might as well pay it at a cheaper interest rate.
The Chairman. That might encourage you to enter more debt,
if we made it part of the national----
Mr. Mead. The second thing I'd do, Senator Stevens, is
freeze their ability to borrow. Their freedom to borrow is what
got us in this hole, and so that's the second thing I would do.
The Chairman. For the Amtrak people, when the Alaska
Railroad got into trouble, we finally worked out an arrangement
that our state bought the Alaska railroad, and now we have sort
of a partnership, as the President mentioned in connection with
this issue when he set up this recommendation. Have you looked
at that proposal? Why shouldn't these states buy a piece of
this railroad and let us work together. Our state covers,
basically, the operating expenses, and the Federal Government
assists us in capital investment. Why isn't that a model for
you all, too?
Mr. Gunn. The problem, Senator, is that the Alaska Railroad
is an intrastate operation, and with Amtrak, the bulk of our
service is interstate, and some of our trains go through eight,
nine states.
The Chairman. That's where it fails, doesn't it?
Mr. Gunn. Yes, but I think you get into the situation where
everybody will hold their money in reserve until they're faced
with a crisis, and by that time it's too late. I think Alaska
was very wise with what they did, and even in the Northeast
Corridor, which is where we run track and run the whole thing,
we still go through eight states, and it's very difficult.
The Chairman. Have you suggested a model where there'd be
some kind of sharing? Why shouldn't the states be part of this?
Mr. Gunn. Well, actually, in the Board package we do, the
Reform Package that Amtrak's put forward, the goal is to get
the states to move to a situation where the states pay the
operating deficit, similar to the Alaska situation, for their
corridor services. That's what we're proposing, but to do that,
you need to give the, you have to have the partnership which
the Alaska Railroad has on capital.
The Chairman. Is the Amtrak Board representative of the
states that have the major part of the riders of Amtrak?
Mr. Laney. Senator, I'm the Chairman of the Board, and I'm
delighted you've joined us. We'll want to visit with you
further about what's going on in Alaska, it's a model we've
looked at carefully, we're going to look at it a lot more
carefully, and it makes a lot of sense to the extent we can
adapt elements of what's being done in Alaska to what we're
doing.
But we have four members of the Board, and they, I think,
represent a variety of states, depending on where they live
during the year, from the kind of states that have only long
distance service, the states that are centered right in the
middle of a group of states that enjoy the benefits of the
Northeast Corridor, so I think we're fairly well represented,
as well as you know, one member of the Board is Secretary
Mineta, and he's designated Mr. Rosen as his representative on
the Board, so we've got the Department of Transportation and
it's perspective brought to bear with all of our discussions
and thinking and planning as well. So, it's a broad
representation.
The Chairman. So, have you engaged the states, and the
Governors and their staffs in conversation of how to save this
railroad?
Mr. Laney. Yes, sir, we have, in a number of different
ways, and they are, they've made it very clear, I think
virtually all states that enjoy one benefit or another from
Amtrak, that they are very interested in being heard, and we've
made it equally clear that we are very interested in hearing
from them. They've already contributed a lot to what you see in
our proposal with respect to long distance and corridor
service.
The Chairman. How important is long distance service,
compared to the commuter service on this train?
Mr. Laney. I don't know that I could compare the two,
they're apples and oranges, but both are essential elements, we
believe to the future of intercity passenger rail.
The Chairman. Well, when I came to the Senate, those of us
from the West came to the Senate, I went home many times by
rail. We found it much more convenient and less expensive than
travel by air. I know you don't understand a necessity for long
distance, federally supported trains. Tell me, why is there a
necessity for these long distance trains going west?
Mr. Gunn. I'll take a crack at that, if I may, I think if
you look at the ridership on the long distance trains, we've
got a report that details each of the trains, which you're
welcome to see, you'll see that the ridership on the bulk of
these trains, or the bulk of the ridership on these trains is
not endpoint to endpoint. If you take the Empire Builder, for
example, that Senator Dorgan was talking about, that train has,
serves a lot of areas that have no other options, probably a
lot like the Alaska Railroad in the north. So, people will ride
from Minneapolis to Rugby, or Minneapolis to Havre, or Shelby,
and these trains--and they're busy. The trains are not empty,
they actually carry a lot of people. And, on a number of these
trains you're providing services where there isn't a good
option for the people.
I would submit that if you actually rode the Empire
Builder, you'd be surprised at the on/off through all of these
towns that we go through--most of the towns are 2 hours apart,
but it's a busy train, and it provides, I think, an essential
service to those communities.
The Chairman. Respectfully, I don't think that answers the
long distance thing, but my time's up. I hope you've all read
that delightful new book, The Christmas Train. If you haven't,
it would be worthwhile.
Mr. Mead. I have some numbers here that respond to the
questions. There are about 4 million riders on the long
distance trains that you referred to. This is an annual figure
for 2004, 4 million.
The Chairman. Are they going the long distance, or are they
just riding part way on the long distance?
Mr. Mead. I'm coming to that.
Senator Sununu. Can I clarify that? 4 million riders, you
mean, 4 million embarkments.
Mr. Mead. I'm going to answer, if you let me give out the
number, there were four million total riders for 2004 that got
on a long distance train. Of that number, only 527,000 went
from beginning to the end. Also, there were 400,000 that went
between city pairs, where you already had the Amtrak corridor
services, and our analysis showed that the remaining three
million people rode about between 500 and 700 miles. And that's
how it broke down.
The Chairman. More than--?
Mr. Mead. Three million went between 500 and 700 miles.
The Chairman. Has that changed since 9/11?
Mr. Mead. I don't know, sir.
Senator Lott. Well, we will continue for another round.
Thank you, Mr. Chairman.
Looking at the solution here--and that's what I think we
need to do, rather than just looking back at where we have
been, but looking forward at where we want to go--I do think we
have to make a basic decision, Do we want a national rail
passenger system, or not? If we do, how are we going to pay for
it? If we don't, this is the year where we need to face up to
this. But if we do, how we're going to pay for it?
And I think we've got to do it in three steps. One, I do
think we need reauthorization with some innovative ideas and
new options. I want to look very carefully, Mr. Laney, at the
report you provided that--we've been talking to Mr. Gunn and
Mr. Mead and a lot of others to try to come up with some ideas
where this authorization is not just a rehashment of where we
are. Second, I do think we need to identify what we really are
going to have to do with annual appropriations. But I don't
think that's enough. I think we've got to have more.
And that leads me to the point that Senator Stevens touched
on, and I wanted to come back, because I've asked most of you
about this before. I do think we're going to have to have a
national transportation bonding authority, capital bond
authority, with the tax incentives that go with it. None of you
touched on that.
Now, Mr. Laney, you've worked in this area. You're a leader
in Texas in the transportation area. What is your reaction to
that? What's your thought about the bonding-authority
capability?
Mr. Laney. Senator, that's a question that ultimately goes
to the heart of a matter that's much bigger than Amtrak itself
and goes to the overall issue of infrastructure in the rail
industry. And most of that infrastructure, as you know, is
freight-rail infrastructure. Outside of the Northeast Corridor,
that's the rail we operate on, and, ultimately, as go the
freights and their infrastructure health, so goes most of
Amtrak, whether it's corridor service or long-distance service.
There is--and everyone in the freight-rail industry and in
our industry and in the highway industry know it--we are
approaching very significant constriction and bottlenecks and
congestions throughout our transportation system nationally in
the infrastructure capacity.
Senator Lott. So, is this the solution?
Mr. Laney. Bonding is an enormous step forward, we think,
in terms of injecting potential capital. And I'm speaking not
for the board of Amtrak; I'm giving my own----
Senator Lott. That's what we're looking for.
Mr. Laney. It's an enormous potential opportunity to
address--to begin to address the long-term issues and negative
impacts of capacity constraints on freight rail, just like
we've done it in the highway capacity. And there's an
interrelationship, as you know very well, between freight rail
and freight on highways. And freight cannot absorb the demand
driven from highways because of highway congestion in the
direction of freight rails.
Senator Lott. Thank you, Mr. Laney.
Mr. Gunn, what's your comment on----
Mr. Gunn. I agree with my chairman.
[Laughter.]
Senator Lott. He's a very smart man.
Mr. Mead, you and I have talked about this. What's your
reaction?
Mr. Mead. Yes. And since that discussion, I've given it
some thought. And I think the conundrum, the big issue, on
bonding is, where would the money come from to pay the
purchaser of the bond the RI, the return on investment, during
the life of the bond?
If you look to a model that Amtrak proposed several years
ago, it worked like this. You buy the bond. Say, I'm Amtrak,
hypothetically. I get $1,000. I take 20-25 percent of that, and
I put it in an escrow account. And, over the life of that bond,
the interest accruals on that 25 percent that I've put aside
are sufficient to pay off the face value of the bond. But you,
as the investor, are going to say, `` Well, Mr. Mead, I want a
return of investment. I don't want to wait 25 years. I want a
good return on my investment during the life of the bond.'' I
can't figure out where that money's going to come from. In the
aviation world, when they float a bond, the airlines, the
landing fees, all contribute to the repayment of it. In
Amtrak's situation, I don't know where the money would come
from. And that's a conundrum that I'm still trying to work
through, sir.
Senator Lott. Well, we'll be waiting on your answer,
because this is what we intend to do, so we've got to have some
logical answer to that question. And you've touched on one.
Maybe you touched on both of them. We may have to look at some
way to get a--some fee, some designated source to make sure
there's repayment there.
Mr. Rosen, what would be the Administration's position on
that?
Mr. Rosen. Well, Senator, the question of how bonding would
work often comes down to the particulars. And so, I don't know
that I want to say, in a definitive way, an Administration
position, but let me suggest that I think there are at least
two sets of potential difficulties that we would really need to
take cognizance of. One set of them relates to the whole
problem of accountability and repayment. And Inspector General
Mead was alluding to part of that issue, of, how do you ensure
that there will be repayment? But, also, how do you ensure that
the funds will be used in the optimal manner, because, in the
private-sector financing, the bondholders are going to be
paying real close care as to whether those debenture agreements
are being fulfilled and the funds are being used appropriately.
On the other hand, anytime you talk about Federal-backed or
subsidized bonds, you have a whole different set of problems,
which is, is this an efficient way of financing relative to the
general fund? Because the U.S. Government can borrow money, and
can do it pretty efficiently and cheaply. And so, the question
you always have to ask is, if you're going to create something
that's different than a U.S. Treasury debt instrument, what
advantages are you gaining from that? And that can be an
extremely problematic question, and it's one you always have to
confront.
But, as I say, it does come down to the specifics, but I
think it's a mistake for people to just assume that bonding is
an easy thing that gets us out of the conundrum of, are we
using taxpayers' dollars? Because the ultimate answer may be
that we are, and we, ultimately, may not be doing it
efficiently. And so, those are the kinds of tests that you have
to look at.
But the--again, as I say, it does come down to the
specifics. And I don't want to speak for the Administration in
any comprehensive way without knowing the details of what we'd
be talking about.
Senator Lott. Well, I would urge you, the Administration,
to look at this. If we're going to have a national rail
passenger system--and I assume the Administration is for that--
we're going to have to figure out how we're going to pay for
it. And I don't think what you've come up with is enough. I
mean, are you just going to rely on us to appropriate the funds
annually? We've proven we can't do that in an adequate way. So,
you know, and competition and other things have suggested state
participation. That's all fine, but I don't think it's enough.
So, we need a little more innovative thinking from the
Administration on how we're going to do more, if we want to do
this in a responsible way. And I urge you to look at that.
Mr. Rosen. Senator, I hear your general point on that, and
I think the fundamental problem that I think many people are
concerned about, and I infer you may be, is the multi-year
problem, that it's not so much that it's an appropriation, but
that it's an annual event. And I think we would be interested
in working with you and this Committee, and perhaps the
appropriators, as well, to think about how to deal with that
aspect.
Senator Lott. Thank you very much.
Senator Lautenberg?
Senator Lautenberg. Thank you, Mr. Chairman.
I wonder, in terms of sources of funds, what do you think
of the security--our security requirements are, relative to
rail service? Mr. Rosen, do you think there's any need to have
a comprehensive rail system throughout the country, in the
event of attacks by those who would bring us harm?
Mr. Rosen. Well, I think that's bound up in the larger
question of--one of our fundamental transportation policies is
to have mobility--is to have nationwide mobility and, as I've
alluded to earlier, a multimodal system. So, you don't want the
system to be entirely susceptible to a weak point anywhere. But
I don't think you can build one piece of your system entirely
on the premise that this is because we're concerned about the
next attack. The way you try to develop a secure system is both
to have mobility in multiple modes and, as DHS has the lead
with respect to--thinking about how you provide security
measures in the modes.
Senator Lautenberg. We're going to differ on that. I think
it's an essential part of protecting our society's mobility in
the event of a disaster such as we saw. And I remember vividly,
at 9/11, when Amtrak was the only thing that was running in
the--that area of the country, and we were so glad to have that
when aviation was shut down. And if it happened before, heaven
forbid, it could happen again.
Secretary Mineta--we were talking about subsidies of
varying types--Secretary Mineta has been quoted as saying that
if the states won't pay for service, then trains shouldn't open
their doors whole moving through that state. Well, we have an
example in the State of New Hampshire, where it doesn't
contribute anything to the Downeaster service provided by the
State of Maine. Would the Secretary, therefore, say, eliminate
all stops in New Hampshire, even though doing so would
significantly impact the ridership and the financial
performance of the service?
Mr. Rosen. Well, again, I think you have to differentiate
between the status quo 1970 model, where the situation is what
you describe, but not just in New Hampshire; many places are
not currently providing state support and--because they're not
called upon to do so by the existing system of Amtrak.
Senator Lautenberg. So what would the Secretary's view be,
based on this? Going back, this is a statement, that if the
state doesn't pay--doesn't contribute anything, the doors--the
train, even if it passes through the state, shouldn't stop and
open them.
Mr. Rosen. OK, but let me be clear, the Secretary is not
alluding to what should happen, or should have happened in the
past, with regard to the status quo.
Senator Lautenberg. I see. So----
Mr. Rosen. The Secretary is alluding----
Senator Lautenberg.--we're going to deal in the realm of--
you'll forgive me----
Mr. Rosen, you made a statement, in your testimony here,
that--you say, likewise, the intercity bus industry, no
comprehensive or dedicated Federal operating system carries as
many as 350 million passengers annually.
Mr. Rosen. That's right.
Senator Lautenberg. The CRS report says that, in fact,
there is a provision under the--not CRS--what about Section
5311 intercity bus program--offers a 50-50 Federal/State match
for intercity bus operations, and an 80-20 for intercity bus
infrastructure. Well, is there any challenge in those two
positions?
Mr. Rosen. No, I don't think there is, Senator, because I
think what you're alluding to is not a comprehensive Federal
program. You're talking about a transit program that has a
small indirect way. And I believe the expenditure on that's
about $20 million a year. So, I don't think we're talking about
kind of----
Senator Lautenberg. Well, we're not talking about amounts,
we're talking about principle here.
Mr. Rosen. Well, I think the principle's quite different,
as well.
Senator Lautenberg. All right, well, I read your statement,
``No comprehensive''--you can pick words apart here--
``dedicated''--there are operating subsidies to some intercity
bus operations.
Mr. Rosen. Senator, if we were talking about $20 million a
year for Amtrak, I don't believe we'd be having this hearing. I
mean, I think we're talking about very different----
Senator Lautenberg. Thank you for your opinion, Mr. Rosen.
I want to ask whether or not--Mr. Gunn, for instance, you
might be interested--knowledgeable about what happened in the
case of Argentina and Mexico when they eliminated subsidies for
intercity passenger rail service.
Mr. Gunn. Actually, I'm not very knowledgeable of those two
areas. I know the British results better.
Senator Lautenberg. OK.
Mr. Gunn. But, basically, the Argentine railroads are gone.
Senator Lautenberg. They're out of business.
Mr. Gunn. Yes.
Senator Lautenberg. And----
Mr. Gunn. With a few----
Senator Lautenberg. Yes.
Mr. Gunn.--of bulk commodities, but--and there are commuter
services left.
Senator Lautenberg. The service disappeared, I can tell you
that----
Mr. Gunn. Yes.
Senator Lautenberg.--from CRS.
Mr. Gunn. That's all I know. I don't----
Senator Lautenberg. And that's what would happen if we stay
on this fantasy ride that we want to----
Mr. Gunn. Well, Senator, you asked me a question earlier
about privatization. I think the one thing everybody has to
realize, that no matter who's running it, there's going to be a
subsidy. This is not----
Senator Lautenberg. Well----
Mr. Gunn.--going to be a profit----
Senator Lautenberg.--I think a good way to invite companies
or organizations to compete is, tell them there's a subsidy.
Unless we just outright say, ``If we ever go private, there
will never be a subsidy by the Federal Government.'' And I
think that would change the conditions a lot.
Mr. Rosen. Senator, could I just offer a thought on that?
The place where perhaps we differed is, the Administration is--
finds it acceptable to have what you could call a subsidy for
infrastructure. But we're talking about operations. And on the
train operations--for example, the Alaska railroad is not
subsidized on operations. It is----
Senator Lautenberg. You don't want to discuss the Alaska
railroad. You have to look at how Alaska was skillful enough to
acquire that railroad and the costs that----
[Laughter.]
Senator Lautenberg.--it takes, and then we--New Jersey
would take that anytime.
[Laughter.]
Senator Lautenberg. Mr. Chairman, the one thing that we see
here--and I think you were very clear in your comments--and
that is that we've got to step up to the plate with this thing,
and we can't pretend that there's not a problem here, that,
frankly, I think, would have a gigantic effect on the way
people move through our country. We'd have--we've got essential
air service because it's necessary. That's why it's there.
Otherwise, you'd never get it through here. And we provide that
service. It's fairly high cost. Some are a couple of hundred
dollars a passenger. And that's what government's for. It may
surprise people here to know that we even pay for border
protection and lots of other things, and healthcare. Gee,
that's a surprise. That's what government's about--supplying
services, my friends, and we've got to continue to supply
services. And I hope, Mr. Chairman, that when we get to work on
our bill, we're going to make sure that there is a national
passenger rail service, and one that has enough investment in
infrastructure to bring it up to modern times.
Senator Lott. Thank you, Senator Lautenberg. And I'm
looking forward to working with you on this. And I do think the
Federal Government has a role to play. Where people, or cities,
individuals, can't do things for themselves, the Federal
Government does have a role. Personally, I don't like operating
subsidies to intercity--intracity transit systems. And I wonder
how much of a responsibility the government has to pay for a
lot of things--a lot of individuals' needs. But in other cases,
like in transportation, it is interstate. The individual and
the state, or the city, can't do it by itself. That's why I do
view this one, and other transportation programs, as different
from just Federal Government subsidizing everything.
Senator Sununu?
Senator Sununu. Thank you, Mr. Chairman.
Obviously, if you're running intercity rail, and a national
rail system is going to be intercity, but I would certainly
draw the Committee's attention to page 3 of Mr. Rosen's
testimony, which clearly shows the percentage of intercity
transportation that is rail. I assume this is all rail. Mr.
Rosen, it is all rail?
Mr. Rosen. It's all intercity rail. In other words, it
wouldn't cover trolley cars in the city, for example.
Senator Sununu. It's a very small portion. It looks like
it's less than 1 percent, to me. But when the line starts
hugging the very bottom of the graph, it's hard to tell. And
so, we get back to the question of, well, to what extent do we
wish to subsidize this level of ridership and this portion of
ridership?
I'm sorry Senator Lautenberg has left, but I'm going to say
good things about him, in general, in this sense. I don't know
that I support the idea of New Jersey taking over the Northeast
Corridor, but I do think that that's the kind of idea that at
least ought to be explored. Whether it's New Jersey or a
combination of states in the Northeast Corridor taking
responsibility for owning, operating, managing, making capital
resource allocations, creating incentives for riders,
marketing, and all the rest, I think they would, in all
likelihood, do a far better job than is being done under the
current umbrella. That's not a comment on management quality so
much as it is a commentary on the structure itself and the
mandate we're putting on this entity to continue to operate
nationwide. And it does come back to----
Senator Lott. Could I inquire of the Senator, under those
circumstances, where a group of states would get together to
manage and operate and pay--they would also pay for everything;
there wouldn't be a Federal subsidy under that arrangement,
right?
Senator Sununu. Perhaps. But, then again, perhaps they
would do a better job if they were to negotiate a subsidy. My
guess is it would be dramatically less than the one we're
currently providing. But----
Senator Lott. My point is----
Senator Sununu. And----
Senator Lott.--we, in Mississippi, are not going to be
willing to help pay for that service just up there----
Senator Sununu. We are not negotiating----
Senator Lott.--in the Northeast.
Senator Sununu.--a contract now, but I----
[Laughter.]
Senator Sununu.--certainly understand that the----
Senator Lott. I just want to make sure everybody----
Senator Sununu.--that the nature and the structure of the
subsidy may be different, but there still may be a subsidy,
nonetheless.
In response to the question about the state's share and the
Downeaster, in particular, if we went to a system where we had
state-sharing--I think Mr. Rosen was being very polite to me;
he didn't want to make an awkward comment about New Hampshire--
but if we went to a system where we had state-sharing, and that
was the methodology for support and finance of very reasonably
strong systems like the Northeast Corridor, and a state like
New Hampshire didn't want to participate, I suppose, in theory,
it would be appropriate for there not to be stops in that
state.
Now, I think that, again, if the states had a sharing
arrangement, they would look out for their riders, their
commuters, their travelers, their economic interests, and come
to an agreement about how best to approach it. But that's not
the system in which we're operating. The Downeaster, in
particular, was a route that was instituted with a great deal
of help from former Senator Mitchell in order to provide
service to Portland. The contract for operating that was
negotiated largely under the auspices of the Maine Rail
Authority. In partnership with New Hampshire, they've
established a couple of stops in New Hampshire, as well as the
ones that are in Maine.
But the problem is, we're not in that situation. And I
don't think that that's an especially clever way to argue
against the kind of reforms people have suggested here.
Mr. Rosen. Senator, could I elaborate on one aspect of
that? Because I think you make very good points. It's also not
impossible for a state to determine--and this is where I was
going when Senator Lautenberg asked me to stop--that even if
New Hampshire didn't want to participate, that the people in
Maine and Massachusetts want to be able to stop in New
Hampshire, and that Maine and Massachusetts would simply decide
they'll pick up the tab.
Senator Sununu. It would be very parochial of me to suggest
that people from Maine and Massachusetts wanted to visit New
Hampshire, but I think you make a very good point.
Mr. Mead. One--may I make a point on this--the operating
issue?
Senator Sununu. Yes, please.
Mr. Mead. In our oral testimony, and in our written
statement, there's a section on capital grants, and there's a
section on formula grants without a required match. That's
designed for states, during this reauthorization period, to get
something when they may not have opportunities for capital
development--but where the Federal Government would contribute,
without match required, to that state, a grant. Now, if the
state's not going to use the grant for rail, they're not going
to--they shouldn't get it. Now, it would not cover 100 percent
of the loss, so the State of New Hampshire would have to pay
more than it's paying now.
Senator Sununu. Under a state-share program.
Mr. Mead. There would be--I think it's fair to say----
Senator Sununu. Well, by definition, since we don't have a
state-share program now, and we went to a state-share program,
then states would have to share more than they're sharing now.
Mr. Mead. Right. I have a----
Senator Sununu. I don't mean to belittle the point, but
there's no question, this would be a different form of subsidy,
but, at the same time, let's not think that taxpayers in New
Hampshire or California or Oklahoma or Mississippi aren't
providing some subsidy now. They're just not providing it
through their state government; they're providing it in the
form of Federal tax revenues----
Mr. Mead. That's exactly right.
Senator Sununu.--that are contributed to Amtrak at a clip
of roughly $1.2 billion per year.
Mr. Mead. Right. And I've got in front of me a list of the
states that actually do make direct operating-loss
contributions to Amtrak, and also make direct capital
contributions.
Senator Sununu. Those contributions, though, are done on
the basis of agreements in which they have voluntarily entered
into with Amtrak. Is that correct?
Mr. Mead. Under the current model, yes, sir, that's
absolutely correct.
Senator Sununu. Mr. Gunn, how many long-distance routes are
being operated now?
Mr. Gunn. Fifteen.
Senator Sununu. Fifteen, OK. I have a list of 16. What's--
in my list of 16--I think this is from 2003, early 2004--which
one did you get rid of?
Mr. Gunn. The Three Rivers.
Senator Sununu. Three Rivers. But you're still operating
the Pennsylvanian and the Cardinal?
Mr. Gunn. The Pennsylvania and the Cardinal are still
operated.
Senator Sununu. What's----
Mr. Gunn. The Palmetto has been truncated.
Senator Sununu. What does that mean?
Mr. Gunn. It doesn't go south of Savannah. It used to go to
Miami.
Senator Sununu. And you say, since you've been at Amtrak,
you've eliminated three. So----
Mr. Gunn. There was the Kentucky Cardinal, the Three
Rivers, and then the Palmetto has been shortened.
Senator Sununu. I'm sorry, I thought the Cardinal was still
operating.
Mr. Gunn. Did I say the Cardinal? I didn't mean that. The
Palmetto----
Senator Sununu. We probably just scared Senator Mitch
McConnell. But----
Mr. Gunn. Yes. Anyway, there are three that I can think of
right now that we've taken off.
Senator Sununu. Three Rivers, the truncated Palmetto----
Mr. Gunn. Yes.
Senator Sununu.--and a third----
Mr. Gunn. The Kentucky Cardinal.
Senator Sununu. Oh, there are two different Cardinals. I
see. I find that confusing, but--OK.
The numbers that I've seen show that overall revenues
declined by 10 percent in 2003, by 8 percent in 2004. What do
you project overall revenues to be in 2005, relative to----
Mr. Gunn. I didn't bring my budget for 2005, but they
would----
Senator Sununu. Do you expect them to decline again?
Mr. Gunn. No. They were basically flat.
Senator Sununu. That's your projection.
Mr. Gunn. It was what--I can tell you what we've done up to
now, but I don't know--I didn't bring my budget----
Senator Sununu. What, in your mind, is the reason for the
significant decline in revenues over the last two and a half
years? And why do you think that trend is going to stop in
2005?
Mr. Gunn. I think that a couple of things happened; one of
which was, there was definitely a change in mix from higher-
fare tickets to lower-fare, to coach. The mix changed. And,
obviously, the endpoint-to-endpoint competition from the low-
fare airlines has hurt us.
Senator Sununu. And why do you think that----
Mr. Gunn. Yes, that--and the other thing, just--the
Chairman just reminded me--I don't know what revenue figures
you're looking at, but if it includes mail and express, we got
out of that business. Do your figures include mail and express?
Senator Sununu. I think, in the Congressional Research
Service documentation that they put together, those would be
combined revenues----
Mr. Gunn. That's the other thing that--if you're looking at
the total revenue per train, the biggest reason for the drop
would be getting out of mail and express.
Senator Sununu. And why did you get out of mail and
express?
Mr. Gunn. Because we were losing money on that.
Senator Sununu. And what is the impact, then, on your
operating loss? Isn't your operating loss either the same or
slightly greater?
Mr. Gunn. Yes--no, the first year, it was basically a wash,
because we--this is cash, now--it was a wash. I think--because
there were some things we had to do to get out of the
business--I think we'll pick up two, three, four million
dollars a year, cash. We had to write off a lot of assets,
which gave us a big bookkeeping loss from that in 2004. But we
were also able to sell--we've been fortunate that we were able
to sell all of our road rail--or we had two types of--three,
really--three types of basic equipment, and our road railers--
we were able to sell those to a freight railroad and basically
get rid of the paper that--because they were all financed.
We're in the process of trying to reach a deal to sell--or to
long-term lease a bunch of our--the boxcars, and that will--
we'll recover cash from that. And we've stored about 40
locomotives that we're in the process of trying to lease to
other operators. We're close to leasing a batch of them right
now. So, that will help. That will generate cash. So, there's a
series of things that, if they happen, will help us, will
improve--will have a very positive impact on us. And----
Senator Sununu. The Federal appropriation was $1.2 billion,
is that correct?
Mr. Gunn. For the--1.2.
Senator Sununu. And your request is $1.8 billion this year?
Mr. Gunn. Yes. But that--let me just say, the difference--
it's 1.8, but if we had a credit facility to take care of our
working capital, it drops to 1.6, approximately. In other
words, the difference--the actual difference, in terms of what
we intend to spend on the railroad, is 400, and it's all
capital.
Senator Sununu. Well, that would seem to reflect an
insignificant change in your operating level.
Mr. Gunn. Well, our goal is to keep the operating deficit
from growing, which is fair. You know, given the physical
conditions we have, that's a pretty ambitious goal, but we've
been successful over the last couple of years. Because we do
have inflation. I mean, that--and the price of fuel and a whole
series of things that are buffeting us. But the growth in the
request is capital. It's to begin to--it's to repair--on the
infrastructure side, it's to repair the Northeast Corridor,
basically, although we have some other small projects and
facilities we own. On the equipment side, it's to continue the
overhaul of the existing fleet, which, I might add, we can
thank the Lord we were doing it, given what happened with these
sellers.
Senator Sununu. And you maintain that if you eliminated all
of the long-distance train routes, you would only cut your
operating loss in half.
Mr. Gunn. Yes, basically. That's correct. You'd--but you'd
cut another 50 million on it out of the capital. Now, maybe
over an extended period of time, you'd improve that, but
initially you'd have to pony up the C-2 labor protection, which
would be over--if you did what we're talking about, would be
over a billion dollars. And you would have--you would offset
that with savings, after you took the trains off and you had
furloughed the people, of about 300.
Senator Sununu. Anybody know what the discounted value of
$300 million is, in perpetuity?
Mr. Gunn. It depends on the--your--the rate you use.
Senator Sununu. Probably quite a bit.
I have one more question, Mr. Chairman, if I may.
Mr. Rosen, you mentioned the subsidy--the overall average
subsidy level for the long-distance trains. Did you say it was
$218 per passenger? I think that was the fully allocated----
Mr. Rosen. That sounds right. I can double-check the number
I was giving you. It was actually out of my written testimony.
Mr. Gunn. Can I just make a comment?
Mr. Rosen. $214.
Senator Sununu. Yes.
Mr. Gunn. Just a factual comment. We talk about subsidy per
passenger. And what happens when we make these calculations is,
people tend to divide the number of Amtrak passengers into the
subsidy. In fact, there are hundreds of thousands of other
daily passengers who are on Amtrak track and under our wire,
using our signals, that are involved, as well. So, you've got
to be a little careful with just dividing Amtrak passengers
into subsidies----
Senator Sununu. I'm not sure I understand----
Mr. Gunn.--unless you segregate into----
Senator Sununu.--that.
Mr. Gunn. Pardon?
Senator Sununu. I didn't understand that. We're talking
about the long-distance trains that----
Mr. Gunn. Oh, OK.
Senator Sununu.--the 15----
Mr. Gunn. You're talking about intercity? I'm just--then
that's probably a good----
Senator Sununu. And I wasn't talking about the Northeast
Corridor.
Mr. Gunn. I just wanted to point out that there are an
awful lot of passengers on our facilities that use Amtrak, in
one way or another, that are not Amtrak passengers. In fact,
there are probably four times the Amtrak passenger count for
these other passengers.
Senator Sununu. So, you're talking about the mass transit,
say, the----
Mr. Gunn. I'm talking about----
Senator Sununu.--MBTA in Massachusetts and----
Mr. Gunn. No, I'm talking about--the MBTA is the Attleboro
line. There's a small number. But there's a--there are large
numbers on Jersey Transit, large numbers on SEPTA, in
Philadelphia, and large numbers on the MARC service, between
Baltimore and Washington.
Senator Sununu. My question, Mr. Rosen, is, is there a
comparative number, either per mile or per passenger, for the
Northeast Corridor, relative to the long-distance train?
Mr. Rosen. There is. And while I don't have it at my
fingertips, it's roughly a breakeven-type number.
Senator Sununu. You're saying it's roughly zero.
Mr. Rosen. Yes.
Mr. Mead. Yes, but there's a big caveat there. An enormous
amount of money--billions--have been poured into the Northeast
Corridor over the years in capital. In your state, that's not
so. We're talking operating loss----
Senator Sununu. Well, actually, about 65 million, I think,
was what was put into the corridor.
Mr. Gunn. And that was Maine's money.
Senator Sununu. Well, no, actually it was Federal taxpayer
money.
Mr. Mead. My point is that----
Senator Sununu. I think if the State of Maine had had to
put the money in, we wouldn't be talking about the----
Mr. Mead. The only point I was trying to make is, when
you're looking at this system, you're coming up with these
losses per passenger. When you look at the Northeast Corridor,
it is true that, in terms of operating expenses, they are
roughly breaking even. When you throw in the huge capital
contribution that the government's made over the years, that
figure changes fairly dramatically, and you'll find some of
those Northeast Corridor passengers are riding on the
taxpayer's back, as well.
Senator Lott. Senator Sununu----
Senator Sununu. Thank you, Mr. Chairman. Thank you, you've
been very generous.
Senator Lott. Well, thank you very much. I look forward to
working with this panel and others that are very much
interested. I hope we can come up with an appropriate solution
for the needs of the American people.
Thank you.
[Whereupon, at 11:58, the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
Thank you, Mr. Chairman for holding this hearing today to help
Members of the Subcommittee get a handle on the various proposals to
reform America's passenger rail system, Amtrak.
While both the House and the Administration have recently put forth
their ideas for reforming our struggling National Passenger Rail
Corporation, my colleagues and I here in the Senate continue to discuss
the very complex issues that confront Amtrak.
I must admit, I am disappointed that the Administration continues
to attempt to eliminate Amtrak. Under the guise of reform, it seems
that the Administration has provided us with a blueprint to break up
Amtrak and leave the pieces in the hands of the states and private
corporations. This is not the sort of reform that Amtrak needs. It
certainly has its flaws, but maintaining a national passenger rail
system is in America's national interest. It reduces congestion, it
betters environmental quality, and places fewer automobiles on the
road. I do not advocate blindly throwing money at Amtrak, but efforts
must be made to not only maintain the existing assets but deliberately
and carefully expand this service.
Obviously, as a Senator from Maine, I have a great deal of interest
in the viability of the Northeast Corridor. Not only its continued
operation, but augmenting and improving the Corridor. A significant
part of the augmentation of the Corridor is having the power to make
capital improvements. Without this power, the safety of our commuters
is at risk. According to Amtrak's numbers, the Corridor moved over 14
million passengers last year, easily the most traveled rail corridor in
America, including freight lines. I do not feel that we can neglect
Amtrak's ability to make these safety improvements, and urge my
colleagues to take this into account as we formulate a comprehensive
reform package.
In my state, we have an Amtrak route known as the Downeaster. It
travels from Boston to Portland, and moves over a quarter of a million
people annually. This has been a significant success in Maine, but our
route is not financed through the yearly appropriations fight we
undertake on behalf of Amtrak. Instead, it uses a Federal Highway
Program entitled CMAQ ( see-mack ), which is intended to relieve
congestion and improve air quality. It seems clear to me that passenger
rail does both of these things as good or better than any other mode of
surface transportation. One thing I would like the panelists to speak
to is how to fund passenger rail in non-traditional ways, rather than
leaning on the General Fund and potentially exacerbate our already
ballooning national debt.
Lastly, the security of rail, both passenger and freight, is an
often overlooked but very real concern in our everyday lives. I took
the step of requesting that the General Accounting Office examine the
adequacy of our rail security in relation to international standards
throughout Europe and Asia. They are due to complete this study in a
few short months. I look forward to hearing from the panelists to what
extent rail security has been taken into account in the various ideas
that have been offered to initiate these reforms.
The future of passenger rail is important, not only to the
Northeast but, as gas prices climb and energy costs soar, throughout
the country. If we can develop a template for successful passenger rail
here in this Subcommittee, it could provide an avenue to improve our
Nation's infrastructure and make our economy more efficient. I am
hopeful we can begin to accomplish that today.
Thank you, Mr. Chairman.
______
Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
Thank you Mr. Chairman. I appreciate your holding this hearing and
I welcome our witnesses from Amtrak and the Department of
Transportation.
Although a vast majority of individuals travel by car or plane as
their primary means of transportation, still each year millions of
travelers choose, or depend on, intercity passenger rail for such
purposes.
Amtrak provides a valuable service for Oregonians who rely on
passenger rail for traveling across the state and up and down the west
coast. Amtrak operates one short-distance service in Oregon (The
Cascades), and two long-distance services, (The Coast Starlight and The
Empire Builder). Of Amtrak's total annual ridership of 25 million,
ridership in Oregon is nearly 700,000 passengers per year.
In addition. the State of Oregon is one of 13 states currently
providing funds to support and maintain Amtrak's rail service.
Specifically, the State of Oregon spends $4.5 million per year on The
Cascades train line that runs from Eugene to Vancouver, BC. These
annual state expenditures have greatly contributed toward the success
of operating Amtrak rail service in my State of Oregon. It is my belief
that in order for Amtrak to be successful, a system needs to be
developed whereby all states with intercity passenger rail service make
a fair contribution to support its operations.
As we all well know, funding for Amtrak has been an issue the
Congress wrestles with annually and Amtrak has continued to limp along
year-to-year with just enough funding to maintain its operations.
In the United States Senate, I have supported funding for Amtrak
and believe intercity passenger rail can and should continue as a
viable mode of travel for our citizens.
However. Amtrak's financial house is in a shambles, now reaching
losses exceeding $1 billion per year. This can no longer continue.
Amtrak's operations need to be assessed and reforms implemented in
order to sustain the long-term viability of intercity passenger train
service.
Reform of Amtrak is much needed and I welcome a constructive and
candid discussion of the issues so that, moving forward, passenger rail
will be a more efficient mode of providing transportation for our
citizens.
I look forward to hearing today's testimony from representatives of
Amtrak and the Department of Transportation and their proposals to
address the state of Amtrak's passenger rail service.
Thank you Mr. Chairman.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Hon. Kenneth M. Mead
CMAQ Funding for the Downeaster:
Background:
I wanted to ask some questions about the Administration funding
priorities for passenger rail. As a Northeasterner, the operations on
the Northeast Corridor are vital to high-density passenger rail network
that operates along the East Coast. In my home State of Maine, our
route from Portland to Boston, known as the Downeaster, has been a
hard-earned success. However, unlike traditional Amtrak programs, it is
not funded through the typical Amtrak revenue streams.
Through the efforts of the Maine delegation, we have been able to
achieve funding via the Highway Trust Fund for operation of the
Downeaster. More precisely, the CMAQ (see-mack) program, which as you
know is used to alleviate congestion and improve air quality, has been
used as a funding source for our Amtrak service. As I mentioned in my
statement, the Downeaster transports over a quarter of a million people
a year, and it has been a resounding success for commuters traveling to
and from metropolitan Boston. Yet every couple of years, we have to
fight the Federal Highway Administration for a two-year waiver.
Question 1. Rather than constantly fight for a waiver from the
Federal Highway Administration on an annual basis, I would prefer that
Maine be permitted to use CMAQ funds to achieve precisely what they
were intended to do; relieve congestion. What is your feeling regarding
the utilization of CMAQ funds to operate passenger rail and mass
transit service?
Answer. CMAQ is an $8.1 billion program under TEA-21 intended to
help fund capital investments in new projects and programs located in
air quality nonattainment and maintenance areas which reduce
transportation-related emissions. Rail projects qualify for these funds
as long as funds are used in or in close proximity to air quality
nonattainment and maintenance areas. We are aware that Maine launched
its Downeaster service with $51.7 million in CMAQ funds (along with
state bonds and Taxpayer Relief Act Funds) for capital improvements to
track and signals and stations. CMAQ funds have been used by other
states for a variety of freight and passenger rail services. New York
State has spent $100 million or more in CMAQ funds on rail improvements
to support passenger service on the Empire Corridor between NYC and
Schenectady.
CMAQ funds can be used for up to 3 years to cover operating losses
during a system startup period, after which other sources of funding
must be used if the service is to be continued. Thus the program, as
currently defined, is not intended to provide long-term state support
for operating losses on passenger rail service. CMAQ annual
appropriations since FY 2002 averaged $1.4 billion a year. The
operating subsidy requirements for transit and intercity passenger rail
far exceed this level of funding, and, if used to fund operating losses
would leave nothing for capital projects. Operating subsidy
requirements might better be addressed in new legislation that
explicitly recognizes Federal and State agreements on funding rail
operating subsidies, such as we have suggested in our testimony.
Alternative Funding Sources for Retaining Amtrak
Background:
While no one here looks forward to another fight with the
Appropriations Committee about funding for Amtrak, it strikes me that
the most recent proposals to restructure Amtrak revolve around
continued utilization of the appropriations process, which seems to me
to be spinning one's wheels. Maine uses a unique but effective way of
funding its operations for our Amtrak route, and I wonder that
relegating the survival of Amtrak to congressional appropriators, and
farther down the line to states, seems to deflect the problem rather
than attempt to solve it.
There must be at least a few suggestions to creatively finance the
passenger rail sector, and Amtrak in particular.
Question 2. Does the panel have any ideas on using alternative or
nontraditional sources of funding for passenger rail? Has their been
any examination of developing financing outside the realm of receiving
a check from the Federal Government every year?
Answer. Since 2001, both the House and the Senate have proposed
legislation that would establish a long-term funding source for
intercity passenger rail development. Funding recommendations in these
proposals have centered on the issuance of tax-credit and tax-exempt
bonds as a long-term funding source for corridor development. These
proposals have not been enacted primarily because of the resistance to
increasing U.S. debt financing and the negative impacts on the budget.
Previous proposals focused on the use of highway trust fund monies and
a \1/2\-cent gas tax which also failed to generate sufficient support.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
David L. Gunn
Question 1. Rather than constantly fight for a waiver from the
Federal Highway Administration on an annual basis, I would prefer that
Maine be permitted to use CMAQ funds to achieve precisely what they
were intended to do: relieve congestion. What is your feeling regarding
the utilization of CMAQ funds to operate passenger rail and mass
transit service?
Answer. Amtrak believes that states should have the flexibility to
utilize their Federal highway funds for whichever mode of
transportation, including intercity passenger rail, best meets the
states' transportation needs and other policy objectives, such as
congestion mitigation and improving air quality. The Downeaster service
to Maine--which operates parallel to the congested Maine and New
Hampshire Turnpikes, and has carried nearly one million passengers
since its inception in December 2001--illustrates how new state-
initiated intercity passenger rail services can provide modal
alternatives in congested highway corridors.
Question 2. Does the panel have any ideas on using alternative or
non-traditional sources of funding for passenger rail? Has there been
any examination of developing financing outside the realm of receiving
a check from the Federal Government every year?
Answer. While intercity passenger rail service cannot be provided
without government funding, Amtrak believes that new funding
mechanisms--including private investment--are necessary if intercity
passenger rail is to fulfill its potential. Indeed, the lack of a
reliable, predictable Federal funding source like other modes is a
major impediment to attracting non-Federal matching funds. Private
investors, states and local governments are reluctant to commit their
funds to support intercity passenger rail when the level of Federal
funding it will receive next year--and, for that matter, whether it
will continue to exist--is so uncertain. Thus, it is critical that a
Federal funding program for intercity passenger rail, like the programs
that fund other modes, provide a long term and predictable level of
funding.
Amtrak, and the states who will be the ultimate purchasers of
intercity passenger rail services under Amtrak's Strategic Reform
Initiatives, would be open to innovative approaches that could help
meet some of the funding needs of intercity passenger rail,
particularly with regard to corridor development and the acquisition of
new equipment. Such approaches might include bond financing, a multi-
modal user fee, and the creation of a special purpose entity to acquire
and finance new equipment. Amtrak looks forward to working with
Congress, the Administration, and the states to advance such
initiatives.
Question 3. Who determines the extent of the inspections of the
Acela Trains, and the Amtrak fleet in general? Do you feel that the
inspections are lacking in thoroughness? Is this part of a pattern of
overlooking or simply missing mechanical problems in Amtrak's fleet?
How can you reassure the public that these oversights will not
continue?
Answer. Every maintenance inspection performed on all equipment
owned by Amtrak including the Acela is developed to comply with the
Federal Railroad Administration's regulations in Volume 49 of the Code
of Federal Regulation. The Consortium of Bombardier Transportation of
Canada and Alstom of France through a subsidiary company--the Northeast
Corridor Maintenance Services Company (NECMSC)--are responsible for
inspecting and maintaining the Acela trainsets in accordance with
Federal Regulations and the original equipment manufacturer's
recommended practices. The Federal regulation is quite extensive in
encompassing every major component on both passenger cars and
locomotives to ensure the highest degree of safety for the traveling
public. Amtrak's philosophy has always been where possible to increase
the safety margin in our inspection process above that which is
outlined by regulatory requirements.
______
Response to Written Questions Submitted by Hon. Gordon H. Smith to
David L. Gunn
Question 1. What steps are you taking in order to improve
operational efficiencies at Amtrak?
Answer. Amtrak is undertaking and has initiated a number of efforts
to improve operational efficiencies. We have taken advantage of
technological improvements in our reservations system, closed down one
of our reservation call centers, exited the mail and express business
and as a result eliminated or truncated four routes. In addition, we
are streamlining procurement of long lead time material for our fleets,
outsourcing component renewal and remanufacture where practical,
increasing utilization of employee resources as well as eliminating
unnecessary fleet configurations. We are also continuing our current
initiative to standardize our maintenance inspection procedures across
fleet types. This effort will reduce our out of service time for
planned maintenance activities while increasing system reliability and
overall fleet availability.
Question 2. What are your plans for the routes that are the biggest
financial drain on your organization? Would you consider reintroducing
routes, such as the Pioneer Line, that have been previously
discontinued if these routes are deemed to provide more benefit to
consumers and businesses than existing routes?
Answer. The proposals and planned actions in Amtrak's Strategic
Reform Initiatives include:
requiring all users of the Amtrak-owned Northeast Corridor,
whose infrastructure requirements are the largest component of
Amtrak's capital budget request, to pay their full
proportionate share of the Corridor's operating and capital
costs;
establishing performance thresholds for long distance
trains, and discontinuing trains not meeting these thresholds
absent state (or additional Federal) support; and
a variety of actions to improve the financial performance of
all routes, including changes in food service, selective
outsourcing, and limited changes in certain statutory
provisions that impose higher costs on Amtrak than on its
competitors.
The initiation of new routes is a major corporate decision that
requires action by Amtrak's Board and approval by the Secretary of
Transportation. This issue is addressed in Mr. Laney's response to the
similar question you have posed to him.
Question 3. Budgets at both the Federal and State levels are being
stretched in all directions. Are you supportive of having all states
with Amtrak service shoulder a fair and equitable share of their
operational and capital costs?
Answer. As indicated in its Strategic Reform Initiatives, Amtrak
believes that all states should provide a fair and comparable share of
the operating and capital costs associated with the short distance
corridor trains that serve them. Amtrak plans to transition all
corridor routes to state coverage of fully allocated operating losses
(excluding interest and depreciation), and equitable charges for usage
of Amtrak-owned equipment, over a four year period beginning in FY
2008. Critical to accomplishing this transition, however, is the
enactment, prior to the start of that transition, of a Federal matching
grant program under which all states will be able to leverage their
capital investments in intercity passenger rail on a basis comparable
to the Federal match that is provided for other modes.
Question 4. In 2010, the Olympics will be held in Vancouver, BC.
The Olympics will draw scores of people to the region during that time.
As a result, I anticipate this will cause much traffic congestion,
especially on I-5. Are you willing to make the Cascades a priority so
that adequate rail infrastructure exists in anticipation of the 2010
Olympics?
Answer. The Cascades service to Vancouver, BC is supported by the
State of Washington, and Oregon provides funding for the portion of the
Cascades route between Eugene and Portland. The rail infrastructure
over which it operates is owned by private freight railroads.
Decisions about infrastructure investments on state supported
corridor routes are made by the states involved. Currently, the states
are also the primary--and in many cases exclusive--funding source for
investments in corridor infrastructure.
Because there is no Federal matching program in place to match
state capital investments in intercity passenger rail, the States of
Oregon and Washington have funded the vast majority of the expenditures
to date to upgrade the Cascades corridor and extend service to Eugene
and Vancouver, BC. In its 2004 Strategic Plan, Amtrak designated the
Cascades corridor as a ``Tier I'' corridor based upon the readiness of
the states of Oregon and Washington to make additional investments in
corridor development as soon as a Federal matching program for
intercity passenger rail is enacted. An important underpinning of
Amtrak's plan to transition states to full operational cost
responsibility for and control of all corridor services is the
enactment of such a program prior to FY 2008.
That said, we have been contacted by some local communities in the
Pacific Northwest who would like to work with us to provide adequate
mobility to and from the Olympics. We intend to work with these groups
and are open to their suggestions and ideas on how we can improve and
expand service during the Olympics.
______
Response to Written Questions Submitted by Hon. Gordon H. Smith to
David M. Laney, ESQ.
Question. My understanding is that under Amtrak's proposal, states
will be responsible for filling funding gaps for long distance routes
such as the Empire Builder that operates in Oregon. How will each
state's financial obligation be calculated? Will you consider and
analyze the possibility of reintroducing previously discontinued routes
such as the Pioneer Line if they prove to have a more favorable
revenue-to-cost ratio than some existing intercity passenger rail
lines?
Answer. Under Amtrak's proposal, states will be required to provide
operating funding for long distance trains only if a particular train
fails to meet the minimum performance thresholds that Amtrak is in the
process of establishing. In that case, state funding would be required
to cover the ``gap'' between the minimum performance threshold and the
train's actual operating losses. Whether to provide funding, and how
much of the required funding would be provided by each participating
state, would be up to the individual states involved.
Amtrak intends to operate a long distance train network that
optimizes cost efficiency and public benefits within the limits of
available Federal funding and equipment. Consistent with these
objectives and applicable law, Amtrak would consider operating long
distance trains on new or different routes if:
(i) a market analysis indicates that a new route would meet
minimum performance thresholds (with state financial support if
necessary), in which case a more detailed study of comparative
revenues and operating costs, route termination/start up costs
and availability of equipment, would be the next step in the
analysis; and
(ii) the new route has adequate infrastructure--particularly
rail line capacity--to enable Amtrak to provide reliable
service (or a state or group of states is prepared to fund the
necessary infrastructure improvements, utilizing the available
Federal match if appropriate).
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
David L. Gunn
Question 1. Do you fully support the plan developed by the Board?
Are there areas that need further improvement or refinement?
Answer. I fully support the Board's plan.
The Strategic Reform Initiatives that Amtrak has laid out are
merely the first step in a multi-year planning and implementation
process. A large number of refinements will be required as we develop
the more comprehensive strategic plan that we expect to issue in early
Fall, and as we begin to take actions to implement the initiatives we
have proposed. The involvement of other stakeholders is particularly
critical as the proposals that we have sketched out in the Strategic
Reform Initiatives are refined, fleshed out and revised.
Amtrak management and the Board put a lot of work into the plan and
we believe it is a serious proposal and answers the call from the
Administration and others about what shape reform of Amtrak should
take.
Question 2. What is the single most important tool Amtrak needs to
be successful in the future?
Answer. Adequate, predictable funding. Funding of state of good
repair needs can no longer be deferred, and a Federal match, comparable
to that for other modes, of state funded corridor development projects
is essential for intercity rail passenger service to begin to fulfill
its potential.
Question 3. Do you believe outsourcing certain functions will
significantly lower operating costs? What have been your experiences
with outsourcing so far?
Answer. To an extent outsourcing can reduce our costs and where
applicable we will explore those opportunities. Amtrak has outsourced
selected activities on many occasions with mixed results. While cost is
certainly an important consideration care must be taken to acknowledge
the other aspects associated with an outsourcing venture;
specifications, oversight, Federal procurement requirements and the
like which restrict and occasionally eliminate the most viable
candidate leaving you with an alternative less capable than existing
internal resources.
Question 4. Is Amtrak's security funding needs incorporated into
the Board's proposal? Does the $1.8 billion requested for this year
include any significant funding for security?
Answer. Security funding in the amount of $13.3 million is included
in Amtrak's $1.8 billion requested for FY06. In addition, the Police &
Security Department's FY06 operating budget is projected at about $35
million.
Question 5. Amtrak is facing significant on-time performance
challenges, especially for long distance trains. What is the major
cause of delay for these trains? How do we address this delay? For long
distance trains to become better performers economically, as the
Board's plan suggests it hopes to accomplish, won't service reliability
and on-time performance have to be improved?
Answer. Amtrak long distance trains operate beyond the Amtrak-owned
Northeast Corridor using tracks owned by other, ``host'' railroads.
Most delays to Amtrak trains operating off Amtrak-owned tracks are
attributable to host railroads. Each minute of delay to an Amtrak train
is assigned a cause, and each cause is the responsibility of either
Amtrak, the host railroad, or third parties. On non-Amtrak owned lines
during the first half of Fiscal Year 2005, host railroad-responsible
delays accounted for 78 percent of all delays, followed by Amtrak-
responsible delays at 16 percent and third party delays at 6 percent.
Of delays caused by host railroads, Freight Train Interference
accounted for 29 percent of total delays to Amtrak trains; temporary
speed restrictions (``Slow Orders'') accounted for 16 percent; Signal-
related Delays 11 percent; Passenger Train Interference 10 percent;
Routing 6 percent; Maintenance of Way 3 percent; Commuter Train
Interference 3 percent.
Amtrak is addressing these delays using several approaches: (1)
Amtrak operating personnel work continuously on a real-time basis with
host railroads to keep trains moving; (2) Amtrak funds personnel
located in the dispatching centers of major host railroads to monitor
and improve Amtrak train performance; (3) Amtrak offers the host
railroads financial incentives for good performance and penalties for
poor performance; and (4) Amtrak is offering a new program of funds to
match host railroad and state investments in small, targeted
infrastructure projects to remove bottlenecks and improve performance.
Amtrak also supports Federal efforts to fund rail infrastructure. The
primary requirement for improving on-time performance is capital
investment in rail infrastructure to match rail capacity with demand
for freight and passenger traffic.
On time performance is one of the primary drivers of Amtrak
customer satisfaction. Therefore, improvements in service reliability
and on-time performance are key contributors to revenue growth and
improved economic performance.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
David M. Laney, ESQ.
Question 1. What are the main differences between your plan and the
Administration's plan?
Answer. The Administration's plan would terminate Federal operating
funding for Amtrak's 15 long distance trains. Amtrak's plan proposes to
establish performance thresholds that each long distance train would
have to meet by the end of a transition period, during which time
various actions would be taken to improve financial performance. At the
end of this period, long distance trains that fall short of these
performance thresholds would be discontinued unless states or Congress
decided to fund the ``gap'' between individual trains' operating losses
and the minimum performance threshold.
The Administration's plan proposes to turn over the Northeast
Corridor (``NEC'') infrastructure to a compact of eight states and the
District of Columbia. Amtrak's plan would not, at least at this point,
separate NEC assets from NEC operations. (We do propose--and have
already begun--to separate NEC infrastructure management and NEC
operations for planning, accounting, and financial reporting and
analysis purposes.)
The Administration's plan contemplates that the Federal match for
state capital investments in intercity passenger rail would be no
greater than 50 percent. Amtrak's plan contemplates a Federal matching
program for state investments that provide a stimulus comparable to
that provided for other transportation modes at this stage in their
development (e.g., 80/20).
The Administration's plan is silent in its proposal as to what
level of funding would be provided for continued intercity passenger
rail operations and capital needs or for bringing the Northeast
Corridor to a state of good repair, authorizing only ``such sums as may
be necessary.'' Amtrak's plan spells out in detail the level of funding
that Amtrak believes is required for these purposes.
Both the Administration's and Amtrak's plans contemplate
competition in the provision of intercity passenger rail services to
reduce costs and improve service quality. However, the Administration's
plan does not address fundamental issues necessary to position Amtrak
on an equal footing with all other operators/service providers in
certain respects, or provide intercity passenger rail operators with
the labor flexibility that other industries have. To address these
issues, Amtrak has proposed that all new intercity passenger rail
employees be covered by Social Security rather than by the Railroad
Retirement system, and that labor agreements terminate when they
expire.
Question 2. An essential element of your plan is dedicated, multi-
year federal capital match program. Is the Board's plan possible
without this capital match program?
Answer. No. The vision of intercity passenger rail's future
underlying Amtrak's plan--and in the proposals advanced by the
Administration and various members of Congress--requires an adequate
federal capital match program. Many of the critical elements in the
Amtrak's plan--state assumption of the full operating losses of all
corridor trains by 2011, corridor development, and increasing the
public benefits from (and therefore public support for) intercity
passenger rail--depend upon the availability to states of federal
matched funding by which they can leverage their investment in
intercity passenger rail as they do with other modes. A match program
would also allow a leveraging of federal investment in intercity
passenger rail with new state funds.
Question 3. Will the metrics established to judge long distance
trains include both economic and societal and mobility benefits?
Answer. The metrics for long distance trains that the Board will
establish have not yet been finalized. Based on the Board's discussions
to date, I anticipate that financial performance will be the primary
criterion, but that other factors relating to public and transportation
benefits will also be taken into account.
Question 4. What sort of state operating support do you anticipate
the long distance trains will require? Are you proposing that Amtrak
should cover some maximum loss per train and that the states will have
to pick up the rest for operations that lose more than that maximum
amount?
Answer. Amtrak proposes that the Federal Government continue to
cover the operating losses of long distance trains that meet
performance metric thresholds. For trains that do not meet these
thresholds, states (or Congress, if it chooses) would have the option
of covering the ``gap'' between the minimum performance threshold and
actual operating losses. If such coverage is not provided, the trains
will be discontinued.
Question 5. Can the Corporation survive on a funding level of $1.2
billion?
Answer. As stated in the Amtrak Strategic Reform Initiatives and
FY06 Grant Request, ``Amtrak cannot continue to operate at the current
funding level of $1.2 billion in FY06.'' From a $1.2 billion funding
level, Amtrak would first need to reserve $278 million for debt service
on its legacy debt. Second, $560 million is needed as operating support
for the current base of operations. This leaves a balance of $362
million for all capital programs. The FY06 requirement for capital
needs which represent ongoing state-of-good-repair primarily for
equipment and infrastructure totals $959 million. Of this $172 million
is planned to be supported by non-Federal funding including from states
and transit agencies with the balance of $787 million required from
federal funding. It is not possible to keep both equipment and
infrastructure in a state of good repair with less than half the
funding required, $362 million.
Question 6. You mentioned a desire to change the laws governing
contract negotiations and retirement plans for Amtrak employees. What
types of changes are you looking for? Are you suggesting that these
laws should be changed for the entire railroad industry or just Amtrak?
If just for Amtrak, why should Amtrak be treated differently than other
freight or commuter railroads?
Answer. With regard to contract negotiations, the change we are
looking for is to amend the Railway Labor Act (``RLA'') to provide that
the termination date of an agreement is the date that Amtrak can impose
new agreement terms or the union may engage in self-help. Without this
the terms of an agreement without a negotiated change continue in
effect ``forever.'' We are also seeking to make new intercity passenger
rail employees subject to Social Security rather than the Railroad
Retirement Tax Act (``RRTA''); current employees would continue to be
covered by the RRTA.
These changes should be limited to intercity passenger rail
operators and their labor unions only. The Alaska Railroad--the other
current operator of intercity passenger rail service in the United
States--is not subject to the RLA or the RRTA, and new passenger rail
operators who compete for contracts to operate intrastate corridor
services currently operated by Amtrak would likely not be subject to
these statutes either. Commuter railroads are governed by provisions of
the RLA regarding the contract negotiating process. These differ from
the provisions applicable to freight railroads that also currently
apply to Amtrak.
There is no reason why Amtrak, which is subject to statutory,
congressional and administration mandates to reform its operations and
reduce its costs, should be subject to all of the statutory provisions
applicable to privately owned freight railroads. Amtrak's proposals
would create a ``level playing field'' in which all operators of
intercity passenger rail service operators would be subject to the same
laws.
Question 7. The Board is advocating very robust competition for the
services it now solely provides. I can't think of many other private
companies that are asking for competition in their marketplace. Does
this call for competition conflict with your fiduciary responsibilities
to the Corporation?
Answer. Amtrak is not sustainable as currently funded. The company
cannot continue to operate the way it does today with the current level
of Federal financial support, which in FY 2005 is approximately $200
million less than projected losses (a gap we are closing with working
capital that will soon be depleted). For Amtrak to avoid insolvency,
support for Amtrak's funding needs must be obtained from those who have
advocated significant reforms in the provision of intercity passenger
rail services, including the Administration and many Members of
Congress. The Board believes that the introduction and development of
competition is one of the steps necessary to achieve this objective.
Competition introduces market incentives for operating efficiencies and
service quality that are not as pronounced as long as Amtrak is the
sole provider. Competition should enhance Amtrak's performance at
virtually all levels. It also represents an essential component of
proposals from Congress and the Administration and a key to funding
levels that will enable Amtrak to continue its operations.
______
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
David M. Laney, ESQ.
Question 1. Has the Board considered taking any actions to cut
routes to save money immediately? If so, how much money could be saved?
Answer. The Board continues to evaluate many cost saving actions
including cutting routes. In fact, for FY05 the Board approved the shut
down of the Three Rivers route and the truncation of the Palmetto
route. However, meaningful reductions in operating expense would
require widespread route and service actions related to long distance
service requiring notice, an orderly shut down and supplemental funding
for the significant restructuring costs. Restructuring costs include
those related to contractual labor and financing agreements. Instead
the Board supports a longer term evaluation process with a set of
benefit performance metrics to be used to evaluate and determine the
future of each long distance train. This process includes working to
improve performance including state contribution where required to
achieve performance thresholds or termination beginning in FY08 for
routes that continue to fall short.
Question 2. How do you believe that proposing additional
competition will aid the bottom line of the company to which you owe a
fiduciary duty as Board Chairman?
Answer. Amtrak is not sustainable as currently funded. The company
cannot continue to operate the way it does today with the current level
of Federal financial support, which in FY 2005 is approximately $200
million less than projected losses (a gap we are closing with working
capital that will soon be depleted). For Amtrak to avoid insolvency,
support for Amtrak's funding needs must be obtained from those who have
advocated significant reforms in the provision of intercity passenger
rail services, including the Administration and many Members of
Congress. The Board believes that the introduction and development of
competition is one of the steps necessary to achieve this objective.
Competition introduces market incentives for operating efficiencies and
service quality that are not as pronounced as long as Amtrak is the
sole provider. Competition should enhance Amtrak's performance at
virtually all levels. It also represents an essential component of
proposals from Congress and the Administration and a key to funding
levels that will enable Amtrak to continue its operations.
______
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
David L. Gunn
Question. Has the Board considered taking any actions to cut routes
to save money immediately? If so, how much money could be saved?
Answer. The Board continues to evaluate many cost saving actions
including cutting routes. In fact, for FY05 the Board approved the shut
down of the Three Rivers route and the truncation of the Palmetto
route. However, meaningful reductions in operating expense would
require widespread route and service actions related to long distance
service requiring notice, an orderly shut down and supplemental funding
for the significant restructuring costs. Restructuring costs include
those related to contractual labor and financing agreements. Instead
the Board supports a longer term evaluation process with a set of
benefit performance metrics to be used to evaluate and determine the
future of each long distance train. This process includes working to
improve performance including state contribution where required to
achieve performance thresholds or termination beginning in FY08 for
routes that continue to fall short.
______
Responses to the remaining questions were not available at the time
this hearing went to press.
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Hon. Kenneth M. Mead
Question 1. In your testimony, you note that the freight railroads
have expressed considerable concerns about the concept of extending
Amtrak's statutory access to other railroads and to new operators. Have
you considered any alternative approaches such as having Amtrak manage
the operations with the freight railroads and provide operating
employees to other service providers on a contract basis, similar to
what Amtrak currently provides for private trains or the service that
the Alaska Railroad provides for some of the cruise operations in that
state?
Question 2. Your testimony suggests crating non-matching formula
grants to serve as baseline Federal support for the states to cover
long distance and corridor train operating losses and capital costs. If
passenger rail funding needs exceed any state's apportionment of
formula funds, as it likely would be the funding levels decrease over
time per your recommendation, then a state would have to pay for the
difference.
Do you support allowing states to use some of their other Federal
transportation funds, perhaps provided through the Congestions
Mitigation and Air Quality program (CMAQ), the surface transportation
program, or the 5311(f) intercity bus program to help cover those
additional costs?
Question 3. Can you discuss some of the costs that might be
associated with trying to restructure Amtrak through bankruptcy?
Question 4. Do you have examples of other Federal transportation
programs that require states to collectively provide matching funds to
cover operating costs? What are the challenges associated with this
approach?
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Hon. Jeffrey L. Rosen
Question 1. Does the Administration still support restructuring
Amtrak through bankruptcy?
Question 2. You've said that the Administration will only support
Amtrak funding if it's accompanied by ``significant'' reform. Given the
busy schedule for this year, it is possible, even likely, that final
passage of an Amtrak reauthorization bill could occur after we have to
approve funding for Amtrak for FY 2006.
Will the Administration support funding to maintain Amtrak while
Congress completes its work on Amtrak reauthorization?
Question 3. Greyhound has recently withdrawn significant services
in the West and Southwest, while many airlines have cut or eliminated
service to many smaller cities and airports. Some of these regions and
communities are served by our long distance trains, which Secretary
Mineta has described as ``trains nobody rides between cities nobody
wants to travel between.''
If we eliminate the train in these areas, what are people with
mobility needs to do in these communities who can't or don't drive?
Question 4. Do you generally agree with the DOT IG's assessment of
Amtrak's condition and financial needs?
Question 5. How many Amtrak Board meetings has the Secretary
attended during his tenure?
Question 6. In your testimony, you say that Federal funds don't
support transit operations, but that is incorrect. The Federal transit
program does support operating costs for smaller transit properties and
other programs including intercity buses. Why is providing operational
support for transit acceptable, but not passenger rail?
Question 7. Do you believe that we should measure the success of
transit operations and intercity passenger rail by the same yardstick?
Does Amtrak's fare box recovery figures compare favorably with the
average rail transit property figures? Is Amtrak not public transit?
Question 8. The Administration, through its SAFETEA proposal
supports and has actually proposed strengthening the 5311(f) program,
which provides both operating and capital support for intercity bus
operations? Why has the Administration not proposed a similar program
for passenger rail?
Question 9. I understand that under the 5311(f) program, many
states can't even come up with the 50 percent match required to
subsidize intercity bus service. Isn't it likely that very few states
could then provide a 100 percent match as you propose, requiring for
intercity rail operations?
Question 10. Every major Federal capital grant transportation
program features some sort of dedicated, multi-year nature of capital
projects. Why doesn't the Administration support this approach for
passenger rail?
Question 11. In your testimony, you note that Amtrak consumes 9
percent of discretionary transportation spending. But, isn't most of
our Federal transportation spending non-discretionary? What percentage
of all transportation funding does the Federal Government spend on
Amtrak annually?
Question 12. Is it true that the Department of Transportation's FY
2006 budget proposal to the Office of Management and Budget for Amtrak
was $1.4 billion?
Question 13. Secretary Mineta has been quoted as saying that if
states won't pay for service, then trains shouldn't open their doors
while traveling though that state. We currently have an example of this
with the State of New Hampshire, where it doesn't contribute to the
successful Downeaster Service provided by the State of Maine. Does the
Secretary support eliminating all stops in New Hampshire even though
doing so would be significantly impact the ridership and financial
performance of the service?
Question 14. The Administration has proposed no funding for the
Next Generation High Speed Rail program. Does the Administration
believe that highspeed rail projects are no longer viable?
______
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
Hon. Jeffrey A. Rosen
Question 1. You stated you believe it is not inconsistent for the
Administration to provide Federal operating assistance for intercity
buses because smaller amounts (than Amtrak's Federal operating
assistance grant) are involved. Why does the Administration believe in
principle that federal operating assistance for intercity
transportation is warranted in some cases and not others?
Question 2. Has the Administration examined the safety impacts of
separating infrastructure responsibility from operations over a major
corridor? What analysis did the Department perform? Did the Department
consult America's freight railroads before making such a proposal? What
advice did they provide?
Question 3. Did the Administration study the effect of not having
intercity passenger rail service in congested areas like New Jersey
before the President proposed the potential bankruptcy of Amtrak?
Question 4. You serve as the Secretary's representative to the
Amtrak board. Has the Board considered taking any actions to cut routes
to save money immediately? If so, how much money could be saved?
______
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
Hon. Kenneth M. Mead
Question 1. You testified before this Committee in the last
Congress that a very similar proposal to the Administration's would
cost around a billion and a half dollars a year. Is this still
accurate?
Question 2. Would the President's proposal likely lead to the
reduction of Federal spending on intercity passenger rail service?