[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                    DEPARTMENT OF TRANSPORTATION AND
                    RELATED AGENCIES APPROPRIATIONS
                                FOR 1998

========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

 SUBCOMMITTEE ON THE DEPARTMENT OF TRANSPORTATION AND RELATED AGENCIES 
                             APPROPRIATIONS

                    FRANK R. WOLF, Virginia, Chairman

TOM DeLAY, Texas             MARTIN OLAV SABO, Minnesota
RALPH REGULA, Ohio           THOMAS M. FOGLIETTA, Pennsylvania
HAROLD ROGERS, Kentucky      ESTEBAN EDWARD TORRES, California
RON PACKARD, California      JOHN W. OLVER, Massachusetts
SONNY CALLAHAN, Alabama      ED PASTOR, Arizona
TODD TIAHRT, Kansas          
ROBERT B. ADERHOLT, Alabama  

NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

John T. Blazey II, Richard E. Efford, Stephanie K. Gupta, and Linda J. Muir,
                           Subcommittee Staff
                                ________

                                 PART 5
                                                                   Page
 DEPARTMENT OF TRANSPORTATION:

   Federal Railroad Administration................................    1
       Grants to Amtrak...........................................    1
   Research and Special Programs Administration...................  666
   Surface Transportation Board...................................  819

                              

                                ________

         Printed for the use of the Committee on Appropriations
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                     U.S. GOVERNMENT PRINTING OFFICE

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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director











 DEPARTMENT OF TRANSPORTATION AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  1998

                              ----------                              

                                          Thursday, March 20, 1997.

                    FEDERAL RAILROAD ADMINISTRATION

                               WITNESSES

JOLENE M. MOLITORIS, ADMINISTRATOR
DONALD M. ITZKOFF, DEPUTY ADMINISTRATOR
KATHRYN B. MURPHY, DIRECTOR, OFFICE OF BUDGET
S. MARK LINDSEY, CHIEF COUNSEL
JAMES T. MCQUEEN, ASSOCIATE ADMINISTRATOR FOR RAILROAD DEVELOPMENT
BRUCE M. FINE, ASSOCIATE ADMINISTRATOR FOR SAFETY
RAPHAEL KEDAR, DEPUTY ASSOCIATE ADMINISTRATOR FOR POLICY SYSTEMS

            NATIONAL RAILROAD PASSENGER CORPORATION (Amtrak)

                               WITNESSES

THOMAS M. DOWNS, PRESIDENT, AMTRAK
AL ALTSCHUL, CHIEF FINANCIAL OFFICER, AMTRAK
    Mr. Wolf. Good morning. Today, we will hear from Tom Downs, 
President of Amtrak, and Ms. Molitoris, the Administrator of 
the Federal Railroad Administration. I am very concerned about 
the difficult position that Amtrak is in. Last week, GAO 
testified that Amtrak remains heavily dependent upon Federal 
support for both operating and capital assistance and is ill-
prepared to operate without a lot of help.
    Some points that GAO made were quite striking. The GAO 
noted that Amtrak debt and capital lease obligations almost 
doubled in a three-year period to just less than $1 billion in 
1996 and will grow by another $1 billion beginning in 1999. To 
pay off these enormous debt obligations, Amtrak has been 
increasingly using Federal operating assistance, up from six 
percent in 1993 to 21 percent in 1996.
    Further, for Amtrak to become a competitive railroad, it 
must complete upgrading and installing its high speed rail 
service along the Northeast Corridor, which will cost $5.5. 
billion. Of this total, approximately $3.2 billion is expected 
to come from Federal capital grants.
    At a time when Amtrak is struggling to survive, Congress 
and the Administration have asked them to become self-
sufficient from Federal operating assistance in the next four 
years. If this is to occur, and GAO predicted that it could 
not, Congress must address Amtrak's needs in a comprehensive 
way to secure its financial footing and long-term viability, 
not in a piecemeal manner as we have done in the past few 
years.
    I want Amtrak to survive. I believe America needs a 
national railroad passenger system as a vital part of a 
balanced transportation network for our nation. But we cannot 
continue the status quo with Amtrak.
    In the 104th Congress, I introduced legislation to 
revitalize Amtrak. Later today, I will be introducing the 
Amtrak Route Closure and Realignment Bill. This is a measure 
that I believe will help save the integrity of intercity 
passenger rail service in our nation because despite Amtrak's 
efforts, restructuring has not always worked as planned.
    Some of Amtrak's unprofitable routes have been mandated by 
Congress, and this has stymied its efforts to operate in a 
businesslike manner. I believe it is imperative that we enable 
Amtrak to better operate in accordance with business 
principles.
    Mr. Downs and Ms. Molitoris, let me welcome you and your 
supporting staff. We will put your statements in the record, 
and perhaps you could do the highlights. And since you are with 
the Administration, Ms. Molitoris, we will recognize you first.

                          FRA Opening Remarks

    Ms. Molitoris. Thank you so much, Mr. Chairman. We very 
much appreciate representing the Administration's budget here 
with you and your committee today.
    Mr. Wolf. Oh, excuse me. Mr. Sabo, I apologize.
    Mr. Sabo. Welcome.
    Mr. Wolf. Ms. Molitoris.
    Ms. Molitoris. The FRA budget tracks the three priorities 
of Secretary Slater for the Department of Transportation, Mr. 
Chairman, and the three priorities are safety, investment, and 
common sense government. Today I will focus my oral statement 
on rail safety, Amtrak, and technological investment.

                                 Safety

    First, safety is our primary mission. FRA has set a goal of 
zero accidents, injuries, and deaths from railroad operations. 
It is indeed an ambitious goal, but it is the right goal. 
During our hearings last year, Mr. Sabo, I talked with the 
Chairman about the change in the rail safety program that we 
had instituted, focusing on root causes and solutions to rail 
safety problems across whole railroad systems instead of only 
the traditional one-inspection-at-a-time approach.
    Let me point to our safety improvement chart, which we have 
brought with us today, because I don't think there is any more 
important message that I could give to you and the committee 
than what you see in that chart. What you see is a message 
about significant improvements in the rail safety record of our 
rail transportation.
    [The chart follows:]

[Page 3--The official Committee record contains additional material here.]


    We are very pleased that the new program that we have put 
into place is bearing very important safety fruit. For example, 
since 1993, fatalities have been reduced by 20 percent. The 
employees on duty casualty rate dropped from 7.59 percent in 
1990 to 3.6 percent in 1996, and the train accident rate 
between 1993 and 1996 has been reduced by 16 percent.

                            Grade Crossings

    In addition, with regard to grade crossings, which is the 
single largest loss of life along with trespassing in the 
railroad industry, we are extremely pleased that we have 
experienced a 20 percent decline in fatalities and a 9.4 
percent decline in accidents in only one year, which is the 
biggest decline since we have been measuring these things.
    We achieved these gains through partnerships. Secretary 
Pena in 1994 made grade crossing safety a national 
transportation priority, and all of the surface modes worked 
together on 55 initiatives to help achieve this 20 percent 
increase in safety.

                    Safety Programs and Initiatives

    Last October, I furnished the committee and all members of 
Congress with a report on the effectiveness of our program, and 
each of the members of the committee will have one of the books 
at their place today. I think this is a plainspoken, direct 
report about what we are doing in safety and how it is helping 
us achieve results.
    The primary ingredient in our safety program is safety 
partnerships because safety is everybody's business. Because 
everybody is involved, our database is bigger. It is more 
accurate. Our proposed rules are better, and, most of all, as 
the chart shows, safety has improved significantly.
    All of our safety partners deserve recognition. Labor and 
management have contributed enormous resources. There have been 
significant capital investments by the railroads, and increased 
citizen awareness gives us the rounding out of our safety team. 
But we can't rest on this success. We have zero tolerance as 
our goal, and we are going to continue to push to that very 
important goal.
    I want you to know that the entire team, Mr. Chairman, at 
the FRA is very proud of this chart which we have been talking 
about while you were gone because it says a very important 
message, and that is the new program is working. Safety has 
increased very significantly in the last two years, and we are 
very pleased, not only because our team at the FRA is proud of 
what has happened, but because our customers in labor and in 
management are telling us that this is the right thing to do so 
we know we are on the right track.
    Consequently, we ask that you support the 1998 budget for 
safety. About 90 percent of the FRA's $57 million safety budget 
supports 456 field and 90 headquarters staff that are directly 
involved in developing and revising safety rules and in 
monitoring and inspecting the railroads.
    I also should mention that this year the safety budget 
covers 100 percent of our Safety activities, plus about 60 
percent of our Chief Counsel's activities which is the Safety 
Law Office.

                                 amtrak

    The second very important subject is Amtrak, as you have so 
rightly pointed out. Much has been said about the challenges 
they face. And when we arrived four years ago, we recognized 
how big those challenges were, and we set about addressing 
them. And that is why we brought on what we think is a very 
strong management team with Mr. Downs as the leader.
    I think it is important sometimes, Mr. Chairman, the 
question is, are we looking at it half full or half empty. I 
think at least for a moment we ought to look at the 
accomplishments of Amtrak because they have been significant.
    When we arrived, it was very difficult even to find out 
what things cost because everything was bundled together so 
much. Over the last two and a half years to three years, we 
have cut Federal operating subsidies in half. That is a very 
big thing for Amtrak. They have been divided into three 
business units. These business units are focusing on getting 
new business, satisfying customers, and providing good service.
    We have unbundled all of the mystery about numbers, and 
that is why we have the big spotlight on the real numbers. And 
I think that is why it is a challenge that we are all 
recognizing.
    Also, there have been tremendous private-public 
partnerships such as Amtrak partnerships with business; for 
example, Fortune 500 companies like Disney and Pepsi and United 
Airlines. In the Disney partnership alone, Amtrak ran a kids-
ride-free coupon in the video release of the movie 
``Aristocats.'' They, through tracking this, have identified 
$13 million that they have brought to Amtrak through this one 
promotion.
    In addition, states are stepping up to the plate. Not only 
have they doubled the state support of Amtrak in just one year, 
they are buying Amtrak equipment. They are bringing capital 
dollars to the line. We think that this is very important 
because Federal dollars can't do it alone.
    We have made a terrific step, and it is one of the reasons 
the debt is so high, Mr. Chairman, because we had to decide 
what is our tradeoff. We had to attack the problem of 50-year-
old ``heritage'' cars. We had to attack the problem of 
locomotives that constantly broke down. And that investment, I 
believe, is netting a very important result.
    Because we have been aggressive in terms of pricing 
strategies, although ridership has been flat for the most part, 
the yield for revenues has gone up about 10 percent. In 
addition, this has been voted the most improvedtransportation 
company in customer service in the country.
    Let me emphasize, Mr. Chairman, there is no fat in the 
Administration's budget. I think that in olden days, maybe 
before you and I, there was always the technique of padding the 
budget so that the Congress would be expected to cut it.
    I want to emphasize that this is a bare-bones budget. We 
believe Amtrak can survive and can avoid bankruptcy. I know a 
lot of people have been talking about that, but we need every 
dollar that the Administration has asked for.
    This won't be easy. Amtrak will have to stretch. The Board 
has been very strong over the past three years in our budget 
negotiations. Management always comes to us with projections 
that have large deficits. We continue to push to get them to 
come to us with budgets that don't have large deficits and, in 
fact, in 1996, they met that. We believe that Amtrak has 
tremendous talent. They have shown that they can stretch, that 
they can cut costs, that they can make business deals that will 
work.
    Our NEXTEA proposal that the Administration has brought 
forward makes a significant commitment of resources to Amtrak 
in an environment of very difficult budget times because we are 
committed to reducing the deficit to zero. For example, our 
capital commitment is $423 million in 1998 and $3.4 billion 
over the six-year life of NEXTEA.
    In addition, it is part of the Highway Trust Fund, a 
commitment which says we believe Amtrak must be a key element 
of the national transportation system. That capital number over 
the life of NEXTEA is 75 percent of what Amtrak itself said 
they wanted.
    We think that this is a big commitment in a tight budget 
year. It includes an incentive program. As Amtrak continues to 
reduce operating needs from the Federal Government, they will 
increase the availability of capital. While we are making a 
significant commitment, we know the Federal Government can't do 
this alone. There needs to be more private partners, more state 
and local partners to Amtrak.
    In summary, the Administration remains very committed to 
Amtrak. We remain committed to the elimination of the operating 
subsidy by the year 2002. We know it is difficult because no 
railroad passenger service in the world has reached those 
targets.
    We believe the kind of record that Amtrak has shown in the 
last especially two years, shows what they can do. We want to 
work with Congress to develop an environment where Amtrak, the 
Federal Government, the private sector, and local communities 
can work together especially in those areas where Amtrak is 
such a priority.

                        research and development

    Finally, let me just mention our research and development 
program which is part of our budget. It is focused right where 
our priorities are on safety. It is focusing on those areas 
with the highest accident rate still remaining, for example 
human factors such as fatigue studies and so on, and track 
accidents. Those are our two remaining main causes of 
accidents.
    In addition, the Next Generation Rail program has been very 
successful in attracting partnerships around the country in 
areas of advanced train control, non-electric locomotives, and 
grade crossing safety--to help the various programs in the 
country such as the Fox program in Florida to really reach 
reality and come into existence. We believe, Mr. Chairman, that 
together Amtrak cannot only survive, but can thrive. Thank you 
very much.
    [The prepared statement and biography of Jolene Molitoris 
and the FRA safety programs and initiatives report follow:]

[Pages 7 - 110--The official Committee record contains additional material here.]


                         Amtrak Opening Remarks

    Mr. Wolf. Thank you, Ms. Molitoris. Mr. Downs, we look 
forward to your candid comments, if we can.
    Mr. Downs. Thank you, Mr. Chairman. It is always a pleasure 
to be here. And it reminds me again that being neither fish nor 
fowl, our story is mixed depending on who is looking at us. We 
are a private business that depends a lot on Americans buying 
tickets. We also depend on operating and capital from the 
national government. Your perspective on us all depends on how 
you view each of those roles--government agency versus a 
business.
    GAO did paint a picture that I think, as GAO is supposed to 
be, conservative in its approach, but it paints a pretty 
accurate picture of our finances over the next couple of years.
    The picture tries to value the three main businesses that 
Amtrak is developing but does not quantify them from a revenue 
standpoint. I would like to talk about that later in my 
remarks. But I first want to talk about why we are running out 
of cash.
    Two years ago, almost to the week, I sat before this 
committee and outlined a three-legged stool or a three-pronged 
approach to the reform of Amtrak. One was a massive internal 
restructuring of the corporation and its services, elimination 
of routes, elimination of trains, reduction in services, 
layoffs, reinventing the technology of the company.
    The second was the creation of a capital trust fund that 
would allow us to recapitalize a company that had been badly 
undercapitalized in the 1980's to disastrous financial results.
    The third was legislative restructuring for the 
corporation. One of those prongs of that restructuring has 
taken place, ours; the other two have not. Legislative 
restructuring failed in the last Congress, and we have no 
capital fund for Amtrak. We have done our part. The 
Administration and the Congress have not done theirs.

                           operating subsidy

    In addition to operating, we had an agreed-upon glidepath 
for Amtrak's operating subsidy over the next five years. The 
agreement was worked out with OMB. There were budget 
resolutions from House Budget and Senate Budget Committees that 
enrolled those glidepath numbers over the next five years, that 
went to zero in 2002.
    I hope each of you has chart one. It shows where we have 
been on operating subsidy. In 1995, we had $392 million worth 
of operating subsidy. The ``agreement'' was that the next year 
would be $260 million, a $130 million reduction; instead, it 
was $185 million. The next year it was to be $250 million; 
instead it was $200 million. The next year it was to be $225 
million; instead, it was $200 million.
    The underfunding in that glidepath is $150 million. We have 
eaten a lot of that in addition to other changes that wehave 
made, but that results now in about a $70 million cash shortfall for 
the corporation.
    [The chart follows:]

[Page 112--The official Committee record contains additional material here.]


                             fiscal picture

    Mr. Downs. We can live with that in a number of ways, but 
we do not go to Treasury. I want to remind everybody, I think 
it is well known that we do not borrow money from Treasury. We 
go to commercial banks, such as Bank America, Citibank, and 
others for our short term cash borrowings. At the end of the 
year, we borrowed about $8.5 million cash to close out the year 
to make payroll and to make vendor payments.
    This year we are projecting as much as $75 million to $120 
million worth of cash shortfall. That is cash. We do not plan 
on coming back to you for an emergency supplemental. We plan on 
going to a bank again to borrow that money for cash purposes. 
We repay it at the beginning of the first quarter of our fiscal 
year out of our Federal payment.
    The other thing that has been a part of the change in 
economics at the big picture level is shown on chart two, which 
says Federal capital appropriations for Amtrak, fiscal years 
1976 to 1997. For one reason or another, I guess the Congress 
decided to starve Amtrak to death for lack of capital.
    A railroad is a capital consumption machine. Railroads only 
make money if locomotives and cars and facilities are being 
utilized to their maximum; in other words, that the trains are 
moving constantly. That eats up capital. Railroad depreciation 
and maintenance operation is all capital.
    In 1986, you will see the number was $3 million for capital 
for Amtrak. That is not billion, that is not hundred million, 
or even 30 million. That is $3 million. For the remainder of 
the decade of the 1980's, our capital stayed pretty much at 
that level of $30, $40, $50 million.
    Each year our capital depreciation account on in other 
words, the consumption of capital in the corporation was about 
a quarter of a billion dollars. So each year we were eating up 
about a quarter of a billion dollars of the core capital of the 
company.
    We were told at that time, ``If you need capital, go to the 
private marketplace. Get your funding, privatize it, privatize 
your capital. We think you can make it work in the private 
marketplace.'' Well, lo and behold, we could. We have now had 
funding for Amtrak capital, as the Chairman, mentioned over 
that period.
    [The chart follows:]

[Page 114--The official Committee record contains additional material here.]


                              debt status

    Mr. Downs. You will see where it starts in 1987 on chart 
three, our debt, all private funding against equipment, shows 
outstanding debt, capital lease obligations from 1987 to 2002. 
Years 2000, 2001, 2002 reflect a jump is to pay for the high-
speed train the 18 high-speed trainsets that we now have on 
order and are now in production.
    That marketplace, ironically, was not domestic. We had to 
go overseas to get financing for Amtrak capital for America's 
railroad. We are funded, in part, by KFW, the German export 
bank; by ING, the Dutch leasing bank; and the EDC, Economic 
Development Bank of Canada. Ironically, we do not own this 
railroad any longer from an equipment and capital asset 
standpoint. It is owned by a group of foreign banks.
    Banks are funny. They expect to get paid for loans. If we 
can't pay them, they come get the equipment because the 
equipment is the equity underlying that debt. If we can't make 
it on a cash basis and make those payments, they have every 
right to come get all of the locomotives and all of the cars 
that we have purchased with this private sector financing.
    I hate people who come to a committee and say, ``Chicken 
Little, the sky is falling, the sky is falling,'' or, ``We are 
going to turn the lights off on the Washington Monument.'' Our 
strategy about capitalizing the railroad inthe private 
marketplace is pretty much at an end. We now have to pay for it.
    We are out of cash as a result of drastic and unthought-
through reductions in Amtrak's operating subsidy. They all have 
consequences, particularly when you exist as a private company 
in the private marketplace. We are now at the point where it is 
possible for a group of foreign banks to close America's 
railroad. It is an uncomfortable place to be. Our operating 
expenses begin to look a lot like the Federal budget as a 
result.
    [The chart follows:]

[Page 116--The official Committee record contains additional material here.]


                         principal and interest

    Mr. Downs. Chart four, principal and interest expenses for 
Amtrak from 1987 to 2002. We started out with almost zero 
principal and interest expenses in 1987 because we were funded 
with Federal capital. We went to the marketplace. You actually 
have to make payments on that debt even if it is the national 
debt.
    Our principal and interest payments now are the fastest 
growing part of our operating budget. Our operating subsidy is 
declining. The push comes about, then what gives. If the 
railroad loses control of its business and can no longer sell 
tickets, the railroad has no future. If we cannot sell rail 
passenger service to Americans, you can't make the principal 
and interest payments. Banks will take the railroad away. It is 
the end of the story.
    [The chart follows:]

[Page 118--The official Committee record contains additional material here.]


                            self-sufficiency

    Mr. Downs. What does that story cost? The last chart is 
Amtrak's glidepath to self-reliance. We were asked by several 
committees to quantify the cost of bankruptcy. That is chart 
five. We had a glidepath. We had an agreement with the Budget 
Committees. We had an agreement with the White House about the 
glidepath to self-sufficiency. Almost everybody has broken that 
agreement.
    Between the Administration and the Congress, we are left 
with the prospect of hitting bottom. The bottom cost is $5 
billion to unwind this company. It would be as large a 
bankruptcy in some respects as the Penn Central bankruptcy and 
would probably take as long as six, seven, eight years to work 
out against all the creditors and claimants in this process.
    CBO verified those estimates and said that those are real. 
Ironically, we are now at a point where the cost of unwinding 
the corporation is higher by 20 percent than the cost of 
capitalizing it and having a successful railroad operate in 
America.
    [The chart follows:]

[Page 120--The official Committee record contains additional material here.]


                           operating subsidy

    Mr. Downs. We are at a point where all of these 
consequences come home. We are not like a Federal agency. We 
act by charter and by law as much as a business as we can. 
Actions of this committee, this Congress, and of this 
Administration have business consequences.
    Those consequences are about to come home. We can't make it 
work under the kind of assumptions that we will starve it into 
efficiency. We will starve it into a corner and watch it die 
slowly as long as nobody is accountable for that consequence.
    We are there this year. We are out of cash. We will 
probably reach by the middle of fiscal 1998 the limits of our 
cash borrowing. The answer is that we can come back and ask for 
emergency supplementals. You would all hate that. We can try to 
get banks to loan us some more money. I don't believe they 
will. Or we can begin the unwind of the railroad. The 
alternatives to that, you can give the railroad away in smaller 
chunks to states and regions.
    Mr. Packard [presiding]. We have got about five minutes----
    Mr. Downs. I will do it real quick. There aren't a lot of 
options. You can give this railroad away and hope that somehow 
this $5 billion doesn't hit anybody's bottom line. We said we 
needed $245 million for the operating subsidy. I don't lie 
about figures like that. We try and minimize any subsidy 
request.
    The White House did not feel that amount was a justifiable 
number for reasons I still don't understand. The President said 
$200 million. We still say it is $245 million on the operating 
subsidy side. We knew what we needed on capital. It is not what 
the President requested, and we understand the difficulty of 
dealing with that. We are here at your mercy, but if there is 
no pay, this railroad can't go.
    Mr. Packard. Let me recess the committee to go vote, and 
the Chairman will be back very shortly. He left early for that 
purpose. And then we will get into--if you have a further 
statement, we will hear it at that point or get into the 
questions. Thank you.
    Mr. Downs. Thank you, Mr. Packard.
    [Recess.]
    Mr. Wolf [presiding]. Mr. Downs, I apologize for not being 
here. We are going to have votes, and I was checking to see how 
it is going to go today. In summary, in two sentences or more, 
tell me what you said.
    Mr. Downs. I said at the end there are consequences. We are 
by charter supposed to be a business. There are consequences to 
our funding levels. We have reached the end of those 
consequences. We can't make it on a cash basis through 1998 at 
$200 million.
    We told the Administration we had to have $245 million. For 
reasons I still don't understand, they said $200 million. The 
assumption must be that we will starve the organization into 
submission or have it die in a corner without accountability.
    We have to have at least $245 million in cash, or we need 
to come back. We need to have the committee understand that we 
will probably have to come back for some kind of supplemental 
in 1998. I don't lie about numbers like that. They have to be 
defensible. It is to the point where we can't avoid the 
consequences of the funding pattern.
    [The prepared statement of Thomas Downs follows:]

[Pages 123 - 132--The official Committee record contains additional material here.]


            administration fy 1998 budget request for amtrak

    Mr. Wolf. Okay. Mr. Downs, Amtrak is requesting 
$1,138,000,000 for operating and capital needs in fiscal year 
1998. In comparison, the President's budget is requesting 
$767,450,000. How accurately does FRA's budget request reflect 
Amtrak's needs?
    Mr. Downs. As I said, it understates, I believe, our 
operating subsidy requirements by $45 million, give or take $5 
or $6 million. On the capital side, it does not recognize our 
capital needs even to get high speed rail service in place by 
the year 2000.
    With the proposed numbers that I have seen in the 
President's NEXTEA budget, there are some assumptions I don't 
fully understand but I think we will be reducing operating 
subsidy and seeing increases in capital over the life of that 
bill. The numbers still do not reflect a number on capital that 
would get us to self-sufficiency by 2002.
    Mr. Wolf. Ms. Molitoris, please explain how the 
Administration calculated its budget request for Amtrak. Why is 
it $370,550,000 less than the amount Amtrak requested?
    Ms. Molitoris. Mr. Chairman, as we said earlier, the 
Federal budget dollar cannot do it alone. We calculated our 
numbers within a much bigger budget picture, as you know. 
Amtrak's needs have been stated as they see them. As I told 
you, I believe our numbers are bare-bone. We think they need 
every dollar we have offered.
    We believe that these dollars, which represent a 
significant investment in a very hard budget year, if married 
with business initiatives which Amtrak has already put into 
place and can continue to put into place, Mail and Express 
holds great promise.
    They just signed a contract with Quest for $45 million for 
fiber-optic cable on their right-of-way in the Northeast 
Corridor. It was estimated originally at $13 million. They did 
a great job of making a good deal.
    We believe this kind of thing, along with increased support 
throughout the country where it is a priority, are ways to 
reach the goals that they have. I believe the numbers that Mr. 
Downs is using reflect the budget estimates that they have 
without additional actions. Every year in the last three, they 
have seen opportunities for budget actions that have made a 
significant difference in the shortfall.
    Mr. Wolf. Mr. Downs has expressed disappointment with the 
Administration's budget proposal, stating that the budget 
proposal limits funding for Amtrak so severely that service in 
our Northeast Corridor's high speed rail program would stall.
    He further noted that the level of capital proposed is so 
seriously inadequate and the level of operating assistance so 
insufficient that Amtrak's national system cannot survive. Tell 
me how you disagree with that and where you disagree briefly 
here, but then in detail with the record.
    Ms. Molitoris. We will elaborate, Mr. Chairman, in the 
record, but I will repeat that I believe that Amtrak's record 
of developing business deals is something that we should not 
forget. They have done a good job. Mr. Downs has pursued, as 
have his three CEO's of the three business units. We have seen 
success in California, and the Northwest. We have seen the 
Northeast Corridor make money for the first time in the history 
of Amtrak. We believe there are ways to reduce costs and 
increase revenues to the bottom line.

[Page 135--The official Committee record contains additional material here.]


    Mr. Wolf. What ways are you suggesting that Mr. Downs do 
it? Have you given him positive, active suggestions on where he 
should reduce the cost and in what areas? Or are you just 
giving him numbers?
    Ms. Molitoris. No. The role of the Board is to work with 
management. It is the responsibility of management to come up 
with these activities. But, for example, the whole idea of 
cellular phone towers on the right-of-way is something that is 
being explored throughout the country. And I have forwarded 
this concept to Mr. Downs which is being reviewed right now by 
Coopers & Lybrand.
    There may be a $10 to $20 million opportunity there, but we 
won't know the numbers until Coopers & Lybrand comes forward 
with this response. My focus, Mr. Chairman, is bringing money 
to the bottom line of this company because that is how we 
achieve health and are able to grow the business.
    Mr. Wolf. Mr. Downs, do you have any comment about that?
    Mr. Downs. Depending on how aggressively we pursue business 
opportunities and depending on one-shots over a longer period 
of time to solve what has become a structural financial problem 
for the corporation isn't an outcome that we can depend on. We 
can develop new business opportunities. I think we are in the 
process of doing that by expanding Mail and Express.
    Mr. Wolf. It takes time.
    Mr. Downs. But not only does it take time, but sometimes 
they work out and sometimes they don't. Trying to depend on 
this drastic of a reduction ahead of time on our operating 
subsidy has consequences for us all, and it shows up in cash. 
We are running out of cash.

                         amtrak capital budget

    Mr. Wolf. Amtrak states in its strategic capital plan for 
1998 to the year 2002 that if a major investment in capital 
from a dedicated funding source is delayed beyond fiscal year 
1998, high speed rail and other critical investments will not 
produce returns but instead will cause expenses to be incurred. 
What revenues will not be produced, and what newexpenses will 
be incurred?
    Mr. Downs. On the north end of the corridor between Boston 
and New York we have mandatory environmental requirements that 
have to be met as a part of the institution of the high speed 
service there. Those costs have to be met. They are not 
currently funded.
    On the south end of the corridor, because of the way the 
corridor was rebuilt years ago, a number of items were not 
tackled. Something as simple as modernizing the centenary power 
systems--the electric traction systems--that were built in 1936 
have never been touched. There is a billion dollars' worth of 
work that has to be done south of New York between New York and 
Washington to actually have high speed rail live up to its 
promise.
    High speed rail--and all of our bankers say it is still 
true--with all expenses, principal, interest, everything--high 
speed rail will generate about $150 million a year worth of net 
profit for the corporation. We have to get there.
    If we do not have the capital plant improvements that were 
envisioned as part of that high speed rail, those revenues will 
not show up to that extent. They will still be cash positive, 
but it will simply be a shiny train operating at the current 
speeds of Metroliners today. And that won't generate the 
revenue that we are supposed to be developing to make us self-
sufficient.

                    Northeast Corridor Capital Needs

    Mr. Wolf. Mr. Downs, over the next five years, Amtrak's 
strategic business plan is requesting, on average, $782 million 
per year for capital and Northeast Corridor needs. This request 
is significantly higher than the $640 million you were 
requesting just one year ago and well above the $398,450,000 
appropriated for fiscal year 1997. Why should Congress greatly 
increase its funding of Amtrak's capital and Northeast Corridor 
programs in an era of declining Federal resources?
    Mr. Downs. Because I believe it is a good business 
investment. Those numbers reflect every year that there is a 
squeeze-down in our capacity to rebuild the corridor to any 
kind of modern high speed rail capacity. The expenses build up 
between now and the launch of high speed rail.
    So we are, in effect, compounding the problem by delaying 
it further and further. But it is related to the return on the 
investment. If we can make those investments, the capital 
itself has a positive rate of return for the American public. 
It helps generate a profit. It pays for itself. It avoids 
catastrophic loss.
    If the corridor itself fails, the national government has a 
$1.6 billion lien on it that is first in line in any 
liquidation. It means, in effect, that the corridor would 
probably be sold off. To avoid that and the consequences of it, 
the capital investment has a positive rate of return, not just 
from a monetary standpoint, but from a congestion standpoint, 
from an environmental standpoint, about a better transportation 
mode for the Northeast.

                      Amtrak Self-Sufficiency Plan

    Mr. Wolf. The Administration and Congress have instructed 
Amtrak to be free from Federal operating assistance by the year 
2002. Although Amtrak has improved its bottom line by more than 
$300 million over the last two years, significant improvements 
are necessary in the remaining years to meet the goal of 
operating self-sufficiency. Currently, Amtrak is significantly 
behind schedule in its plan to eliminate operating subsidies. 
How does Amtrak plan to get back ``on track'' and achieve all 
of its planned savings by the year 2002?
    Mr. Downs. I don't believe we were behind on our original 
compact about the glidepath to self-sufficiency. I mentioned 
while you were out that we had the House Budget Committee and 
the Senate Budget Committee set a glidepath number for us for 
the next five years. We have consistently been under that 
number.
    Our glidepath was not the drastic decline that we have seen 
in our operating subsidy, and that has, in effect, wrecked our 
glidepath and caused us to have this cash crisis. We have made 
every target that we have been held accountable for in terms of 
operating.
    When we have made decisions that are tough about reducing 
services, sometimes they have been changed. We have still lived 
with those changes and tried to make it work financially for 
the company and the country. I believe we are still on our 
target.

                         Legislative Proposals

    Mr. Wolf. Will there be any legislative changes necessary?
    Mr. Downs. We had hoped that the House-passed bill, the 
Amtrak reauthorization bill of last year that passed the House 
I think 406 to 4, a good bipartisan vote, would have been at 
least a part of the answer of the restructuring of the company. 
It apparently died because there was not enough time on the 
Senate agenda at the end of the last Congress to have that bill 
considered by the full Senate.
    It did come out of committee, and it I think died for a 
lack of a consensus on how to handle the difficult issues of 
labor reform and tort liability reform in the Senate. Senator 
Hutchison, as Chair of our subcommittee, has promised quick 
action out of her committee on a new Amtrak bill as quickly as 
she can get it through a hearing process and markup.
    Mr. Shuster has said that his interest is in a bill that 
would be out this year. Whether it is part of the President's 
request for NEXTEA or as part of a freestanding bill, I don't 
know.
    Mr. Wolf. Ms. Molitoris, why do you believe it is 
appropriate that Amtrak's funding, including retirement costs 
of former railroad employees who never worked for Amtrak, be 
derived from the Highway Trust Fund as you have proposed in the 
budget request?
    Ms. Molitoris. Mr. Chairman, the Administration believes 
that Amtrak is a key element of a surface transportation 
system. And I think the decision to include it as such, along 
with transit and bike paths and other elements of surface, is a 
commitment to Amtrak. It is a statement by the Administration 
that this service for Americans is crucially important. I 
believe that is the policy and the reason that the 
Administration went in this direction.
    And if I could just for one moment mention on the last 
question about the changes that are often talked about in terms 
of reform, this is a discussion that has been going on now for 
a couple of years. But I want to emphasize that I believe that 
Amtrak has successfully made business arrangements and has 
operated like a business even with the legislation that we 
have.
    For example, people talk about contracting out a lot. The 
fact is, I have right here 47 letters of agreement from labor, 
in which Amtrak has been able to contract out. So the myth that 
they can't contract out at all is simply not true.I think the 
opportunity to work with their labor force has been a successful one. 
Bear and other somewhat self-directed work areas where they even have 
contracts are now making a profit doing other business because they are 
so efficient. I think that is a very important element. And I just want 
to emphasize that I don't think we should over or underscore too much 
the fact that those things have to happen before Amtrak can pursue some 
of these business initiatives.

                       Response to GAO Testimony

    Mr. Wolf. Did you look at the GAO testimony?
    Ms. Molitoris. I did.
    Mr. Wolf. Could you give us a point-by-point comment on the 
testimony?
    Ms. Molitoris. For the record or right now?
    Mr. Wolf. For the record.
    Ms. Molitoris. Certainly.
    [The information follows:]

[Pages 140 - 146--The official Committee record contains additional material here.]


                             Capital Needs

    Mr. Wolf. Mr. Downs, Amtrak plans to fund $1,440,100,000 in 
capital needs in 1998; however, your funding sources [federal, 
state, external] only account for $1,098,600,000? Amtrak does 
not plan on being able to generate any internal capital revenue 
dollars until well past the year 2000 and because of past 
credit history, the railroad may not be able to borrow. How do 
you plan on funding the $341,500,000 shortage?
    [The information follows:]

    With a secure, dedicated source of capital funding such as 
a trust fund with revenues equal to those generated by \1/2\ 
cent of the current gasoline tax and with contract authority, 
Amtrak anticipates that is would be able to obtain short-term 
financing for the shortfall in capital needs in FY 1998. 
However, without the guarantee of such a stable source of 
capital funding, such short-term financing would be made more 
difficult.

                        Budget Deficit Forecast

    Mr. Wolf. In Amtrak's 1997-2002 forecast [page 7], the 
railroad is showing a budget deficit almost equal to that 
projected for 1997 and 1998. I thought that Amtrak was planning 
on making a profit in the year 2001 from its high speed rail 
operations along the Northeast Corridor. Why is the railroad 
still projecting a sizable budget deficit?
    [The information follows:]

    In Amtrak's FY97-02 strategic business plan, the Northeast 
Corridor's high speed rail program is projected to begin 
service in late fiscal year 1999. The operating impact of this 
program is approximately $150 million bottom line improvement 
per year starting in fiscal year 2000.
    Fiscal year 1998 and fiscal year 1999 have budget deficits 
similar to fiscal year 1997 despite continuation actions to 
further reduce costs and increase revenues due to significant 
declines in federal operating support is assumed. It is not 
until fiscal year 2000, the year in which the high speed rail 
program is fully implemented, that the plan shows a positive 
budget result for the company as a whole. From fiscal year 2000 
through fiscal year 2002, positive budget results fund the cash 
deficits that built up in the previous years.

                         Amtrak's Funding Needs

    Mr. Wolf. At the end of fiscal year 1996, Amtrak was 
projecting at least a $71 million deficit, however the Board 
agreed to provide $40 million from Amtrak's capital grants to 
reduce the deficit. The question is can you legally do it? 
Would you explain to the Committee how Amtrak can legally 
divert capital dollars to reduce your operating deficit and on 
what authority do you base that on?
    Mr. Downs. The corporation has a $40 million account in its 
1997--its Amtrak general capital account for payment of 
interest on our existing debt. It is exactly like the payment 
for interest on debt in the Federal Transit Administration's 
authorization and appropriation legislation, and we believe 
after a lot of review, both at the Amtrak Board of Directors 
level and at the legal level, that that is a justifiable use of 
capital.
    Mr. Wolf. Would you submit that for the record, your legal 
opinion, so we can--
    Mr. Downs. Absolutely, Mr. Chairman.
    Mr. Wolf. We would like to ask some other people to take a 
look at it, too, if you could do that.
    Mr. Downs. I would be glad to.
    [The information follows:]

    When I agreed to submit for the record Amtrak's legal 
opinion on the use of capital funds to pay interest on capital 
expenditures, I was unaware that this opinion was set forth in 
a privileged and confidential communication subject to the 
attorney-client privilege. Amtrak cannot provide this opinion 
to the Committee without waiving the privilege entirely.
    As I said at our hearing, Amtrak's use of these funds is 
analogous to the Federal Transit Agency's use of capital grants 
to pay certain interest expenses for capital projects. In the 
absence of adequate operating funds, and given a finite 
borrowing capability, our options were severely limited.

                   Budget Deficit in Fiscal Year 1996

    Mr. Wolf. Not including the transfer of capital dollars, 
what was Amtrak's budget deficit at the end of fiscal year 
1996?
    Mr. Downs. Budget deficit, I have with me today Al 
Altschul, who is the Chief Financial Officer. Al?
    Mr. Altschul. The budget deficit was $8 million.
    Mr. Downs. Cash?
    Mr. Altschul. Cash.
    Mr. Downs. On a cash basis. On the business plan, though, 
the plan was off by $70 to $82 million?
    Mr. Altschul. $82 million.
    Mr. Downs. $82 million. If you measure us the way you 
measure a federal agency, at the end of the year whether or not 
our budget balanced by cash, we were off by $8.5 million.

             Estimated Budget Deficit for Fiscal Year 1997

    Mr. Wolf. Based on your first two quarters of revenue, what 
do you believe Amtrak's budget deficit will be at the end of 
fiscal year 1997?
    Mr. Downs. On a cash basis, the worst case----
    Mr. Altschul. At the end of fiscal year 1997----
    Mr. Wolf. 1997.
    Mr. Altschul. Yes, we expect that on a worst-case basis it 
would be in the range of $100 million, give or take $10 or $15 
million.
    Mr. Wolf. What impact did the floods have in the Northwest 
and Midwest?
    Mr. Altschul. It was in the millions of dollars. I would 
ask if I could submit that to you in writing, but it was 
costly.
    Mr. Wolf. And what about in comparison to last year's snow?
    Mr. Altschul. Last year's snow was also costly. This year, 
though, we have budgeted for a 50-year snow, so we have--we now 
have in our business planning process weather planning events 
that are now part of our fiscal planning, instead of having 
them appear every four or five years with a catastrophic 
financial consequence.
    Mr. Wolf. Will these have any impact on your budget deficit 
for 1997, the floods, the weather this year?
    Mr. Altschul. They have an impact on cash. We don't get the 
ticket revenue in or we have inconvenience payments to members 
who are on a train and the train isn't running to their 
destination. We have to carry them on. Those costs all turn to 
cash problems at the end of the fiscal year. I would be glad--
again, I will be glad to quantify those for you.
    Mr. Wolf. At this point, do you believe that Amtrak will 
need to borrow to cover any budget deficit in 1997? Will this 
amount be greater or less than the amount required in 1996?
    [The information follows:]

    Amtrak has initiated borrowings during the month of March. 
The purpose of the borrowings is to cover our operating cash 
flow deficits. These borrowings have since been repaid upon 
receipt of the quarterly grant funds, April 1, 1997. It is 
expected that Amtrak will continue to exercise the short term 
lines of credit through fiscal year 1997 with borrowings to 
cover cash shortfalls by the end of the year of somewhere 
between $70 and $100 million. This amount was greater than the 
amount borrowed to cover the short fall in the 1996 fiscal 
year.

              GAO Testimony on Amtrak Financial Condition

    Mr. Wolf. GAO presented some alarming testimony on Amtrak's 
financial condition. They noted, and I quote, ``Amtrak's 
increased debt level could limit the use of federal operating 
support to cover future operating deficits. In fact, over the 
last four years, interest expenses have tripled from $20.6 
million in fiscal year 1993 to $60.2 million in fiscal year 
1996. Since Amtrak pays interest from federal operating 
assistance and principal from federal capital grants, this 
increase has absorbed more of the federal operating assistance 
each year.'' This debt service could continue to rise in 1999 
when Amtrak begins incurring the cost of financing $1 billion 
for high speed train sets and the related maintenance 
facilities. As Amtrak assumes more debt to acquire more 
equipment, what portion of the federal operating subsidy will 
be used for interest payments over the next five years?
    Mr. Downs. I am not sure of the total, but I think it is 
close to $50 million, principal and interest alone over the 
next five years. At the end of the five-year period, our 
current capital level will be approximately half of our entire 
capital budget, the principal and interest. It is a mandatory 
account that we don't like to see grow. And the problem is that 
banks, because they consider us an unreasonable risk because of 
our dependence on the annual appropriation process, charge us a 
couple of full points above what they might for a traditional 
business. We have some debt that is 9\3/4\ percent, 9\1/4\ 
percent. It is an extra penalty on us for being in the market.
    Mr. Wolf. The federal government pays the interest income, 
however it may be possible that in the near future the interest 
income will be higher than the federal operating assistance.
    Mr. Downs. It depends on the federal operating assistance 
level. If it goes to zero as quickly as it is going, that is 
very true.
    Mr. Wolf. How do you envision paying for the increasing 
debt service costs, then?
    Mr. Downs. On the largest increase in our future on this 
chart of outstanding debt, capital lease obligations between 
now and the year 2000, you will see until--from 1997, 1998, 
1999, P&I [Principal and Interest] begins to decline. In the 
year 2000, 2001, 2002, that is all high speed train set. And as 
I said, all of our bankers, all of our lenders, all of the 
financial people who have been involved in the financing of the 
train sets for the corridor know and agree that that investment 
will pay all of its principal and interest payments and yield a 
profit. So that will not hit our operating line.
    Mr. Wolf. Okay, last question, and then I will go to Mr. 
Sabo. I will recognize him and we will go in the order the 
people came in.
    GAO concluded in its testimony that ``Amtrak's financial 
future has been staked on its ability to eliminate federal 
operating support by the year 2002 by increasing revenues, 
controlling costs, and providing customers with high quality 
service. Although strategic plans have helped eliminate 
operating losses, Amtrak continues to face significant 
challenges in accomplishing this goal, and it is likely that 
Amtrak will continue to require federal financial support, both 
operating and capital, beyond that time frame.'' If Amtrak does 
not receive a half cent in dedicated funding, do you believe 
GAO's conclusions are accurate?
    Mr. Downs. Yes.
    Mr. Wolf. Mr. Callahan.

                    The Cost of an Amtrak Bankruptcy

    Mr. Callahan. Thank you, Mr. Chairman. Mr. Downs, GAO and 
CBO say that bankruptcy is inevitable unless you have some cash 
transfusion. And they say that the cost of bankruptcy is over 
$5 billion. How could that be? Do you owe $180 million, or is 
that what your debt is? How much is your debt?
    Mr. Downs. Our debt is approximately $2 billion.
    Mr. Callahan. Two billion. What would the other $3 billion 
be?
    Mr. Downs. The other $3 billion is unwinding the pension 
and employment costs, liquidating the company.
    Mr. Callahan. Well, the $2 billion that you owe, I mean, is 
collateralized by equipment, I assume, or assets of some sort. 
And the full faith and credit of the United States does not 
stand behind that?
    Mr. Downs. It does not.
    Mr. Callahan. So then the $2 billion wouldn't be all loss 
factor. I mean, we would lose an asset, but we wouldn't need 
that asset if you went bankrupt.
    Mr. Downs. That is true. And you wouldn't need the high 
speed train sets in the corridor or any of the other assets. It 
would be interesting, though, lawyers being lawyers, when you 
have $2 billion worth of debt, how long litigation would last 
between the United States government and the banks involved 
about whether or not that was a voluntary and directed 
bankruptcy by the national government.
    I am not a lawyer. I don't know how those things work out. 
I just remember watching how long it took the Penn Central 
process, the bankruptcy of the Penn Central to unwind. And I 
think there is still ongoing litigation. I remember that the 
federal government put $7 billion into that, the resuscitation 
of that railroad, the Penn Central, and got $2 billion out. 
That was a $5 billion net contribution of the national 
government to the resuscitation of that railroad, and in fact 
that is what that bankruptcy cost. Our costs are probably going 
to be similar.
    Mr. Callahan. Well, but I don't--I am not a lawyer either, 
but I will admit--and I think I have told this room in past 
years I don't apologize for that and neither do I think you 
should. In dealing with some of our lawyer friends, had I known 
how little common sense it took to be one, I would have gone 
ahead and got me one of those degrees, too.
    But I do know something about financing because I borrowed 
money when I was in business. And when you pledge and asset and 
you can't meet the payments of that asset, the financing 
institution has no recourse except to come and get the 
collateral, the equipment or whatever, unless there was some 
further endorsement. I assume you didn't personally endorse 
this $2 billion debt.
    Mr. Downs. Not out of my bank account.
    Mr. Callahan. And neither did the United States of America.
    Mr. Downs. That is true.
    Mr. Callahan. So if you owe $2 billion, you know, they 
would take the equipment. They would sell it and they would 
recapture whatever they can and they would charge it off. I 
don't know what legal recourse they would have unless the 
contract that was signed gave them an opportunity to do 
something else.
    Mr. Downs. It did not.
    Mr. Callahan. Well, we hope we don't face that, but 
obviously we are not going to be able to give you what you 
need. And obviously the Administration doesn't support 
yourtotal interest, because they asked for a great deal less than you 
are talking about. And so if it is inevitable, you know, maybe we ought 
to get the CBO's--maybe we ought to re-look at that and see where they 
got that $5 billion figure. You think there is $3 billion pension 
liability factor there?
    Mr. Downs. It is called C2. When you close this railroad, 
the law says there is a six-year wage provision that applies to 
every railroad employee who is laid off as a result of the 
closure of a line or of the corporation.
    Mr. Callahan. Well, but if we are contributing a billion 
dollars a year or whatever amount we are contributing now, 
wouldn't that be offset? I mean, wouldn't the amount of 
contributions that we are contributing offset some of that 
loss?
    Mr. Downs. The Comptroller General has an opinion that 
those liabilities did not accrue to the United States 
government.
    Mr. Callahan. I am not talking about the liability. I am 
talking about the fact that we are--how much are we 
contributing? How much did we contribute last year overall to 
Amtrak?
    Mr. Downs. Operating subsidy was $200 million this year.
    Mr. Callahan. So then for a six-year period, if we didn't 
contribute that 200 million, that would take care of 1.2 
billion of it. So then if you assume that there is no further 
legal liability of the United States on the debt and that 
there--we are going to have to pay 200 million anyway towards 
the--and you are asking for more, then does--the $5 billion is 
reduced down to about $1-1/2 billion. I mean total--I know----
    Mr. Downs. Assuming that there are no liabilities here 
about the legal liabilities of the corporation and that somehow 
this all just goes away and that private share--either the 
corporation is a private shareholder, although all of the 
shares are held by the United States government--all the shares 
of this corporation are held by the United States government, 
and it is possible to interpret that as simply walking away 
from any responsibilities as a shareholder. It is possible to 
assume that banks that have loaned us money over the last five 
years have no recourse to any other financial compensation as a 
result of the corporation going out of business.
    That may all be true, and it may wind up only costing a 
couple of billion dollars. It is at the point where this 
government, this Congress, this Administration, has to chose. 
If the choice is put us out of misery and kill off the 
corporation, that is the prerogative of the national 
government. We are past, though, chiseling into this, having 
the corporation risk selling disappointment to millions of 
Americans who buy railroad tickets for services that cannot be 
fully provided.
    It is time to make a decision about whether or not this 
mode of transportation fits in the United States. If it does 
not, that is a national government choice. We are saying that 
we are coming very close to having to make that decision, 
because it will not be either good public policy or, I believe, 
responsible government to simply let this thing die by 
strangulation for lack of funding or have the banks make that 
decision for the national government. I believe that would be 
bad policy. I do not believe that foreign banks ought to be 
making a decision about the future of this railroad.
    Mr. Callahan. Well, if we are going to chisel in something, 
we are going to leave that to the attorneys. They are the ones 
that are good at doing that. But still, knowing basic law, 
unless there was some indication of mismanagement on the part 
of the stockholders of Amtrak, which would be the United 
States, unless they could prove mismanagement, then in my 
Public Law 101 I wouldn't think they would have much of a case 
to go against the United States, unless you pledged or unless 
you indicated to them that Congress or the Administration had 
promised you certain assets through appropriations and they 
failed to fulfill their pledge to you. Now that could 
constitute some type of liability, but----
    Mr. Downs. I believe this is the Congressional Budget 
Office's business. And they said it was 5 billion. I will be 
glad to share that data again with the committee, but I do know 
that no matter how this comes out, this committee will be 
dealing--if we go under, this committee will be dealing with us 
probably for as long as you sit on this committee. It took 
almost a decade and a half to unwind Penn Central and start 
Conrail. And that was a private corporation, and a freight 
railroad with a business, a core business. There are a lot of 
interesting issues that I think will require appropriations in 
both the House and the Senate and with the Administration to 
deal with over a very long period of time. I am not competent 
to quantify those for you, but I would guess that you would be 
dealing with us for a very long time.
    Ms. Molitoris. Mr. Callahan, if I could just add a comment, 
please, with regard to this line of discussion. I think it is 
very important, and we would be happy to report for the record, 
if you so choose, that this kind of discussion include the 
other impacts on Amtrak's system. For example, in the Northeast 
Corridor, we are talking about 600,000 passengers a day that 
operate on Amtrak's right of way. Now, a small portion, is 
Amtrak. A major portion is commuter. The impact on the highway 
system, what would it cost, the resulting stress on the highway 
system, what would it cost in terms of Logan Airport and the 
need to increase those kinds of facilities. I think the value 
of Amtrak cannot be fully appreciated with a limited discussion 
only around, sort of, the bottom line kind of numbers that you 
are discussing right now. You would have to get a bigger 
picture look to give you a full sense of the importance of this 
company, not only to the whole country but to various regions.
    Mr. Callahan. Well, I agree with you, and certainly--I hate 
to even sit here and talk about the inevitability of 
bankruptcy, but the chart says it is inevitable. It is 
inevitable even if we do increase the appropriation. With that 
indication, I mean, instead of 1998 it would be the year 2000 
unless some changes were made in operational prompted areas. So 
I hate to talk about it, but I just say I don't want to sit 
here and believe that we are going to have to come up with $5 
billion the day you declare bankruptcy if that is the case.
    You mentioned the Northeast Corridor. That could be sold. 
That is an asset. It is a profitable asset. I assume it is 
profitable. And I imagine you would find willing buyers to pay 
a lot of money for that asset. But in any event, I hope it 
doesn't reach that stage.
    Ms. Molitoris. Mr. Callahan, may I just say for the record 
that I do not believe it has to go into bankruptcy and I think 
the kind of leadership that this company has shown,even in the 
face of this very challenging environment, that these challenges can be 
met.
    Mr. Callahan. Maybe we ought to cut back on some of these 
short-line runs that are losing money. Have you all thought 
about doing that?
    Mr. Downs. Do you have one in mind, Mr. Callahan?

                       mail and express expansion

    Mr. Callahan. I have one in mind that you ought not cut 
out.
    Mr. Downs. To reinforce the point that the Federal Railroad 
Administrator has made, we are close to what I think could be a 
very important success story for the national government, for 
the Congress, for the Administration. We know how to use the 
capital. We know how it can be used to develop other lines of 
business. We know high speed rail is going to be a financial 
success and help this company make it to self sufficiency. We 
now know better, fully, the economics of our mail and express 
business, what used to be on the head end of passenger trains 
all over America with REA, the Rail Express Agency.
    In the late 1950s and early 1960s as much as half of all 
passenger train revenue came from mail and express. On some of 
our trains, the Southwest Chief from Chicago to Los Angeles, 42 
percent of the total revenue of that train is mail revenue. We 
do it as a business with the post office. We bid it. They like 
us because our rates are good and we are dependable for long-
haul mail. We think we can reinvent that business to help 
produce a better impact on the bottom line, be more 
businesslike, help those long distance trains achieve economic 
self sufficiency.
    On most lines, I believe, it is possible to develop at 
least half, and maybe more, of the revenue coming off of mail 
and express. The post office has said it. The Board just 
authorized us to lease 900 new cars to develop that business as 
quickly as possible. We are in the process of trying to 
negotiate with two class one railroads a new partnership that 
would allow us to do that. Out West we have been aggressive 
about developing capital and operating agreements with 
California, Oregon and Washington. That sets a new standard for 
us about state partnerships for rail services the states want 
to buy.
    Those three things could ensure us a financially secure 
future as a business. It takes capital. We have been 
drastically undercapitalized. We have gone to the private 
marketplace to try to make up a portion of that deficit. It has 
been very expensive for us because of the rates we are charged. 
We have to get that debt down and we have to make the right 
investments on that capital with a positive rate of return. 
With that, we could be the business that you want us to be. We 
can reduce the operating subsidy to 2002 to zero. We are close. 
It is a choice. The choice is we have to be able to make it in 
the short term through 1998. We need the capital. We think we 
can say with a straight face we are still on track about 
operating self sufficiency. We are that close.
    Mr. Callahan. I don't want to take any more time, Mr. 
Chairman, but I want to help Amtrak, but I want to have a 
parochial interest reason why to help them, too. So I am 
concerned about that. If I lose my parochial interest, I just 
wonder if I will have the same interest I have now in making 
certain that we have a viable railroad passenger service in 
this country. I guess we will just have to make that decision 
during the conference.
    Thank you, Mr. Chairman.

                           amtrak realignment

    Mr. Wolf. I am going to recognize Mr. Torres, but before I 
do, if I could just say, Mr. Downs, I am really disappointed, 
that you, and frankly the Administration, haven't stepped 
forward to do something a little more dramatic. This bill that 
we put in last year for an Amtrak realignment commission, we 
would have never closed the military bases in the nation if we 
hadn't looked at it in a comprehensive way. Why wouldn't you 
want to do something like this? I want you to do well. And I 
think personally you have the capability to do well. It may 
very well be a wonderful success story, but then again if you 
look at the numbers that Mr. Callahan talked about and if you 
listen to the GAO and not just the comment that I read, it 
could be a big failure, too. And for those of us that want you 
to succeed, why would you not be in support of a realignment 
commission that would be set up in a period of 100 and some 
days looking--similar to what we did in the base closing 
commission?
    Mr. Downs. Well, it is--if you want us to be a business. I 
think increasingly it is understood by the Congress that we 
have to either be treated as a business or go out of business. 
Although the six-month delay on the five routes that we had 
proposed to eliminate this last round, I believe that only one 
of them will probably come out of this successfully with a new 
state partnership, and that is the Texas Eagle.
    I think the process that we embarked on doesn't take a 
lot--I mean, we knew that we had to act quickly. We had to act 
in a businesslike way, make decisions about which routes we 
thought could economically survive and which couldn't. We did 
that. The Board did that, bit the bullet. Congress modified 
that by six months, but I think that it was only a six-month 
modification. I think we are going on with that as a business 
decision.
    Base closings are about closing important government 
installations. This is more about making business decisions 
about whether or not mail and express, for instance, on certain 
lines will turn into a profitable business. And that depends in 
part on negotiations with a number of class one railroads and 
developing mail and express business. Those business realities 
will change over time. Some of them will succeed wildly and 
others will fail. And then when they fail, we need to treat 
them as a business decision and let it go.
    I think we can make those business decisions. I think that 
Congress has been more willing now to let us make those.
    Mr. Wolf. But, Tom, that really doesn't answer the 
question. It doesn't. In this bill you would not only look at 
routes, you could look at other tough issues that you are 
facing to give you that opportunity to go off and do what you 
have to do. I am concerned, you know, as somebody living on the 
Northeast Corridor. I think it is a great way to go to New York 
or go to Boston. I am concerned that those of you who want to 
protect Amtrak may actually bear the responsibility, and this 
Administration, of killing Amtrak. And so let the record----
    Ms. Molitoris. Mr. Chairman----
    Mr. Wolf. Let the record show that this Congress last 
year--this committee was prepared to do everything it possibly 
can, and then in five years from now this thing doesn't work 
out, as Mr. Callahan--let the record show where the 
responsibility was. The responsibility was with certain people 
at Amtrak who didn't want to take advantage of some 
opportunities. The responsibility was with the Administration. 
You can finish, and then I am going to recognize Mr. Torres.
    Ms. Molitoris. Mr. Chairman, let me respond to your 
comments, because we had a discussion last year and I knew of 
your concern. And I think I told you last year about the 
Board's concern. I think for the record we need to show that 
Amtrak has been reduced by Board action 16 percent of its route 
miles. That is a lot. I think that was a very hard decision. We 
reduced all service out of the state of our President.
    Mr. Wolf. But the labor changes, the other things that Mr. 
Downs talked about, you didn't do anything with regard to them, 
basically. There were some minor changes, but overall the 
fundamental problem is still there. I am talking about looking 
at the whole ``ball of wax'' and wrapping it together to give 
Amtrak that opportunity. Then I think you would be able to go 
down to the floor of the House, stand up at any forum to say 
this is important that we put federal funding in this to keep 
this alive. Both of you ought to read the GAO testimony. You 
ought to go sit down with the GAO people, listen to them.
    Mr. Torres.

                           amtrak priorities

    Mr. Torres. Thank you, Mr. Chairman. Before I start, Mr. 
Chairman, I am not sure whether--I have been in and out.
    Mr. Wolf. You were next, if that is what you meant.
    Mr. Torres. No, I just meant to say that perhaps in my 
absence--Mr. Pease, our former colleague, is in the audience 
today. He is a member of the Board of Directors of Amtrak. And 
we are happy to see him back here.
    Thank you, Madam Administrator, for your comments. And you, 
Mr. Downs. I read your three leg--the three legs of a stool 
paper. I, too, want to echo your comments on the importance of 
rail in California. It is heavy investment, the kind of strong 
partnership that we have as a state with Amtrak.
    And as we all prepare for the next century in terms of 
freight and the strategic importance of Los Angeles as a major 
Pacific port, we need to have the facilities to move those 
goods and services to the other parts of the country. The 
coming building of the Alameda Corridor, we all look at these 
as very important aspects of rail. I think the six-month 
extension was a good idea, and it gave the state a chance to 
really think about, very seriously think about their 
infrastructure needs and the role that rail plays.
    I would like to just ask you a few questions that I might 
have missed in your own statement, and that is what type of 
decisions will you have to make if you do not receive an 
adequate operating grant?
    Mr. Downs. Cash is king, as they say, and if we cannot make 
the cash payments, we will have to take drastic actions 
internally within the corporation to limit cash outlays in 
1998. That will probably include additional rail line 
abandonments that we hope wouldn't negatively effect cash for 
fiscal 1998. We would have to reduce procurements for things 
like repair parts. We would have to reduce manning and staffing 
at major repair facilities and stations and reservations 
offices. Anything that had a positive cash impact by reducing 
those expenses during fiscal year 1998, we would have to do. 
Whether or not we could reduce them enough during fiscal year 
1998 to live at these levels with our current cash problem is 
unclear.

                        dedicated capital funds

    Mr. Torres. Would you tell me again why a dedicated source 
of capital funds is necessary for Amtrak to cut costs, to be 
self sufficient and still run a viable system?
    Mr. Downs. Well, in part it is reflected in Chart 3. When 
you are starved for capital and are told to go to the private 
marketplace, it costs money. It costs us especially on 
operating. It is the fastest growing operating expense within 
the company. We would like to buy some of this debt down, 
because it would have a good, positive rate of return. We would 
like to be able to make capital investments that grow 
businesses, like mail and express, modernize our information 
systems, modernize completely our repair and maintenance 
facilities in places like Redondo, in Los Angeles. That 
maintenance facility was constructed, I believe, in the 1920s. 
We inherited it from the Sante Fe Railroad, and we are still 
struggling with the right capital investments there to maintain 
trains, locomotives on the West Coast.
    Each of those capital investments will improve our 
efficiency, lower our costs, or increase our passenger revenue. 
Without that capital, this railroad can't make the investments 
that make it a real business with a high probability of 
success.
    Mr. Torres. In that sense, does capital investment cut your 
operating costs?
    Mr. Downs. Absolutely. An undercapitalized railroad is like 
an undercapitalized airline. Older equipment is higher cost 
maintenance, higher failure en route. You begin to manufacture 
parts that are no longer made by the original manufacturer. All 
of the inefficiencies that come with that lack of capital are a 
net economic drag. We have done some estimates over time about 
how much operating drag there was, and at one point it was 
probably as high as 100 to 150 million dollars a year net 
economic drag on the company from undercapitalization.

                       mail and express expansion

    Mr. Torres. You testified--and I might have missed this 
point, but I have read it in the newspaper, the plan to 
increase your haulage of express mail and freight. Do you see 
this as a major investment in your future and a way to keep 
long distance service viable? And secondly, how long do you 
think it would take before you see a return on this type of 
investment?
    Mr. Downs. The answer is yes, it is a viable way to provide 
the financial support for long distance trains. It was, 
ironically, one of the pieces that we struggled with a lot 
about what made Amtrak work over the long haul, literally. Our 
long distance passenger trains, we knew, could not develop 
enough passenger revenue to defray the fully allocated expenses 
of those trains. We were struggling with whether or not we 
should turn it into a land cruise business, more point to point 
on small, urban and rural. We need to do all of those in terms 
of realizing increased passenger revenue. However, passenger 
revenue was never enough.
    Mail and express, which is already on a couple of lines and 
accounts for as much as 42, 43 percent of the income to the 
train, has high profit margins for us. It doesn't cost--in 
other words, the fully allocated cost to providing mail and 
express are not as great as the revenues, so we have a good 
margin there. That profit goes straight to the bottom line of 
the train. We think that is the strategy that will help us get 
to economic self sufficiency for that portion of our business.
    We know the Northeast can make it on high-speed trains. We 
know the West can make it with state partnerships like 
California where there has been a billion dollars invested at 
the state level in rail passenger service in the last four 
years. And we have almost $50 million a year worth of contracts 
with the State of California's agencies about rail passenger 
service. We know we can make it on long distance trains on mail 
and express now. I believe we can make it with partners with 
every class one railroad that we operate over. It will take 
some time; but, I believe that we can develop.
    The last part of your question, how long. I believe it will 
take at least a year to fully develop the first phase of this 
business. On a limited number of trains, I believe we could 
probably within two years see a fully mature rail partnership 
with class one railroads on mail and express for long distance 
trains that will significantly change their economics.
    Mr. Torres. Thank you very much. Thank you, Mr. Chairman.

                      amtrak owned infrastructure

    Mr. Wolf. Mr. Packard.
    Mr. Packard. Thank you. This has become an annual 
depressing time for me, because we have struggled with Amtrak 
for quite some time. And we never seem to quite find solutions 
that ultimately work. I need some information just for my own 
education. Does Amtrak own any of the right of ways, any of the 
rails?
    Mr. Downs. We own the Northeast Corridor between Washington 
and New York, a portion of the railroad between Detroit and 
Chicago, roughly from Kalamazoo to Porter, Indiana, about 98 
miles of that railroad, and some other minor facilities. We own 
a lot of capital plant in places like Chicago, where we own 
Chicago Union Station and Baltimore Union Station, 30th Street 
Station, and Philadelphia/Washington Union Station, New York/
Penn Station.
    Mr. Packard. Are those lines used by freight?
    Mr. Downs. Yes, they are.
    Mr. Packard. And you use a lot of the freight lines that 
Santa Fe and Burlington Northern and Union Pacific, et cetera, 
own?
    Mr. Downs. Our long distance trains operate almost 
exclusively on class one railroad on an incremental cost basis. 
In other words, they charge us the incremental cost for 
operating the trains, and our new operating agreements give 
them a bonus for operating us on time. So we pay them right now 
about $100 million a year for the use of freight railroad 
tracks around the United States.
    Mr. Packard. Are those agreements fair and cost effective 
for Amtrak?
    Mr. Downs. Depending on which railroad you talk to, their 
perspective might be they are unfair or fair. We try to load 
those agreements with very high bonus payment rates. In other 
words, our customers say the most important thing for them is 
on-time delivery. If a railroad delivers our train on time, 
they get, in effect, a bonus for delivering us on time. It can 
be as much as 80 percent of their payment. They can also have 
penalties for delivering us late. We think that is a fair way, 
since that is the most critical part of our business, this on-
time delivery, as well as safe delivery of our passengers. That 
is the fairest way. Some freight railroads say that is not 
adequate compensation. One railroad says that they need a $60 
million-a-year increase in their payment from Amtrak to justify 
hauling passenger trains over their railroad. I don't believe 
that is the case, but some feel a need for a much higher 
federal and much higher payment from Amtrak.
    Mr. Packard. Are those assets that you have outlined that 
you own, lines and stations, et cetera, are they marketable and 
is it a--could it be a consideration for income or spinning off 
some of your assets that would be more cost effective?
    Mr. Downs. As the Federal Railroad Administrator earlier 
said, we have been through some intensive negotiations with the 
fiber-optic communications industry over utilization of the 
Northeast Corridor. We already have MCI with a very good lease 
for use of the Northeast Corridor for their communication 
transmission lines. We have another agreement with Quest 
Communications that is about to be finalized, and that will 
give us a one-time return. We are also looking at the 
utilization of the corridor, as the Administrator said, for 
personal communications systems, cell phone towers, which will 
give us a good, I think, rate of return or a one-time payment. 
We look for business opportunities for that in every way we 
can, because that is part of our charge to reduce our operating 
subsidy. So we have a business that is focused on maximizing 
the real estate value of the corridor.

                              cost-savings

    Mr. Packard. Two years ago and even four years ago on the 
subcommittee it was--we were asking Amtrak to look at every 
route and every possibility of cutting costs. Do you believe 
that you have done all that can be done now, or are you still 
pursuing areas where you might be able to reduce operating 
costs or trim back on routes or cost saving measures?
    Mr. Downs. The Federal Railroad Administrator is correct, 
and we are running about 17 percent fewer train miles than we 
did three years ago.
    Mr. Packard. I heard that.
    Mr. Downs. That is the largest single reduction, I believe, 
in the history of the corporation.
    Mr. Packard. But if it is not enough to still remain 
viable, then what else? What are you--are you looking at other 
options, and what are those options?
    Mr. Downs. Well, we have--the last round of route 
reductions that we announced and that were continued as part of 
the large continuing resolution until the 10th of May, we have 
five lines that we said were going to be eliminating, the 
Pioneer, the Desert Wind, the Texas Eagle, the Gulf Coast 
Limited that Mr. Callahan alluded to, and a portion of the 
Lakeshore Limited. We believe that we will be able to make 
shortly the decisions about the final disposition of those 
lines this year. That was a Board decision that was painful to 
come to about the next round of service reductions. We think we 
will probably accomplish most of those within the next week or 
two.
    Cost reduction in the corporation is an unending task. We 
have set targets for this year and next year as part of our 
business planning process that will continue to try and get as 
much as 50 to 60 million dollars a year additional costs out of 
the corporation. Part of that is through automation, 
eliminating old paper systems. Part of it is a different way of 
handling things like insurance, where we have been successful 
in reducing our insurance cost. But we have constantly made, in 
maybe 80 areas, cost reduction targets internally to the 
management of the corporation and its overhead each year. Is 
that enough? It is already built into our business plan. If it 
is not enough, then will other routes wind up on the block? 
Probably.

                  process used for eliminating routes

    Mr. Packard. Is your process of evaluating routes and 
determining whether it can be cut back or not somewhat similar 
to what we have done and what the Chairman has alluded to in 
terms of a BRAC process? Are you doing what we would do if we 
established a BRAC system of determining which routes are 
viable and which ones are not?
    Mr. Downs. We took that one step further. We tried to 
assess whether or not we had made a right business decision 
about having less than seven-day-a-week service in certain 
corridors. We came to the conclusion that we had made a mistake 
about trying to get to less than seven-day-a-week service 
because a customer doesn't perceive that as a viable route. 
They won't change their travel plans to suit our schedule. We 
knew that we had to eliminate a number of routes. Either we 
were going to take all of our routes to seven days a week, or 
we were going to eliminate the weakest of the routes that were 
on less than seven days a week and use the equipment to routes 
that were viable for seven-day-a-week service.
    The reason we chose seven-day-a-week service and the focus 
on key routes was not just on passenger service, but was on 
mail and express as well. The post office says you have to be 
seven day a week on a train to be able to haul U.S. mail 
dependably, and they don't like trucking as a substitute on 
thedays that the train does not run. We knew that our long-term 
business plan for long distance trains had to include that as a target 
for revenue growth. That was how we made the choice, best future 
business potential of certain lines like the Empire Builder, which 
would be restored to seven-day-a-week service so that we can maximize 
our mail and express business between Chicago and Seattle.

                          mail service revenue

    Mr. Packard. What percent of your revenue is generated by 
mail service?
    Mr. Downs. Right now $67 million a year worth of Postal 
Service revenue. We think we can double it within about 12 
months.
    Mr. Packard. That equates into what percent of your total 
revenue package?
    Mr. Downs. Five percent.
    Mr. Altschul. It is a little bit less than that, but it is 
probably the fastest growing.
    Mr. Downs. It is the fastest growing, and it has the best 
impact on our bottom line, because that revenue is a net profit 
revenue for us. It has got about a 15 to 20 percent profit 
margin total.
    Mr. Packard. Of course, your difficulty is evaluating 
whether five percent ought to drive your policy decision.
    Mr. Downs. But it is a--the interesting thing about mail 
and express--our core business is always passenger railroading. 
It is what we were set up in law by the nation to do. And the 
law also said we were supposed to put anything on this train 
that would help reduce the operating subsidy. So we were 
directed by federal law to develop other lines of business that 
would help support passenger rail service. That part of our 
business languished, frankly, for a number of years as we 
struggled with having no capital.
    Mr. Packard. Do you have contracts with non-government 
postal service?
    Mr. Downs. Yes, we do.

                           amtrak competition

    Mr. Packard. What effect on your passenger level has low-
cost airlines, commuter rails that are not Amtrak operated, 
things like Metrolink in Southern California--those are picking 
up a lot of your commute between, for instance, in my case, San 
Diego and Los Angeles, which perhaps historically might have 
ridden Amtrak but now is picked up by your transit districts 
that are combined to help--to compete, in some instances, with 
Amtrak. What effect has all of this had upon Amtrak's 
ridership?
    Mr. Downs. It is actually pretty healthy economically, 
because, as you are probably aware, we operate everything in 
Southern California on commuter rail. We operate all of the 
Southern California commuter rail for L.A. MTA. We operate the 
coaster service. Those are all contracts that we bid. Those 
contracts are cost plus for us in terms of profit.
    Mr. Packard. Is that generally true around the country or 
just mostly in isolated places?
    Mr. Downs. Our largest single contract is that we operate 
all of the long lines on the MBTA in Boston. That is about a 
$110 million-a-year contract. That allows us to sort out our 
own businesses. For instance, on the San Diegans, Metrolink and 
the Coaster service are interested in better coordination of 
their schedules and our service long distance and medium 
distance so that we can better sort out which market, business 
commuter versus leisure market. It has allowed us a much better 
management of the entire corridor, particularly since the 
entire corridor is now publicly owned by the three counties. 
And it has been good for our business, actually, that North 
County and L.A. MTA have been making--as well as the Corridor 
Development Corporation--investments in that corridor. Our 
business actually is better.
    I like to say even though it sounds silly to say it, Rail 
riders ride rail. Commuter rail markets like Washington have 
better long distance train utilization because people there are 
familiar with and more comfortable with riding a rail system. 
The same thing is developing in Southern California. The more 
aggressive the state gets in supporting longer distance 
commuter rail, the better our market is, because there are hub 
and spoke impacts on it. So it has actually been a good thing 
for our business.
    Mr. Packard. So you feel that it is not competitive. It is 
more synergistic?
    Mr. Downs. Yes.

                           low cost airfares

    Mr. Packard. What about low-cost airfares?
    Mr. Downs. A long time ago I had a brief conversation with 
Herb Kelleher and told him I didn't need to be in his business. 
And he said well, you are, aren't you. And I said no, I am not. 
He said what do you mean. I said most of our long distance 
trains stop every 60 miles. And he paused and he said well, I 
would like to. His business is like Baltimore to Providence, 
Rhode Island. We have a dozen and a half stops between 
Baltimore and Providence, and it is our intermediate market. It 
is New Haven to Philadelphia. It is Trenton to Providence that 
is our real market. It is our intermediate stops. It is Havre, 
Montana, to Devils Lake or Devils Lake to Minneapolis, St. 
Paul. Those markets are where we are best suited. I had a 
conversation with the governor of Wyoming about Amtrak service, 
when I told him that we were leaving Southern Wyoming on the 
Pioneer. He said I hate to see you go, I have constitutional 
provisions in the state constitution that prohibits me from 
spending state gas tax for anything other than highways or to 
match a federal program. He said I hate to see you go, because 
in a lot of those cities along the southern tier of Wyoming we 
have one carrier, a commuter plane. I think it was United, and 
it was the United commuter, 12-seat and 24-seat airplanes. He 
said its round-trip ticket is often $550 between those cities 
and Denver alone. He said your service provides access not only 
between those cities and Denver, but between those cities in 
Southern Wyoming. That is a business we would like to see stay 
in Wyoming, but I haven't got the resources to do it. What he 
was saying is that those low-cost airlines don't have that 
impact out in his state. They are big hubs. We try and stay 
away from that business. I can't compete with Herb Kelleher.

                           dedicated revenue

    Mr. Packard. One last question that I might have. If, in 
fact, your one-half cent proposal simply couldn't be done for 
whatever reason, what would that do to your long-term plans?
    Mr. Downs. Well, at our current capital funding levels, 
with principal and interest payments coming out of that, if we 
have to, and other mandatories like ADA, toilet retrofit, 
station retrofit, we haven't got enough capital to do all of 
the things that we are mandated to do at the funding levels 
that we are getting for capital. We are definitely not there 
about our ability to put the south end of the corridor in 
decent enough shape to run high-speed trains. It won't do us 
any good to be able to run trains at a 150 miles an hour, when 
it snags a wire because the catenary are failing and drags down 
a mile of wire. At 150 miles anhour, you could drag down five 
miles of wire. We can't make the kind of capital investments that would 
let us become financially independent and it is the trade. It is 
operating versus capital.
    Mr. Packard. And your only alternative right at the moment 
is the one-half cent?
    Mr. Downs. That is all we have got.
    Mr. Packard. Have you reviewed or had your legal counsel 
review--and maybe that is a job of this committee, but what 
kind of legislative requirements it would take to permit a 
half-cent transfer from the gas tax?
    Mr. Downs. Mr. Shuster had a piece in the Washington Post, 
I think, two days ago where he said that his committee, which 
is the committee of jurisdiction for us within the House, his 
Rail Subcommittee, would consider a half-cent gas tax for 
Amtrak in the context of trying to deal with the 4.3 cents of 
gasoline tax that is in deficit reduction, and that in 
relationship to the President's budget, the President's 
submission on the reauthorization of ISTEA legislation this 
year.
    I believe Senator Roth, and Senator Moynihan and Senator 
Jeffords introduced a bill last week at Senate Finance about 
creating a half cent dedicated capital fund for Amtrak for five 
years and out. Senator Chafee said at that hearing that he 
could endorse it. And I was stunned. I was sitting next to Tom 
Donohue of the American Trucking Association, and Tom said in 
the middle of his testimony, you know, the ATA could support a 
half-cent gas tax for Amtrak as part of a capital fund that 
would make it more efficient. I said Tom, is that the same Tom.
    But there is a growing belief that Amtrak's needs on 
capital are real, legitimate and may be able to be addressed in 
the context of the 4.3 cents. There are plenty of pitfalls 
around that whole scenario, and I have learned to take nothing 
for granted in Washington, because it is never over until it is 
over and in Washington it is never over. But we are further 
along now about a dedicated capital funding source than we have 
been in the history of the corporation. I understand that the 
expectation is that we are in this to recapitalize and out. And 
that is a discipline for us to manage. I hope it can be an 
outcome this year.
    Mr. Packard. Ms. Molitoris, what is the Administration's 
position on that half cent?
    Ms. Molitoris. The position of the Administration is really 
found in its NEXTEA proposal, in which it has Amtrak as part of 
the Surface Transportation Fund. And we see that as an 
opportunity in the next six years, to bring capital to Amtrak, 
75 percent of what it is they say they need.
    Mr. Packard. What is your opinion, Mr. Downs, on that 
approach?
    Mr. Downs. With all due respect to the Administration and 
the Federal Railroad Administrator, I hate to be pushed into--
the corporation hates to be pushed into a perceived, very small 
room with all of the highway interests in America. The 
President's request states that Amtrak, its operating subsidy, 
its railroad retirement, its capital all belong in the Highway 
Trust Fund, and that we come out of the balances within the 
Highway Trust Fund without any additional revenue going into 
the trust fund. In the outlay, the numbers look like a 
reduction of about a half a billion dollars in outlay for 
highways. That is being in a very small room with a very angry 
industry. And I think it is not a good place for the 
corporation to be put without any additional resources coming 
in to offset that cost to the Highway Trust Fund. I very much 
appreciate the Administration recognizing that we need a trust 
fund and a trust fund structure. I very much appreciate their 
commitment to multi-year capital funding for the corporation as 
a part of that. I am very nervous about being faced off against 
the entire highway industry in a fixed sum or shrinking sum 
game.
    Mr. Packard. It appears that you are in a game of 
brinkmanship, though, when it comes to the half cent, at least 
from your response.
    I have no further questions, Mr. Chairman. I appreciate as 
much time as you have given me.

                   uses of a dedicated funding source

    Mr. Wolf. Sure. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. Let me just comment to 
a couple of earlier comments. I trust, Ms. Molitoris, that you 
are correct that bankruptcy is not inevitable, because I really 
believe that a safe and efficient national passenger rail 
system is an integral part of our overall transportation 
network. And I am quite willing to at least examine every hoop 
that has to be jumped through to provide that. In following up 
one more thing on the previous set of questions about the half 
cent, is that half cent meant for capital or would it be for 
operating as well? Would it be just for capital or would it end 
up being used wherever it was needed?
    Mr. Downs. Capital only, both--the Administration's 
proposal about capital increasing as operating subsidy is 
reduced is focused strictly on capital. It makes a very clear 
distinction between----
    Mr. Olver. How much would that provide? Is that about $700 
million a year or thereabout?
    Mr. Downs. Currently it is about $745 million a year.
    Mr. Olver. Okay, and--all right, then that leads me to a 
question which I think may be to each of you, and probably will 
require more than a moment's thought, unless you have it right 
at fingertips. I am curious whether there is any objective, 
hopefully objective, but quantitative study of the type of 
investment that is put into our whole rail system and as a 
subgroup our passenger rail system compared with the other--our 
other major industrial nations. Maybe the G7 nations, or some 
grouping that somebody might consider to be, perhaps, 
comparable. Do we know--do we have that kind of analysis of 
what goes into the--of capital investment in the whole rail 
systems and in the passenger rail systems of that group of 
nations?
    We talk a great deal about what a huge portion of our 
economy is transportation. And, yes, our system if very 
different. We are a much bigger country and probably most like 
Canada than anybody else, though even that is not--they are 
perhaps a truly outrider in the G7 countries. So the 
combination of what is surface transportation and what is rail, 
what is air transportation are going to be somewhat different, 
but somewhere one ought to be able to at least start with these 
analyses and put them together and see whether you are doing 
what needs to be done if you really claim to have a 
transportation system, a national transportation system that is 
going to support this economy.
    And we keep saying that it is somewhere between 10, 12 and 
15 percent of the whole economy is directly transportation, and 
virtually all of it depends upon transportation if you look at 
the secondary or tertiary impacts.
    Ms. Molitoris. Mr. Olver, I think your question is a 
veryimportant one, because as we talk about, with all of the members 
here, the importance of Amtrak and the kind of investments that we are 
talking about. I would like to submit to the record for the Chairman 
and all the members of the committee some of the information that we 
have about investments which we have around the world in the first 
place, which are far greater than ours. Secondly, we have, as mandated 
by Congress, the Bureau of Transportation Statistics at the Department 
of Transportation now, which is responsible for gathering this kind of 
statistic for your review. And we will bring that kind of information 
to you.
    I think it is very important to recognize that there is the 
difference between the passenger and the freight in the sense 
that the freight systems are completely privately owned. For 
example, since 1990 the freights have invested approximately 
$90 billion in the infrastructure. As the President of Amtrak 
said, it is a capital intensive business. And we have to 
recognize that. The return on the investment, however, really 
needs to be evaluated on the basis not only of people moved but 
what would happen if it wasn't there, the kind of impact on 
congestion, the kind of impact on air quality, the kind of 
impact on our society as our demographics show our society 
aging. You have to stay mobile if you are going to really be 
alive.
    [The information follows:]

    Clearly, the annual level of investment in passenger 
railways in other industrialized countries far exceeds that of 
the United States on both an absolute and per capita basis, as 
the following table exemplifies:

                         COMPARISONS FOR PASSENGER RAILWAYS IN INDUSTRIALIZED COUNTRIES                         
----------------------------------------------------------------------------------------------------------------
                                                                       Approximate                              
                                                                     Annual Railway               Annual Railway
                                                                         Capital     Population,  Investment Per
                                                                       Investment      million        Capita    
                                                                      (billions of      (1990)       (dollars)  
                                                                        dollars)                                
----------------------------------------------------------------------------------------------------------------
U.S.A. (Amtrak)....................................................            $0.4          250           $1.60
France.............................................................             1.4           56           25.00
Germany............................................................             3.9           79           49.37
Italy..............................................................             5.2           58           89.66
----------------------------------------------------------------------------------------------------------------
Sources: United States: average of Amtrak appropriations for capital investment, fiscal years 1993 through 1997.
  European countries: derived from Jane's World Railways, 1996-97, pp. 458 (France), 474 (Germany), and 520     
  (Italy).                                                                                                      

    Ms. Molitoris. So I think there is a whole discussion, as I 
mentioned to another member, that really needs to be looked at 
as you are evaluating how important this company is to a real 
national transportation system.
    Mr. Olver. Well, that raises an interesting question, 
though. You have indicated that on the rail--on the freight 
side--that it is essentially private capital money that is 
going into that freight system.
    Ms. Molitoris. It is all private.
    Mr. Olver. And my guess is that in most of the countries 
that I have suggested as G7, whether that is a correct 
comparison or not, in many of those the freight side is part of 
the public system rather than part of a private system. So our 
investment on the freight side is probably higher because it is 
done where it is being done, and our investment on the 
passenger side--well, I am not going to prejudge what the 
results might be, but obviously that is a complication in the 
analysis--in a quantitative analysis that I have asked for. And 
I trust when you provide what you have on that, that you would 
give me a copy of whatever it is you are putting in the record 
so that I don't have to go and find exactly which time it 
appeared in the record.
    Ms. Molitoris. We will make sure it gets directly to you, 
sir.

                         HIGH-SPEED INVESTMENTS

    Mr. Olver. Thank you.
    Mr. Downs. Mr. Olver, one thing. I think in France--I know 
that they have been investing in high-speed passenger rail at 
about $4 billion a year U.S. dollars, but I was struck with one 
thing that they do differently and that we take for granted or 
is invisible. They don't plan capital investments in 
transportation by mode. They do it against business objectives 
or economic objectives. I had this conversation with your 
governor not too long ago, I guess about a year or so ago, 
about the economics of high-speed rail to Boston and what it 
would mean. He said this is kind of a no brainer for 
Massachusetts, it means that we don't have to build Son of 
Logan. That is a $5 billion, maybe greater, investment that the 
commonwealth and the aviation industry would have to absorb. 
High-speed rail at a billion dollars is five to one more cost 
effective. And it takes that much off of Logan on day trips 
between Boston and New York.
    Mr. Olver. Transportation departments in the corridor have 
been saying that for at least 20 years, and it will be another 
I don't know how many years before we finally got that up to 
not even high-speed rail standards, when we ought to be really 
talking about that corridor for MAGLEV, but it would be really 
something quite horrendous in terms of expense, I guess.
    Mr. Downs. But the French think, for instance--they make 
conscious decisions about high-speed rail, for instance the use 
of Charles De Gaulle. They don't want De Gaulle being used for 
short, in-country air trips. The economic value of that airport 
is on longer distance flights, international flights, so they 
make high-speed rail investments to relieve the airport of non-
economic, not high economic uses. We can't do that yet in the 
United States because we are so tied to modal funding between 
highways, transit----

                                 MERGER

    Mr. Olver. Well, sure. This is a very complicated analysis. 
We could--it is like an onion. We could peel pieces off of it 
and you take one piece and if you look only at one piece and 
you think you have got something, it is quite different from 
the whole pattern. But let me go on to a different thing.
    I have, along with probably a lot of other people who have 
a much greater direct financial interest in the matter than I 
do, which is essentially zero, been watching with fascination 
the mating dance among Southern and Conrail and CSX. And I am 
wondering from both of your points of view, and perhaps 
particularly from you, Ms. Molitoris, whether there are 
implications of the end result there that you can see would be 
helpful to Amtrak and where you--and what your capacity to have 
influence on that is in your position.
    One of the things in the--and I will get to that, if I am 
allowed, in relation to the proposed changes in service by 
Amtrak over the past year, last year, one of the things that 
was affecting the one that I have a parochial interest in was 
the difficulty of the arrangements that had to be made over 
Conrail-owned trackage. And if that trackage is in the hands of 
a sensible system that views it--that is viewed as part of a 
national system, it would seem to me that we would make certain 
in that process that the needs of an effective rail system, 
which really has to operate pretty close to a schedule if it is 
going to be viewed by the public as something that they can 
rely on, that this would be your opportunity to solve problems 
like that in that system, within that system.
    Ms. Molitoris. Mr. Olver, the potential application for a 
merger, which we have all been reading about, of course, is not 
finalized yet. It is not submitted, but we have understood that 
it will be within about 30 days. We have been keeping a very 
close eye on this. This is very, very important, not only to 
competition on freight, but to the enormous movement of 
passengers with not only Amtrak but the commuters. The Surface 
Transportation Board is the entity that makes the final 
judgments on these kinds of things, but the Department of 
Transportation submits its views on these issues. I know that I 
have talked to Mr. Snow, who is also concerned about the 
opportunity to perhaps find ways to give some dedicated right-
of-way to passenger service, because they are concerned about 
liability issues.
    I think that it is crucially important, for example, for 
Amtrak. There has been an agreement between Amtrak and Conrail 
that Conrail freights move at night. That gives safety to 
Amtrak trains. And safety is our number one business. So we are 
concerned not only about competitive issues with regard to this 
merger, because that is a crucially important issue. We are 
concerned about the impact on the vast movement of people, some 
600 thousand per day in the Northeast, and how they will be 
affected. We are encouraged that Amtrak is talking to Norfolk 
Southern, for example. And there appears to be potential for 
partnerships in terms of moving mail and express. So the more 
we see in an application that reflects safety and that reflects 
an understanding of the impact on passengers, the happier we 
will be.
    Mr. Olver. Well, I trust you will be aggressive, as 
aggressive as it is possible from the FRA's vantage point in 
this unfolding process.
    Ms. Molitoris. Yes, sir.

                             ROUTE PROFITS

    Mr. Olver. Thank you. I would like to just--more 
specifically to the Amtrak issues, the GAO report has been 
discussed. I had asked GAO whether there were any routes, 
because I had been trying to figure out what the different 
terminologies really referred to and trying to sort the 
terminologies that people in transportation use with ones that 
seemed logical to me. And I had asked them if there were any 
profitable Amtrak routes. And they said well, if you included 
both capital and--I think this is my understanding. And if 
they--if you included both capital and operating expenditure, 
that the answer was none. Is that correct?
    Mr. Downs. No.
    Mr. Olver. If you take into account both capital--account 
for both capital and operating expenditure, the answer is no?
    Mr. Downs. On a fully allocated cost basis, a couple of 
months ago for the first time in our history Metroliner 
service, all metroline service broke into profit.
    Mr. Olver. So if fully allocated----
    Mr. Downs. Fully allocated cost.
    Mr. Olver [continuing]. It is now profitable?
    Mr. Downs. Yes.
    Mr. Olver. Okay, I see--the charts that I have seen show a 
positive operating ratio, but you--well, a positive profit 
loss, which gives you an operating ratio of under 1.0. Now the 
very terminology operating ratio used there would hide that 
this was on a fully allocated basis, because if it is only 
operating, then it is not taking into account capital. But you 
are saying capital fully allocated.
    Mr. Downs. Fully allocated.
    Mr. Olver. Metroliner is positive?
    Mr. Downs. Yes.
    Mr. Olver. All right. Then I asked them if you--we got into 
this with the GAO, and I think this is slightly different. I 
think they felt that that was not fully allocated, but that may 
be my misunderstanding.
    Mr. Downs. This happened after they were finished their 
review with us.
    Mr. Olver. All right. If--oh, I see. I see, okay. I then 
asked is there anything that operates profitably on an 
operating alone other than--and then they said Metroliner does, 
but they didn't think anything else does. Is that--is there 
anything on an unallocated, purely operating costs that is 
running now profitably?
    Mr. Downs. Autotrain.
    Mr. Olver. Autotrain? But none of the long distance routes, 
per se?
    Mr. Downs. No.
    Mr. Olver. Just Metroliner as a route, which is Washington 
to New York?
    Mr. Downs. Washington/New York.
    Mr. Olver. Is what Metroliner says?
    Mr. Downs. Yes.
    Mr. Olver. Okay. To get a little closer to the parochial, I 
guess, I have tried to understand as well as I could the 
components that go in. This itself is another onion. It is not 
just what the operating ratio may happen to be on these routes. 
But I note, for instance, that one route, and the only one--the 
only route that has a greater than three operating ratio in 
every one of the last three fiscal years, the only route that 
has that kind of an adverse number on operating ratio is not 
one of those routes that was considered in the reorganization, 
the changes that you had made last year.
    All the others that at least had gotten under three, maybe 
they had been under three and went over three or some of them 
had one year below or at least were toying with that, some of 
them, and a couple of them were rather well below that. Why 
would--I should think that such numbers would have been an 
obvious target for such a route. And I don't want to--I will 
leave you to figure out which that is, but I think looking at 
the numbers that I have seen that there is one that was over a 
three operating ratio in every one of those years and was not 
touched.
    Mr. Downs. I believe the worst performing route 
financially--and I don't have the exact number. The Sunset 
Limited that runs from Los Angeles to Miami across the entire 
southern tier of the United States has--I believe is our worst 
performing route. Close behind it is the Cardinal from 
Washington to Chicago.
    Mr. Olver. Well, I don't mean for you to try to figure out 
what----
    Mr. Downs. The southern tier----
    Mr. Olver. I will talk with you privately, because I don't 
want to go beyond that. It seemed to me, though, that with 
ratios like that that it ought to have been an obvious item. 
You had made----
    Mr. Downs. One quick thing that led to a decision about, 
for instance, the Sunset Limited. The Sunset Limited is the 
east/west connection for every north/south train that we have 
in the United States. It is part of a network effect that 
without that train a number of routes like the City of New 
Orleans, the Crescent, the Star, the Meteor, the Coast 
Starlight, has no connection to other trains and the network 
effect is such that you have to anticipate the loss of 
connecting revenues from that train to other trains and from 
other trains onto that train. So it is not an easy comparison. 
That one is almost an essential link for having a network 
service. The loss of it not only would affect the economics of 
the Sunset Limited, but for five other trains that we operate.

                             Route Closures

    Mr. Olver. Look, I am not attacking the Sunset Limited by 
any means at all. That is not the one, you know. And I am 
sucker for rational argumentation about these things, so all 
you have to do is to give me the factors that go in there and I 
will play the analysis, too. But let me go on.
    You had mentioned a couple of times, you had alluded early 
of the five routes under closure last year, that you saw only 
one coming out. You didn't elaborate on it comingout 
positively. You did mention at that point the Texas Eagle. Later in 
discussion, I think it was with Mr. Callahan, you had also gotten back 
into some discussion about what was happening with those routes. Would 
you like to elaborate? Would you be able to elaborate on--I was, of 
course, disappointed at the idea that my parochial interest was not one 
of those that you thought had a chance of coming out of this 
positively. But would you like to update us on that?
    Mr. Foglietta. I remind the gentleman that we do have a 
vote on.
    Mr. Olver. Oh, we do?
    Mr. Wolf. Yes, we do. And----
    Mr. Olver. This is really my last question.
    Mr. Wolf. Okay.
    Mr. Olver. I don't know how long we have till the vote.
    Mr. Wolf. We have about seven minutes, eight minutes.
    Mr. Olver. I could do a quick----
    Mr. Wolf. Go ahead and finish the question.
    Mr. Olver. I can do a quick recount.
    Mr. Wolf. Mr. Foglietta wants to make unanimous consent.

              North Philadelphia Train Station Renovation

    Mr. Foglietta. I would just like to ask unanimous consent 
to submit my questions.
    Mr. Wolf. Sure, without objection.
    [The information follows:]
    Mr. Foglietta. No visit to this subcommittee would be complete 
without me asking you again about the status of the North Philadelphia 
Train Station renovation project. This is one of the most important 
projects in my district in North Philadelphia. For those of you who 
don't know, this project has been on the books for over 15 years. My 
sense is that we're getting closer and closer to making this project a 
reality. But as you and our Chairman know this has not been easy. The 
project has suffered delay after delay. Mr. Downs, can you tell us 
about the status of the North Philadelphia Train Station? and 
Specifically, when do you expect Amtrak to complete its portion of the 
project?
    [The information follows:]
    Amtrak's work can be broken into three major components: (1) Track-
side improvements; (2) Retail-related improvements; and (3) Parking 
improvements for the new station.
    Track-side improvements:
          (1) A new Amtrak station building is completed and open.
          (2) New platforms and canopies have been completed. Lighting 
        to be completed by June 1.
          (3) Installation of 2 new ADA (American Disabilities Act) 
        compliant elevators is complete. Final inspection by the state 
        was on May 8. Elevators were placed into service.
          (4) Extensive tunnel work allowing access to both platforms 
        under the tracks is nearing completion. This work has primarily 
        taken place during inclement weather.
    Retail-related improvements:
          (1) The first of two pedestrian bridges over the SEPTA tracks 
        is now complete. The foundation for the second bridge has been 
        laid and concrete deck has been poured. It is expected that the 
        remaining construction work on the bridge will be done by June 
        1. The pedestrian covers for these bridges will be installed in 
        tandem with the supermarket construction.
          (2) Retail Parking Lot--There has been a tremendous amount of 
        work done in this area. Completed work includes grading; 
        utility installation (in cooperation with the Federal Highway 
        Administration, Penn DOT, SEPTA, and the city of Philadelphia), 
        and demolition of old buildings. All work on this part of the 
        project is scheduled for completion by July 1, 1997.
          (3) The State Historical Commission has given approval to 
        Amtrak's plans for demolition work on portions of the old 
        station building.
    Parking Lot improvements for the new station:
          (1) There will be a sizable increase in the size of the 
        Amtrak station parking lot. The lighting capabilities will also 
        be drastically improved.
          (2) Amtrak crews have already commenced work on the north 
        side of the tracks and are clearing the old lot as preparation 
        to lay the new, larger one. Amtrak is ahead of schedule on this 
        portion of the project and expects to have it completed by 
        September 1997.
    Amtrak expects to complete its physical contribution to this 
project by September 30, 1997, with most work being completed by 
summer. As the supermarket construction gets underway, Amtrak will look 
forward to completing any remaining work tied to this project, such as 
the bridge canopy covers and extension of the terminal to the old 
station building.

[Pages 171 - 173--The official Committee record contains additional material here.]


                             route closures

    Mr. Wolf. And Mr. Olver, you can continue and you can stay 
until you think you are fast enough to make the vote.
    Mr. Olver. Well, if you can answer that in two minutes, I 
will stay and listen. Otherwise I will come back.
    Mr. Downs. The long distance lines that we were targeting 
for elimination were the Desert Wind and the Pioneer.
    Mr. Olver. Should I just recess this?
    Mr. Wolf. No, that is okay. No, go ahead.
    Mr. Olver. Because I am going to have to leave in two 
minutes anyway.
    Mr. Wolf. No, that is okay. I will wait. Go ahead.
    Mr. Downs. The Desert Wind is definitely going away on the 
11th of May. I believe now that we know that the Pioneer will 
go away on the 11th of May. We are still in negotiations with 
the State of Texas and the Texas legislature over funding for 
that line. And on Mr. Callahan's line to Mobile, the tri-state 
commission meets tomorrow, I understand, to see if they can 
make a decision about the Mobile service.
    Mr. Olver. The Mobile line is a section of what is the 
Southwest Sunset Limited.
    Mr. Downs. Right.
    Mr. Olver. So it is one section which was daily, one small 
section which was daily in an overall section which is tri-
weekly.
    Mr. Downs. Yes. And it was more--it is a commute line for 
business and tourism into New Orleans. On the Boston section of 
the Lakeshore Limited, I believe we could get to an agreement 
with the Commonwealth of Massachusetts over a facility that 
would allow us to use the mail and express revenue to change 
the economics of that route sufficiently so that it could 
survive long term, but it depends on the choice made by the 
commonwealth about whether or not it will commit capital to 
that line.
    Mr. Olver. So you consider it in total to be not optimistic 
as you see it at the moment?
    Mr. Downs. Well, it is in the hands--at least on the 
parochial line on the Lakeshore, it is in the hands of the 
commonwealth.
    Mr. Olver. Thank you.

                    DEDICATED CAPITAL FUNDING NEEDS

    Mr. Wolf. Mr. Downs, one of Amtrak's goals is to obtain a 
dedicated source of funding for capital investment, where the 
federal government would provide over 4.2 billion for capital 
investment over the next six years. Amtrak would like one-half 
cent of the 4.3-cent portion of the federal gasoline tax 
currently available for deficit reduction. Quite frankly, it is 
going to be a problem, too, because there are some people that 
are concerned with regard to the deficit and think that if you 
were to use--take that 4.3 off you end up making it more 
difficult to reach a balanced budget. The one-half cent 
proposal represents about $700 million per year. What does 
Amtrak plan to spend the money on in fiscal year 1998, if you 
were to be successful?
    Mr. Downs. We have a process right now that is ranking all 
of our capital proposals. We do this each year on a scorecard 
process that ranks them on rate of return of the investment, 
either on cost avoidance or increased revenue or safety issue 
avoidance, for instance. We are pretty much into that process 
now, but I couldn't give you right now the exact capital budget 
that we would propose both to the Board and be able to 
illustrate for fiscal year 1998, but I believe that process 
would give us that capability all along.
    Mr. Altschul. We should be able to have that within 30 to 
45 days.
    Mr. Wolf. If as soon as you have that, if you would bring 
it up to the committee, we would appreciate it.
    Mr. Altschul. Okay, we will have it within 30 to 45 days.
    Mr. Wolf. Would capital funding continue after the year 
2002?
    Mr. Downs. As I understand the language that was introduced 
by Senator Roth and Senator Moynihan and Senator Jeffords in 
the Senate, the clear intent is that the half cent would return 
to deficit reduction at the end of the five years. It would not 
stay within the fund. Our half cent would, in effect, by that 
law go away. We have been told that that is part of this 
process and it has to be part of the process, that this is a 
five-year capital investment decision. After that we either 
stand or fall on our own.
    Mr. Wolf. What would happen after that, though? Do you 
really believe that would go off?
    Mr. Downs. Do I believe it would go off?
    Mr. Wolf. You know you would be up here at the end of that 
time asking for another year or two, would you not? Would you 
pledge absolutely, positively, categorically that you would be 
not back asking for an extension?
    Mr. Downs. Cross my heart and hope to die.
    Mr. Wolf. Would you pledge? Would you resign if you did?
    Mr. Downs. It depends on if the business--
    Mr. Wolf. Are you telling me that under no circumstances 
you would be asking for it to continue?
    Mr. Downs. Well, I couldn't. It depends. If the railroad 
had a catastrophe, if we had some of the liabilities that come 
due for us on--for instance, without having limits on 
liability, could we propose to be totally independent of 
capital? We have had mandatories imposed on us with ADA station 
and equipment.
    Mr. Wolf. Well, you are going to make a case so that it 
probably would not end. What if it did end, which I don't think 
it would, what would happen to you after the year 2002?
    Mr. Downs. We think that we can make close to our cost of 
capital. And if we are not in a federal capital environment, 
the other part of the bill that is being considered is to allow 
the states the choice under NEXTEA to use their own capital 
funds for Amtrak capital projects as they can for other 
transportation projects. We have been very fortunate in 
striking an agreement, a long-term agreement with the State of 
New Jersey for New Jersey Transit to make investments on the 
Northeast Corridor with their capital funds to defray part of 
the operating expense on their territory. And that is about $25 
million a year over the next five years, and that is absent the 
capability of using federal transportation capital dollars for 
Amtrak.
    We think we can structure agreements with states that 
have--for instance, North Carolina is now buying its own 
passenger locomotives and cars with its own state general fund 
to be able to help defray part of the expenses of capital 
services. I think there are opportunities long term, if we are 
capitalized, to have states be the next primary source of 
capital investment for services that they want.
    Mr. Wolf. What is your fall back if Congress does not 
provide Amtrak with a half-cent funding from the Highway Trust 
Fund?
    Mr. Downs. If there is no capital funding and it is a 
straight line projection at current capital levels, we cannot 
make it. We can't make high-speed rail service work south of 
New York because of the continuing reliability problems south 
of New York with the entire electric traction, for instance, 
for the corridor with tunnel safety on the north end for the 
New York tunnels. All of those issues have to be addressed at 
some point with capital investment. Without them, we can't 
operate either safely or economically.

                       COMMUTER RAIL COMPETITION

    Mr. Wolf. Also, too, I think Mr. Packard had a very valid 
point. I don't know that you are completely accurate. There are 
a lot of people that are avoiding Amtrak from Philadelphia to 
New York, who are going on the commuter trains from Third 
Street Station to Trenton and changing and going up. And the 
cost of that ticket is much less than it is for Amtrak. So I 
think you are losing sufficient amount of ridership. So I don't 
think your answer to Mr. Packard was completely accurate.
    Mr. Downs. We have an agreement with New Jersey Transit 
about cross honoring tickets on the Clocker service that we 
operate hourly out of Philadelphia for New York and then in the 
evening back to Philadelphia. We would like to be able to price 
that better, but we haven't got the agreement structured yet 
about how to do that. We do, in some corridors, compete, but we 
don't like doing it. It is not that we cannot make money at a 
commuter price level. We can make it on more enhanced service, 
few stops, a more business program than a commuter rail. We 
cannot as a core business operate commuter rail in competition 
with other commuter railroads.
    Mr. Wolf. But the difference in the price between going 
from 30th Street to Trenton and changing and going up to New 
York is significantly less than it is to ride from Philadelphia 
to New York on Amtrak.
    Also, Ms. Molitoris, you mentioned about how wonderful it 
is in Europe with all the money and everything else. France's 
unemployment rate is very high. Germany's unemployment rate is 
very high. You are comparing apples and oranges. It is totally, 
totally different. You can't fly from Munich to Berlin without 
it costing you a lot of money. Secondly, they don't have the 
parking problem. Thirdly, they don't have the distances. The 
size of Oregon is exactly the same size of Germany. So to 
compare these things is really not accurate. They don't have an 
airline that will take you from here to Providence, Rhode 
Island, for $49. So I think there is a difference, and I think 
we have got to be careful that we don't just selectively 
present facts that really don't look at the whole broad basis.
    Ms. Molitoris. Mr. Chairman, I think the question that I 
was answering to Mr. Olver was that I didn't say anything about 
wonderful. He just asked me about the level of investment. And 
I simply said they invest a lot more than we do.
    Mr. Wolf. But also then their aviation is not as extensive 
as ours.
    Ms. Molitoris. And I didn't comment on the whole.
    Mr. Wolf. They don't have as many automobiles as we have. 
But I think selective answers really aren't very good. I think 
you have to look at the whole picture.
    Ms. Molitoris. We would be happy to comment for the record 
for that, Mr. Chairman.

[Pages 178 - 195--The official Committee record contains additional material here.]


                         FRENCH HIGH-SPEED RAIL

    Mr. Wolf. Also, has France cut back on the funding of the 
high-speed rail? We were told that they were going to build 
several other different routes and they have now cut back the 
funding because of their high unemployment rate. Is that 
accurate?
    Ms. Molitoris. They have a large number of projects similar 
to Amtrak that are on a priority list, they have made 
decisions.
    Mr. Wolf. To do what?
    Ms. Molitoris. To invest. And some they didn't.
    Mr. Wolf. Some that they had to make the decision that they 
are not going ahead with?
    Ms. Molitoris. Not right now.
    Mr. Wolf. Can you complete that for the record?
    Ms. Molitoris. I certainly will.

[Pages 197 - 199--The official Committee record contains additional material here.]


                        dedicated funding source

    Mr. Wolf. Amtrak suggests that it cannot become free of 
federal operating support without a dedicated funding source. 
However, Ms. Molitoris, the Administration did not support 
Amtrak's request for the creation of a new trust fund--a half 
cent of dedicated funding--in its fiscal year 1998 budget 
request or in NEXTEA. Why is that?
    [The information follows:]

    While the Administration believes that Amtrak should be 
funded from the Federal tax on motor fuels, it does not support 
the creation of a separate trust fund for Amtrak. As the 
Committee is well aware, there has been significant controversy 
over the last several years concerning the accumulating 
balances in the existing accounts of the Highway Trust Fund and 
we do not wish to compound the situation by creating a new 
trust fund or account.
    The Administration's FY 1998 budget request and the NEXTEA 
proposal makes a substantial commitment of capital resources of 
Amtrak totalling $3.4 billion over the next six years. This is 
equivalent to 89.8 percent of the capital Amtrak would receive 
under the bill recently introduced in the Senate (Intercity 
Rail Passenger Trust Fund Act) that would establish a trust 
fund with revenues from one-half cent of the Federal tax on 
motor fuels. The Administration also proposes that this funding 
come from the Highway Trust Fund and, beginning on FY 1999, be 
authorized as contract authority which provides the same level 
of certainty of funding as would be derived from establishing a 
trust fund.

    Mr. Wolf. Ms. Molitoris, and Mr. Downs, if you could both 
please answer this question. A dedicated funding source for 
Amtrak implies a new mandatory program, yet another 
entitlement. How does the creation of a new mandatory program 
and greater federal subsidies induce greater operating 
efficiencies at Amtrak?
    [The information from FRA follows:]

    The Administration's proposal has two elements which are 
designed to assist Amtrak's efforts to improve service and to 
eliminate dependence in Federal operating subsidies. One is 
management and labor efforts to increase net revenues and the 
other is a reliable source of capital. Both are essential for 
the needed efficiencies.

    [The information form Amtrak follows:]

    Amtrak never understood federal funding of the nation's 
highways or airways to be ``entitlement'' programs. Neither do 
we think that similar federal support to intercity rail 
passenger service could be construed as an entitlement, given 
the fact that it is only for a limited time.
    Substantial and consistent federal investment in the 
nation's highway and air transport systems have made them the 
envy of the entire world. The efficiencies created by these 
federal investments have been important contributors to the 
growing national economy. In other countries where governments 
have invested more heavily in rail passenger transportation 
(Japan, Germany, France, etc.), the rail systems make a bigger 
contribution to local economies that Amtrak can do.
    Investment in Amtrak will induce greater operating 
efficiency now as it has in the past. Following the 1973 Energy 
Crisis which caused public demand for Amtrak service to 
multiply, Amtrak was given hundreds of millions of dollars in 
federal support for investment. These funds purchased new and 
rebuilt locomotives and cars, an enhanced Northeast Corridor 
(especially south of New York), plus more efficient maintenance 
facilities. Following those investment, operating cost recovery 
went from below 50 percent to 80 percent. To reach self-
sufficiency, we need to resume that kind of effort.

                           highway trust fund

    Mr. Wolf. Does Amtrak believe that it is fair to divert 
one-half cent from the highway trust fund, which is collected 
from taxes assessed to road users, not from people that do use 
Amtrak? If so, please explain why.
    [The information follows:]

    With respect to the fairness issue, it is important to note 
several facts: First, Railroad passengers paid $2 billion 
(unadjusted for inflation) in federal ticket taxes over a 
twenty year period without any infrastructure return or trust 
fund benefits; Second, railroads today continue to pay 5.5 cent 
fuel tax that goes toward deficit reduction and Amtrak gains no 
benefit from that tax, even though it is a relatively small 
amount; and third, Highway Trust Fund revenues are set aside in 
a Mass Transit Account, yet commuter rail operations are exempt 
from federal fuel taxes that pay into that account. I suppose 
the fairness of transportation tax use is under question in 
many public policy quarters. As you know, the Ways and Means 
Committee has created the Excise Tax Task Force to explore some 
of the questions of fairness on transportation taxes.
    If fairness of taxes paid versus benefits derived were a 
significant issue among highway users, we think that they would 
be much more concerned with far larger cross subsidies that 
exist between the various categories of highway users which 
have been documented in a variety of studies over the years. 
For example, federal taxes are collected for gasoline used on 
all road despite the fact that only about 25 percent of 
national highway mileage is part of the federally supported 
system. This has not caused any great debate, nor do we think 
it should. A cents per gallon tax on motor fuel is simply a 
very efficient way to collect taxes. How those tax proceeds are 
used is a legitimate decision for the government that collects 
them. Highway users elect the legislators who make those 
decisions on their behalf.
    And road users do benefit from Amtrak anyway, although we 
think that they would benefit more if they rode our trains. 
Amtrak service is most dense in areas where congestion on the 
highways is already a problem. Amtrak trains take traffic off 
the roads that would otherwise be even more congested. Outside 
the Northeast, Amtrak operates substantial service frequency 
clusters around Chicago, Los Angeles and Oakland. In addition, 
when highways (and airways) are closed due to extreme weather 
conditions (such as January 1995 in the Northeast), Amtrak is 
usually able to provide substitute service for highway users 
who must still get to their destinations.
    Furthermore, Amtrak, like air and bus travel, is many times 
safer than travel by automobile. To the extent that any of the 
commercial modes of transportation diverts travel from 
automobiles, safety on the highways improves.

                        need to subsidize amtrak

    Mr. Wolf. Why should federal taxpayers, most who do not use 
Amtrak, subsidize the system, whose ridership is highest in the 
Northeast?
    [The information follows:]

    First, it is important to correct the statement in the 
question. While Amtrak ridership is very dense in the 
Northeast, more than two-thirds of travel on Amtrak, measured 
in passenger miles, in our two business units outside the 
Northeast. In fact, much of our support comes from rural areas 
that have few transportation alternatives--limited or every 
expensive air service, little or no bus service and low income 
earners where driving a car is not a serious option.
    No taxpayer uses each and every service funded by the 
federal (or any) government from the taxes that he or she pays. 
For example, we all pay federal, state and local taxes to 
support education, but not all of us have children in school. 
Taxes are paid to support a wide variety of common programs 
that make sense for the nation as a whole, whether each and 
every one of us uses all of them or not. It makes sense to have 
a well-educated electorate and workforce in order to be a 
strong nation, so we do that. It also makes sense to have a 
diversified transportation system that maximizes safety and is 
not overly dependent on increasingly limited resources like 
urban land and petroleum.
    We think that it is in the best interests of the nation to 
have an operationally self-supporting rail passenger system 
that could be expanded to more effectively serve the United 
States. There are areas of the country where more Amtrak 
service would contribute to alleviating congestion in other 
modes and forestall the need to build more highways through 
established neighborhoods. But few of us would want to have 
more rail service if that meant more subsidy. That is why it is 
in everyone's best interest to build a rail passenger service 
that is operationally self-supporting.

    Mr. Wolf. The majority of Amtrak riders have middle to high 
incomes. Low-income Americans are much more likely to ride 
buses. Since Amtrak caters to a comparatively affluent market, 
why should Amtrak receive a federal subsidy?
    [The information follows:]

    Amtrak has substantial ridership from all economic levels. 
Intercity rail passenger service occupies a market niche, with 
respect to income, between bus and air. Actually, the percent 
of ridership that has the lowest incomes (under $25,000 per 
household) on Amtrak is almost the same as bus (19 percent 
versus 21 percent).
    While the average household income of passengers riding 
Amtrak may be slightly higher than the United States average, 
it is also important to consider other demographic features. 
For example, if service to older Americans is important, it is 
significant to note that the percentage of passengers over 55 
using Amtrak for intercity travel exceeds the percentage for 
any other mode by a wide margin. Forty-six percent of Amtrak 
riders are over 55.

                            amtrak user tax

    Mr. Wolf. Should Amtrak users pay one-half cent towards 
capital expenditures instead of all federal gasoline taxpayers? 
How much funding would this idea collect on a yearly basis?
    [The information follows:]

    If Amtrak riders were to pay a .5 cent tax on all intercity 
(non-commuter) tickets, it would raise approximately 
$1,050,000. It would not generate the necessary amount of 
revenue. In addition, if Amtrak is already maximizing revenues, 
an increase in ticket prices could have the effect of losing 
total revenue.

                    decreased federal support impact

    Mr. Wolf. Since trust fund monies must be appropriated, 
what are the various scenarios for Amtrak's future if none, 
some, or all of this proposed federal support does not occur?
    [The information follows:]

    A secure stream of capital, with either direct spending 
ability or contract authority, would enable Amtrak to do long 
term planning, invest in new passenger equipment and plant 
modernization, enhance the corporations ability to raise funds 
in the private market, and consequently decrease Amtrak's 
reliance on federal capital support. If the Congress were to 
provide contract authority and at some point impose an 
obligation limitation to limit the available funds to less than 
the total amount of revenues generated by the \1/2\ cent of the 
excise fuel tax, Amtrak would still realize these benefits.
    Without such a dedicated funding source Amtrak is 
completely dependent on the less-than-certain actions of the 
Congress. This uncertainty hampers the company's ability to 
enter into long-term contracts.
    If this level of federal support does not occur, we will 
not be able to maintain a national passenger rail system.

                            amtrak ridership

    Mr. Wolf. Last year Amtrak estimated that the ridership 
from the Northeast Corridor would grow about 2 million 
passenger trips; however, this ridership was sensitive to 
decreasing airline fares. Since Amtrak testified, Southwest 
Airlines, a low-cost airline, has begun service along the 
Northeast Corridor. Mr. Downs, has Amtrak seen any decrease in 
the passengers since Southwest began servicing markets in the 
Northeast?
    Mr. Downs. No, as a matter of fact, our core passengers 
ridership is growing gradually in the Northeast Corridor. We 
have tried to strike a deal with Southwest Airlines. We have 
been unsuccessful so far. Their market is Boston. They land in 
Providence. We stop in Providence. We will stop high-speed rail 
in Providence when it is on line. We think we are a good 
connector from Providence to Boston for Southwest. We also stop 
at BWI, where their hub is, and we are about a quarter of a 
mile from their terminal location, so we think we can be a good 
extension of their service from BWI to Providence. And I think 
that will ultimately result in a partnership.
    Mr. Wolf. Which would do what?
    Mr. Downs. Joint ticketing or through ticketing that would 
allow you to take the train to BWI, get on a Southwest flight 
at Providence, get off at Providence and take the train to 
Boston.
    Mr. Wolf. What impact do you think Southwest could have on 
the long term? Have you looked at it?
    Mr. Downs. I believe that Southwest is in the hub to hub 
marketplace. They do not seem to be interested in markets that 
most other airlines have abandoned. They have chosen hubs, 
though, they are for instance, in Denver. The fastest growing 
airport in the United States is not Denver now. It is Colorado 
Springs.
    Mr. Wolf. Colorado Springs, because of landing fees.
    Mr. Downs. Because of landing fees. That is a phenomena 
around the country where airports like BWI that are lower cost 
than National, for instance, get the Southwest Airline 
business. They are still major hubs. They are not intermediate 
stops. They are not Minot, North Dakota. They are not 
Whitefish, Montana. They are not Spokane. They are not any of 
the lines where we think we can develop some pretty hefty 
business. Some of our seats in some of our trains turn over 
four times en route, so that we sell the seat four different 
times. Somebody said once well, how can you compete between 
Chicago and Seattle for passenger business. The answer is 
ultimately we don't. We compete between Minneapolis, St. Paul, 
and Minot. We compete between, say, Dodge City and Albuquerque 
or Albuquerque and Los Angeles for that kind of business, so it 
is intermediate city pair business.

                northeast corridor ridership projections

    Mr. Wolf. Has Amtrak updated its ridership projections for 
the Northeast Corridor based on the introduction of service by 
Southwest Airlines? If so, please discuss any ridership 
changes. If not, please explain why.
    [The information follows:]

    While the introduction of Southwest Airlines provides a 
challenge in the Northeast Corridor, it also offers a new 
business opportunity. In the last two years, a number of 
economy airlines have provided short-lived competition in the 
Northeast. However, in November, Southwest launched service 
between Providence and BWI. The rock bottom airline fares and 
time savings have contributed to a total ridership loss of 0.4% 
(40,000 trips) against the NEC's annual ridership base of 11 
million trips. The NEC's projections have been adjusted 
accordingly. But Amtrak also views Southwest as a potential 
business partner. Southwest and Amtrak are exploring ways to 
provide a seamless connection. Similar to those who travel on 
Amtrak for flights from BWI airport, efforts are underway to 
launch a joint promotion that would encourage Amtrak ridership 
to Green (Providence) Airport. The strength of this opportunity 
is demonstrated by the fact that Metroliner ridership to and 
from the BWI Airport station grew nearly 200% from fiscal year 
1995 to fiscal year 1996.

                status of route restructuring and costs

    Mr. Wolf. In September and November of 1996, Amtrak sought 
to eliminate five routes; however, Congress provided 
supplemental funding so that Amtrak could continue operating 
these routes until states had the chance to ``buy back'' these 
services. At the time, Amtrak told Congress that it would 
require $22.5 million to continue service along these five 
routes for a six-month period. It is my understanding that 
Amtrak has now reevaluated these costs. Currently, what does 
Amtrak believe the costs will be to maintain service along 
these five routes?
    Mr. Downs. I don't believe we ever--at least I did not say 
that it would be $22\1/2\ million. I remember a call that 
Senator Hatfield made during the appropriations conference to 
me. He asked me directly how much would a six months extention 
cost. I said $44 million. He said that is too much money, I am 
sorry, that is the end of the story. That was as truthful a 
number as I could get.
    A number of folks then looked at our route and passenger 
system economics and showed that this line for six months 
incurred operating losses of about $22\1/2\ million. And they 
said okay, well, then it must be that you are going to lose 
$22\1/2\ million as a result of keeping these trains on, that 
is the price. What we said after that was we didn't sell any 
tickets on these trains for three months. So these trains will 
be running empty. We didn't have any marketing pegged for this, 
so no one was selling these tickets, not travel agents, not our 
RSOs [reservation sales offices] or anyone. So when the big CR 
extended those routes for six months, revenue losses we tried 
to quantify the base data that showed the allocated loss for 
these trains was $22,500,000.
    We think that we are now going to lose an additional, 
beyond the $22,500,000, that we will lose about $13,500,000 
more than the $22,500,000 by running those trains for the 
additional six months, so that the net outcome for us was a 
$13,500,000 loss.
    Mr. Wolf. Would you please give us the actual cost of 
personnel and equipment and lost opportunity and expand for the 
record?
    If Congress did not provide sufficient funding to continue 
service along these five routes, tell us how Amtrak plans to 
fund these routes for the six-month period.
    Mr. Downs. Out of our deficit, we borrowed money at the end 
of the year from cash from banks. It is coming out of our end-
of-the-year borrowing.
    Mr. Wolf. Which would mean?
    Mr. Downs. We are going to borrow $13,000,000 more than we 
needed to.

                        status of state buybacks

    Mr. Wolf. Have any of the states committed to buying back 
these routes, and if so, which ones?
    Mr. Downs. We have in effect ended all of our opportunities 
for any state participation in the Pioneer Route and on the 
Desert Wind.
    We are awaiting a last tri-state commission meeting 
tomorrow on the Gulf Coast Coast Ltd. service, the service that 
Mr. Callahan alluded to between New Orleans and Mobile, and we 
have the Texas legislature working very fast today, waiving a 
number of rules in the legislature to pass a bill that would 
fund the extension of the service on the Eagle until the first 
of October, but that is as far as they are going.
    Mr. Wolf. Why until just the first of October?
    Mr. Downs. They wanted to see if there was a way that the 
actual mail and express business could develop enough so that 
there would be a viable future there. The governor has been 
reluctant to make much of a state commitment beyond getting 
this train to another kind of business.
    The legislature is not doubtful but cautious about any 
investment in us beyond the first of October, which is the end 
of this fiscal year for us, and I think that they have decided 
that they will make that commitment to this line.
    On what Mr. Olver represents a portion of, as I said, we 
are dependent on some final negotiations with the Commonwealth 
of Massachusetts about a mail and express facility, and absent 
that, I don't know of any way to make that route viable.
    Mr. Wolf. At the same time that Amtrak sought to terminate 
routes, it also sought to increase service along other routes. 
Please highlight what routes these were and the service 
changes.
    Mr. Downs. We made a determination after doing a lot of 
customer work about frequencies. I think we made a fundamental 
mistake in trying to reduce frequencies on routes, as I said 
earlier. It is an assumption that customers will change their 
travel plans to make their travel plans fit your day-of-week 
travel capabilities, which was an assumption that was wrong. 
Customers won't--if they want to go on Monday, they don't want 
to hear that they can't go until Wednesday.
    We had several routes that were less than seven days a week 
that we thought we could develop both passenger service and 
mail and express. Moving equipment to those lines to better 
utilize it, get a better rate of return, was part of the 
strategy.
    The ones that were going to seven days a week were the 
Empire Builder, between Chicago and Seattle, because we think 
it has not only tourism but mail and express business. The City 
of New Orleans, between Chicago and New Orleans, has returned 
to seven days a week; and a third Florida frequency, where we 
have a much better ridership, was added as a result of that on 
a seven-day-a-week schedule. Also, the return of the Zephyr 
which is from Chicago, Salt Lake City, andOakland, California, 
to seven-day-a-week service for the exact same reasons, tourism, but 
also mail and express.
    That would leave us with a system that is basically seven 
day a week on our long-distance trains in order to be able to 
maximize this new business.
    Mr. Wolf. We will have some other----
    Mr. Olver. Could I----
    Mr. Wolf. Sure.
    Mr. Olver. Has that been successful?
    Mr. Downs. We just got from the board last week the 
authority to lease the additional equipment that we would need 
to be able to expand that.
    Mr. Olver. So you haven't actually put that in. That was 
part of last fall's plan but it has not yet been implemented?
    Mr. Downs. It has not. We have not even received the cars 
yet that would allow us to expand the business, but they are in 
process. They are on order.
    Mr. Olver. I see. All right.
    Mr. Wolf. To date, has Amtrak implemented any service 
increases on these routes? If not, please explain why and when 
these service increases may take effect.
    [The information follows:]

    The following table, taken from page 5 of Amtrak's fiscal 
year 1998 Grant Request submitted to Congress on February 14, 
1997, outlines the services implemented as planned.

  TABLE 3.--FY 1997 PLAN ACTIONS AFFECTED BY OMNIBUS APPROPRIATIONS ACT 
------------------------------------------------------------------------
       Plan Actions Affected By OAA            Implemented as Planned?  
------------------------------------------------------------------------
Route and Service Discontinuances:                                      
    Desert Wind (Salt Lake City--LA, tri-   No.                         
     weekly).                                                           
    Pioneer (Denver--Portland, tri-weekly)  No.                         
    Texas Eagle (St. Louis--San Antonio,    No.                         
     tri-weekly).                                                       
    Lake Shore Limited (Boston--Albany      No.                         
     segment, daily).                                                   
    Sunset Limited (Sanford--Miami          Yes.                        
     segment, tri-weekly).                                              
    Gulf Coast Limited (New Orleans--       No.                         
     Mobile, daily).                                                    
Route and Service Restorations:                                         
    City of New Orleans (Chicago--New       No.                         
     Orleans): 6 days/wk to 7 days/wk.                                  
    Empire Builder (Minneapolis--Seattle/   No.                         
     Portland): 4 days/wk to 7 days/wk.                                 
    California Zephyr (Salt Lake City--     No.                         
     Oakland): 4 days/wk--7days/wk.                                     
    Crescent (Atlanta--New Orleans): 4      Yes.                        
     days/wk--7 days/wk.                                                
    Silver Service (New York-Miami): Add    Yes.                        
     third frequency.                                                   
    Restoration of the Broadway Limited/    Yes (but smaller consist).  
     Three Rivers Extension from                                        
     Pittsburgh to Chicago.                                             
    Speical Trains........................  No.                         
Equipment ``Run Throughs'' and Operational                              
 Improvements:                                                          
    City of New Orleans/Empire Builder Run  No.                         
     Through.                                                           
    Southwest Chief/Capitol Limited Run     Yes.                        
     Through.                                                           
    Interchangeable Consisting: LakeShore/  Yes (Crescent and Silver    
     Crescent/Silver Service/Broadway.       Services only).            
------------------------------------------------------------------------

    Mr. Wolf. Amtrak planned to increase services along certain 
routes in order to improve its revenues. If Amtrak was unable 
to increase services along certain lines, what impact did this 
have on Amtrak's 1996 bottom line? What impact is projected in 
1997?
    [The information follows:]

    The following table shows the impact of the Omnibus 
Appropriations Act on the Business Plan approved by the Board 
of Directors for fiscal year 1997.

                                              [Dollars in millions]                                             
----------------------------------------------------------------------------------------------------------------
                                                                                                   Change       
                                                               FY97 OAA (12/  FY97 BUSPLN ----------------------
                                                                   1/96)       (10/1/96)       $          %     
----------------------------------------------------------------------------------------------------------------
Revenue......................................................      1,615.5       1,622.4      (6.9)        -0.4%
Expense......................................................      2,377.7       2,348.5      29.2          1.2%
                                                              --------------------------------------------------
Operating P/L................................................       (762.3)       (726.1)    (36.1)        -5.0%
Federal Operating Support....................................        447.8         425.3      22.5          5.3%
                                                              --------------------------------------------------
Net Operating P/L............................................       (314.5)       (300.9)    (13.6)        -4.5%
Non Cash.....................................................        270.1         270.1       0.0          0.0%
                                                              --------------------------------------------------
Budget Result................................................        (44.4)        (30.8)    (13.6)        -4.5%
----------------------------------------------------------------------------------------------------------------

                           Profitable ROutes

    Mr. Wolf. Is it feasible to assume that one day Amtrak may 
be able to run profitable routes, when you take into 
consideration both operating and capital expenses?
    [The information follows:]

    It is certainly feasible for some routes to be profitable 
while it is less likely for others. For example, the Autotrain 
and Metroliners as well as many State supported trains have a 
strong potential for achieving revenues that cover both 
operating and capital expenses in the future. The Metroliner 
product line generated enough revenue in fiscal year 1996 to 
cover 100% of its fully allocated operating expenses (including 
deprecation) and generate $14 million profit. Amtrak's fiscal 
year 1996 study on EVA (Economic Value Added), showed that if 
the Metroliner product line paid a similar fee for using the 
infrastructure as Amtrak's trains that run over freight owned 
right-of-way, it would also cover its cost of capital as well.
    The potential profitability of any route depends on the 
current condition of the equipment, stations, mechanical 
facilities utilized as well as the revenue potential from 
passengers and state partners.

    Mr. Wolf. What needs to be done to increase Amtrak's 
profitability along all of its routes?
    [The information follows:]

    Four critical things need to continue if Amtrak's core 
intercity train routes are to continue to improve their 
financial performance:
    Investment in appropriate capital assets such as equipment, 
station improvements, maintenance facility improvement, 
information systems to reduce costs through efficiency and 
improved quality and increase revenue through increased 
ridership and fares;
    Continuous improvement of product design which meets 
customer demands in a way that both attracts new customers and 
the frequency of use from existing customers. These 
improvements must generate more revenue than cost to reduce the 
routes loss;
    Continuous improvement of processes to improve the quality 
of the product and reduce the unit cost of providing the 
product to the customer;
    Judicious use and continuous realignment of precious assets 
in ways that provide the highest possible return relative to 
the investment.

                   Mail and Express Service Revenues

    Mr. Wolf. What routes can Amtrak maximize its mail and 
express revenues on?
    [The information follows:]

    Amtrak has the right to carry mail and express on each of 
its routes. The potential revenues for mail and express is 
great on a number of routes. Total annual revenues generated by 
trucks is in excess of $220 billion. The freight railroads 
carry about $35 billion annually. The kind of express Amtrak is 
considering would only be a fraction of what either of those 
are today. This has two positive outcomes. First, a more 
aggressive approach to mail and express will immediately 
improve the economics of those long distance trains that will 
run this service. It will also allow Amtrak to pay the freight 
railroads more for the same train that operates over their 
track today. When passenger trains were in their heyday, almost 
half of the revenues were attributed to mail and express. Today 
we are only averaging about six percent for mail and express. 
Currently, mail and express revenues account for $65 million 
annually, ($62 million from mail and $3 million from express.)
    Amtrak believes that it can significantly increase revenue 
derived from both mail and express on each of its routes. In 
order to do so, Amtrak needs to restore daily service to each 
of the remaining routes and acquire additional express handling 
equipment. The routes with the greatest potential include the 
Southwest Chief, the Empire Builder, the California Zephyr, the 
Capital Limited, the Three Rivers, the Texas Eagle, and the 
three New York-Florida trains.

    Mr. Wolf. Are any of the soon to be terminated routes key 
to increasing mail or express service?
    [The information follows:]

    Amtrak believes that the potential exists to generate 
considerable mail and express revenue on each of the routes 
slated for discontinuance. Once the market is developed along 
these routes, the revenue derived from mail and express could 
cover the operating loss generated by these trains.
    In fact, Amtrak is close to reaching an agreement with the 
State of Massachusetts to retain the Boston-Albany section of 
the Lake Shore Limited. The state is proposing to construct a 
large mail and express handling facility in Springfield. Should 
this facility be constructed, Amtrak could generate enough 
revenue to justify the continued operation of the Boston-Albany 
section of the Lake Shore Limited.
    The State of Texas is considering a legislative package 
that would allow Amtrak to continue to operate the Texas Eagle 
through September 31. This extension would give Amtrak much 
needed time to develop the mail and express market in Texas. 
Should Amtrak have to discontinue the Texas Eagle on May 10, it 
would be very difficult to reestablish service at a later date.

                   penn station redevelopment protect

    Mr. Wolf. I am going to go through some more, questions on 
Pennsylvania Station and then I will recognize Mr. Tiahrt.
    Last year the IG told us the $315,000,000 cost estimate for 
the Pennsylvania Station redevelopment project in New York City 
was completely unreliable. She added, ``I think at this time 
the most correct thing that can be said about how much the 
Farley Building is going to cost is that nobody knows. It is an 
open-ended figure.''
    Ms. Molitoris, is there a more reliable estimate today, and 
for the record, please provide the committee with this 
project's new budget estimate.
    Ms. Molitoris. Mr. Chairman, there is a new budget 
estimate. O'Brien Kreitzberg has completed a new budget 
estimate, and we are expecting a presentation next week on that 
assessment. It was higher, but the presentation we will be 
receiving is on the restructuring of that proposal to fit the 
commitment which we have already made and which we will not 
raise.
    Mr. Wolf. You have made it clear that the federal 
government will not go over that?
    Ms. Molitoris. I think that is not only ourselves, Mr. 
Chairman, but the city and state of New York. All of us are 
committed. We have made our investment statement and the 
project should fit that available resource.
    [The information follows:]

    The Pennsylvania Station Redevelopment Corporation (PSRC) 
Board has not met to review, discuss or accept the new budget 
estimate prepared by O'Brien Kreitzberg. When the budget 
estimate is accepted by the PSRC Board, I will be able to 
respond to your request. But as I stated, the Federal 
commitment is $100 million and we will not go over that figure.

    Mr. Wolf. Will that include the cost estimate for the 
necessary tunnel work?
    Ms. Molitoris. We will--I presume it is, because that is a 
safety issue that is important, but I would like to get the 
presentation complete next week and then we will present it for 
your review.
    Mr. Wolf. The IG staff said the cost would be $450,000,000 
to $500,000,000.
    Ms. Molitoris. My understanding, sir, is that the O'Brien 
Kreitzberg estimate was not that high, but I would like to get 
the real numbers in the presentation and then bring it to the 
committee.
    Mr. Wolf. Please. Mr. Downs, based on the new cost 
estimate, does Amtrak believe that it is financially prudent to 
continue to rehabilitate Pennsylvania Station?
    Mr. Downs. We are not part of the Penn Station 
Redevelopment Corporation Board, and we are now separated out 
from that entire operation. We gave them notice a couple of 
weeks ago of our intention to segment this process, segment 
this project.
    Our interest is in taking care of the old Penn Station 
upgrades that need to be in place for the implementation of 
high-speed rail in the northeast, that we will have 
responsibility below the Farley Building only, being the air 
space above our tracks, and in old Penn Station.
    We have disengaged the corporation from any real 
participation either at the board level or in decision-making 
around the Farley project.
    Mr. Wolf. What is the commitment of the state and city, and 
how much money have they put in so far?
    Ms. Molitoris. They have identified their money. It is 
$100,000,000 from us and $100,000,000 from them and 
$115,000,000 from private resources that would be accrued from 
the retail opportunities.
    Mr. Wolf. For a total of?
    Ms. Molitoris. $315,000,000.
    Mr. Wolf. So if what the IG said was accurate, what would 
that mean?
    Ms. Molitoris. Mr. Wolf, we are not changing our 
commitment.
    Mr. Wolf. I know. I just want you to tell me what do you 
think it would mean if the IG were accurate. What would that 
mean?
    Ms. Molitoris. I don't think that the report, the 
suggestion that she made was accurate. I do think that the 
O'Brien Kreitzberg estimate was higher, and I believe that the 
presentation we will hear is how the project will be redesigned 
to fit the resources.
    Mr. Wolf. The administration is requesting $23,450,000 for 
Pennsylvania Station redevelopment efforts in fiscal year 1998; 
however, it is unclear from Amtrak's grant request whether you 
are requesting funding as well.
    So you are just pulling out, is that what you are telling 
us?
    Mr. Downs. Our agreement was that I notify the Penn Station 
Redevelopment Corporation and the city and state of New York 
that our interest is not in the Farley Building. It is in old 
Penn Station, that our commitment is to do whatever we can to 
rebuild the existing old station for safety, for health and 
life safety, and to accommodate high-speed rail.
    Our intention is that we are not a participant in decision-
making or funding of the Penn Station, Farley Project.
    Mr. Wolf. Has that changed since last year?
    Mr. Downs. Yes.
    Mr. Wolf. When was that changed?
    Mr. Downs. About three weeks ago.
    Mr. Wolf. Three weeks ago.
    Mr. Downs. I did that in writing, but I would be glad to 
submit a copy of that to the committee.
    Ms. Molitoris. Mr. Chairman, also, I would like to submit 
this letter for the record. It was just sent on the 17th of 
March from Charles Gargano, and it is the statement of the 
commitment of the city and state money.
    Mr. Wolf. Please.
    [The letters follow:]

[Pages 211 - 214--The official Committee record contains additional material here.]


    Mr. Wolf. Does Amtrak plan on using any of its appropriated 
funds at all for the Pennsylvania Station in 1998?
    Mr. Downs. I believe we have several health and life safety 
projects still ongoing within the old Penn Station part of the 
project.
    I believe part of that is earmarked for demolishing a part 
of the old Penn Station under Madison Square Garden and 
rebuilding it into better crew quarters and getting some of the 
final rounds of asbestos abatement out of the building.
    I believe that is what is in the capital budget for 1998, 
but I would need to verify that and submit that to you in 
detail.
    [The information follows:]

    Amtrak's FY98 Capital budget will be approved by the Board 
of Directors subsequent to enactment of the FY98 
appropriations. Therefore, at this time, there are no 
specifically approved plans with regard to the utilization of 
capital funding for New York's Penn Station. However, as part 
of the proposed FY98 Capital Plan, there is $11 million 
identified specifically for Penn Station improvements. In 
addition, it is expected that some funding for the ongoing life 
safety/operational reliability for NEC stations program as well 
as funds from the high speed rail program could be directed to 
Penn Station.
    Planned projects, related to ongoing capital improvements 
at Penn Station, include continuation of life and safety 
related initiatives and other enhancements necessary for the 
high speed rail program expected to begin operation in late 
1999. In particular, passenger wayfinding and circulation will 
be improved so that in an emergency passengers will be able to 
quickly reach the nearest means of egress and, under normal 
operating conditions, better pedestrian flows are created. 
Other potential projects include the identification and repair 
of deteriorated steel and concrete supporting the Penn Station 
train shed, which poses a threat to customers and equipment; 
full fire protection and public address system for the ``A'' 
and ``B'' levels; physical/technical coordination of fire 
protection and emergency communications; installation of a 
smoke exhaust system; asbestos abatement; and escalator and 
elevator upgrades.

    Mr. Wolf. To date, $77,700,000 has been provided to the 
Pennsylvania Station redevelopment project; $51,500,000 in 
direct appropriations and $26,200,000 authorized in the 
National Highway System's bill. How much has Amtrak obligated 
and expended? For the record, please specify what this funding 
has been used for, i.e., planning, asbestos removal.
    [The information follows:]

    A total of $76.4 million has been provided for the 
Pennsylvania Station Redevelopment Project. While $26.2 million 
was authorized in the National Highway System Designation Act 
(NHSDA), only $24.9 million was available since the Federal 
Highway Administration was required to impose a 12.5 percent 
permanent across the board reduction in all Intermodal Surface 
Transportation Efficiency Act (ISTEA) funded projects and 
programs for fiscal year 1996. This reduction was required 
under the provisions of section 1003(c) of ISTEA.
    As of March 28, 1997, a total of $40.5 million has been 
obligated with $22.8 million expended. The $22.8 million has 
been used for:
    Environmental and historic assessments;
    Architechtural and engineering services including schematic 
plans (30 percent design), cost estimates and structural steel, 
retail and asbestos studies;
    Safety-related emergency repairs at Penn Station including 
planning, design and improvements for train shed leak repairs, 
installation of closed circuit television and public address 
systems and dynamic and static signs, smoke and firestopping 
repairs, and asbestos abatement and under the Farley Building 
concrete and structural steel remediation; and
    Planning, design and improvements at Penn Station for the 
Americans with Disabilities Act key station compliance and 
rehabilitating crew facilities and at the Service Building 
chimney stack removal.

              northeast corridor capital expense transfer

    Mr. Wolf. In the 1996 appropriation, language permitted the 
transfer of up to $20,000,000 from capital expense to Northeast 
Corridor. At last year's hearing, Amtrak testified that it 
planned to transfer and obligate $9,000,000. Did the agency 
transfer the remaining $11,000,000? If so, what was this 
expended on?
    [The information follows:]

    The Conference Report on the fiscal year 1996 appropriation 
provided Amtrak with the ability to transfer not more than $15 
million from the capital account to the Northeast Corridor 
Improvement Program (NECIP). The Conference Report also 
provided Amtrak with up to $20 million from the capital account 
for emergency life safety repairs at Penn Station and for the 
reconstruction of the station's service building to provide the 
support services necessary for the safe operation of the 
station. Amtrak did not transfer any funds from the capital 
account to NECIP. However, Amtrak identified and obligated $9 
million for three projects at Penn Station including the 
planning, design and improvements for the Americans with 
Disabilities Act key station compliance and rehabilitating crew 
facilities and at the Service Building chimney stack removal. 
Amtrak expects to use the remaining $11 million to complete 
improvements at Penn Station but the funds have not been 
transferred or obligated.

                      fra railroad merger process

    Mr. Wolf. Mr. Tiahrt.
    Mr. Tiahrt. Thank you, Mr. Chairman. Welcome to the 
committee. I am new on this committee, so I am a little bit 
behind the power curve on some of these questions.
    I have some basic questions that I would like to ask and 
then a couple of specifics.
    How involved is the Federal Railroad Administration in the 
merger process of railroads? What role do you play in the 
merger, for example, the Union Pacific and Southern Pacific 
merger; what role did you play in that?
    Ms. Molitoris. We were the lead agency in advising the 
Secretary on all of the implications of that merger, and then 
we worked with the Secretary's policy office to submit the 
views of the Department of Transportation to the Surface 
Transportation Board.
    Mr. Tiahrt. You feed information to the Surface 
Transportation Board, is that right?
    Ms. Molitoris. It is an official submittal of our 
assessment and what we believe is necessary for retaining 
competition and other issues, safety.
    Mr. Tiahrt. Safety issues. Were you actively involved when 
the Union Pacific and Southern Pacific first came then as far 
as looking at, for example, Wichita, the increased number of 
trains coming through Wichita?
    Ms. Molitoris. Our staff worked on all of the 
issuesincluding congestion, safety, competition.

                             wichita merger

    Mr. Tiahrt. Right now, we are going through a mitigation 
study trying to figure out which of those 26 arteries in the 
county that Wichita is in, and we understand the train traffic 
may be as many as 12 manifest trains which are 135 cars long. 
They have to go ten miles an hour through Wichita, and it has 
created a very big concern there about not just delays for the 
common citizen but also safety concerns.
    The railroad separates the east side of Wichita from the 
west side of Wichita. With the increased train traffic due to 
the merger emergency vehicles will be impeded, police vehicles 
will be impeded, firemen, ambulances, et cetera. In addition, 
with the new proposed environmental air regulations Wichita is 
currently borderline, and although the wind blows quite often, 
some days, it is calm.
    We usually write it on the wall somewhere because it is so 
unusual, but in those calm days with additional traffic backed 
up, it can push us over the danger threshold and cause problems 
in our funding schemes.
    We have a big problem in Wichita, and probably need about 
ten grade separations. It is a tremendous problem that we are 
trying to deal with.
    Ms. Molitoris. Mr. Tiahrt, I have spoken to the director of 
transportation and he was giving me the same message. What I 
offered to him and would like very much to work with you, with 
our regional office in that area, and our grade crossing 
managers to work with you to develop a dialogue with the city 
and the railroads to come up with an optimum plan on how to 
deal with any investment needs and other ways of dealing with 
it. There are some options that we might explore.

                      determining route viability

    Mr. Tiahrt. I would certainly welcome any help as we try to 
pursue this.
    Amtrak comes through Newton, Kansas. How do you determine 
which routes are going to be maintained and which ones are you 
considering closing some down? Is there a cost analysis that is 
done or what is the process you go through when you decide to 
continue a route or consider closing one down?
    Mr. Downs. By the way, I am pleased to see a fellow Kansan 
on the committee.
    Mr. Tiahrt. Thank you.
    Mr. Downs. We try to look at it from a business network 
standpoint, which routes are essential to a national network 
that we could develop the best passenger and mail and express 
business.
    The Southwest Chief which does stop in Newton is a kind of 
unique train for this. It is currently seven days a week. It 
carries--as I mentioned earlier, the Southwest Chief carries 
about 42 percent of its revenue in mail between Chicago and Los 
Angeles, so the train is a valuable bottom-line product for us.
    It is intended to be part of our long-term network. It also 
is part of our strategy for expanding mail and express. I would 
like to see over half of the revenue on that train be mail and 
express, and I would like to develop that as a local business 
opportunity as well as a long-haul mail and express.
    The long and the short of it is, we judge each route on its 
overall economics. The Southwest Chief has some pretty good 
economics because of its mail business.
    Mr. Tiahrt. It was interesting that you were looking at the 
Northeast Corridor and talking about Southwest Airlines, I 
assume that is correct? We have a problem of not being able to 
allow Southwest Airlines to come into Wichita because of the 
Wright amendment, and it may have made it more viable to run a 
train down to Oklahoma City and Dallas, but I believe that 
route goes to Santa Fe instead.
    I wondered if you had ever considered a Kansas City-
Wichita-Oklahoma City-Dallas route, and I don't know how you 
would make an analysis of that, but I assume that you don't own 
all the track that you run on.
    Mr. Downs. We own none of our trackage except in the 
Northeast Corridor. We have done some preliminary reviews of 
that because of some interest in Texas about the future of the 
Texas Eagle long term, and whether or not the business is 
better in making it a Chicago-Kansas City-Wichita-Dallas-Fort 
Worth, I believe that train used to be called the Lone Star, 
and it was a viable route until 1979. It was still an active 
passenger line. I even remember riding on it.
    It has some better economic prospects of working as an 
alternate to the current alignment of the Eagle which is 
Chicago-Little Rock-Dallas-Fort Worth-San Antonio, and if part 
of the economics that we have been asked to look at by a number 
of folks in Texas and Oklahoma have been the viability of a 
line instead that would run, as I said, Chicago-Kansas City-
Wichita-Dallas-Fort Worth.
    Mr. Tiahrt. If you have a map of where your routes are 
currently, I sure would like to have one. Thank you.
    Mr. Chairman, I don't have any further questions at this 
time, but I would like to have the opportunity to submit some 
in writing.
    Mr. Wolf. Without objection.
    Mr. Downs. Thank you, Mr. Tiahrt.

                       recent rail safety issues

    Mr. Wolf. Between 1990 and 1991, the Federal Railroad 
Administration was the subject of several highly critical GAO 
reports on the rail safety oversight program. These reports 
showed an agency lax in its inspection practices and reluctant 
to pursue enforcement actions.
    In response, FRA began developing new inspection and 
enforcement practices; however, the Inspector General, IG, 
recently released a report on FRA's safety program that 
concluded that FRA's inspection and enforcement of federal 
railroad safety standards were not effective and did not ensure 
that railroads complied with safety standards. The 
administrator responded to the IG's concerns by noting that the 
audit preceded implementation of the FRA's safety assurance and 
compliance program, and thus, the report was not relevant to 
the way FRA currently does business.
    However, based on the older GAO reports and the more recent 
IG audit, it appears that very little or nothing has changed at 
FRA. Ms. Molitoris, how can you assure Congress that your 
regulatory agency is not continuing to go soft on safety 
violators even in those cases where you have vigorous 
enforcement powers?
    Ms. Molitoris. Mr. Wolf, I think if you read the cover 
letter of the IG, you will note that she says that in fact our 
program has fundamentally changed, and that they will be coming 
back to see the results of that program because theirreview did 
predate the implementation and maturation of that change.
    One of the things we talked about in the introductory 
statement was the chart that is on the wall or right here. The 
fact is, when we arrived at FRA, we looked at statistics and we 
saw a basic flattening of safety statistics.
    In other words, they had reached a certain plateau, and for 
several years starting about 1986, there hadn't been a movement 
to--the safety statistics hadn't significantly moved. What we 
did in the first year, year and a half, is to meet in ten 
roundtables with all our constituents and to review all of our 
issues to find out how we could get that line to go down again, 
how are we going to motivate more safety than had occurred 
since 1986, and our resultant program, the safety assurance and 
compliance program. I think you received this report as did all 
members of Congress. It showed us that we had to go to root 
causes.
    In the 1970's, when we were at the peak of the worst unsafe 
issues, there were many, many different kinds of accidents. 
What we know today is that most of the accidents that occur are 
human factor or track caused. As I mentioned when I was talking 
to Mr. Olver, the freights have invested $90 billion over the 
last six years, for example, and that gives a tremendous boost 
to the safety of equipment and other elements of the 
infrastructure.
    So as we looked at a very large country, lots of miles, 
about 300 thousand miles, about 225 thousand employees, and 20 
thousand locomotives and 1.1 million cars, we knew that we had 
to leverage our limited resources.
    We have about 476 field inspectors and about 89 people in 
headquarters. We designed a program that focuses on root causes 
and railroad system-wide answers instead of only using the 
traditional one inspection at a time approach. We have been 
very gratified that the statistics in the past two years have 
really begun to bear fruit.
    I should also mention that I think we do a better job now 
because we have more people as safety partners. For example, 
labor is now at the table in the beginning of the process 
instead of the end of the process. Nobody knows better what 
happens out on the lines than they do, because they risk their 
lives every day.
    Management is at the table. In fact, this coming Monday, we 
will be having our Railroad Safety Advisory Committee where 
some 50 people sit around a table, all of them constituents, to 
work on common-sense solutions to safety problems. There is a 
lot of ownership, and it results in rules that work well.
    I think the results show that it is working. I think the 
report, to the extent that you can review it, gives you a very 
plain-spoken review of how the process is working, and I am 
encouraged that both labor and management find this process an 
improvement over past years.

                        ig report on inspectors

    Mr. Wolf. In the report, the IG noted that the FRA 
inspectors did not make follow-up inspections when a higher 
than average number of deficiencies existed. What is the FRA's 
follow-up visit policy, and what is the average number of 
deficiencies that they find?
    Ms. Molitoris. Of course, it depends on what they are 
looking at, which railroad. We have a lot of railroads in this 
country, about five majors, and over 550 regional railroads and 
smaller railroads.
    There is a wide range of investment that railroads have 
made and a wide range of more or less safety. So what we are 
doing now is looking at the biggest risks and finding the areas 
that need to be fixed first.
    The safety assurance and compliance program involves 
sitting down at the table with a railroad. There is a list in 
your book of all the railroads that have been involved in this 
process with labor and management and FRA at the table.
    We give them our profile of their railroad, which is the 
result of all the information in our database about them. Labor 
lays their safety concerns on the table. There is a consensus 
around what the priority safety issues are, so that in fact, 
instead of just having individual inspections, if you find a 
violation, fix that.
    We talk about things that are fixed across an entire 
railroad, so that in fact, we are leveraging our limited 
resources to get a bigger safety buck. That is why those 
increases have been so significant.
    Mr. Wolf. Do you have a list of railroads that you are 
particularly targeting?
    Ms. Molitoris. We are working with all the railroads, but 
if you look at page 41 in your report, you will find the list 
of the railroads we have already met with. I think there are 
36, the major railroads, the biggest ones. Now, we are 
focusing, continuing the process this year, and bringing into 
the process medium-sized railroads.
    It is a systems approach to safety answers.
    Mr. Wolf. Ms. Molitoris, I disagree with your statement 
that the IG audit was not relevant to the way FRA currently 
does business. Many aspects of this report do remain relevant 
because in order for SACP to be effective in increasing 
railroad safety, regular inspections, to assure that railroads 
are complying with existing safety standards, still remain a 
critical source of information. Please explain what the SACP 
has done to increase the effectiveness of FRA's safety 
inspections and enforcement.
    [The information follows:]

[Pages 221 - 222--The official Committee record contains additional material here.]


                           safety violations

    Mr. Wolf. Also, the report noted that FRA did not recommend 
civil penalties to the maximum extent allowable for serious 
safety violations. For the record, please provide a table 
highlighting the number of serious safety violations found, 
recommended civil penalties, and percent of these penalties 
that are at the maximum level. This table should show data for 
the past five years.
    [The information follows:]

[Pages 224 - 225--The official Committee record contains additional material here.]


                           safety inspections

    Mr. Wolf. During the 74 of 75 inspections, the IG staff 
noted that inspectors did not review the railroads' inspection 
records prior to commencing, during, or subsequent to their 
inspections, even when violations and serious safety defects 
were identified by the inspectors. Your inspectors did not 
review company records to determine the quality of the rail 
safety inspectors hired by the railroads, even though this 
group is the ``first line of defense'' in railroad safety, and 
there is a federal regulation requiring all such inspectors to 
have appropriate training and credentials. Why wasn't FRA 
engaging in these inspections? Do you have the time to do so?
    [The information follows:]

    FRA's Safety Assurance and Compliance Program (SACP) 
process incorporates procedures for the comprehensive, 
systematic review of inspection records and other relevant 
data. Furthermore, FRA does not believe that safety would be 
enhanced by requiring its inspectors to review railroad 
inspection records in connection with every FRA inspection.
    FRA inspected more than a million railroad records during 
the period of the IG audit. Recognizing the inherent 
difficulties in ensuring sufficient records inspection under 
the site specific approach, FRA made certain the SACP 
incorporated a thorough review of railroad records. Under SACP, 
FRA may include comprehensive reviews of railroad records along 
with accident and injury data, and on-the-ground monitoring, as 
part of the inspection process.
    FRA does not believe it would be productive to review the 
records of designation of railroad inspection personnel unless 
there is some reason to question their qualifications; FRA will 
re-emphasize the need to do so in such situations.

                         record review actions

    Mr. Wolf. What actions has FRA undertaken to assure that 
these records are now reviewed?
    [The information follows:]

    FRA reviews the records of designated railroad inspection 
personnel when there is some reason to question their 
qualifications. When FRA finds noncompliance, it is not often 
the result of a railroad inspector's lack of knowledge. Where a 
lack of qualifications is apparent, FRA acts to correct it, 
often by participating with rail management and labor in the 
training or re-training of railroad employees on regulatory 
compliance.
    The SACP is designed to ensure that FRA exercises its 
safety authority in a common sense way that focuses on results. 
SACP provides for a comprehensive review of the inspection 
records and safety would not be enhanced by requiring 
inspectors to review railroad inspection records with every FRA 
inspection.

                        FRA INSPECTOR PROCEDURES

    Mr. Wolf. Finally, the report noted that FRA inspectors and 
their managers did not comply with FRA policies and procedures 
but instead left inspection and enforcement decisions to the 
discretion of the individual inspectors. What policies has FRA 
implemented to assure consistent work among the inspectors and 
to assure that every inspector is following FRA's policies and 
procedures? How is the agency monitoring the success of these 
changes?
    [The information follows:]

[Pages 227 - 228--The official Committee record contains additional material here.]


    Mr. Wolf. Mr. Sabo.
    Mr. Sabo. I will yield to Mr. Olver.

                     HIGH-SPEED RAIL IN PROVIDENCE

    Mr. Olver. Thank you, Mr. Chairman. I wanted to clean up 
just a couple of things here from previous. I was waiting 
impatiently for a turn here, and I thank my ranking member for 
allowing me to go first so that I can get to another meeting 
which I will be even later for, but so be it.
    Recognizing that--going to something that the chairman had 
said to you, Ms. Molitoris, recognizing that the systems are 
very different, and as I agree, this is like an onion, and you 
really have to consider the whole transportation system, not 
any one part, but if we had data that looked at each piece, 
then you can begin to integrate the whole.
    I think--I would like also in that process some comparisons 
of, and maybe it is Mr. Downs who would have this better, 
because it is really passenger rail comparison also of what the 
speed of trains is in these systems. Again, those are somewhat 
different by how many stops and probably the density of the 
population areas through which people are going, but I would 
like to see something on the speeds that are achieved in these 
major transportation systems, because that might be a better 
indicator of how well we are doing comparatively rather than 
just an investment level, which does, as the chairman quite 
appropriately pointed out, not take into account for us or 
properly by itself take into account how much of our traffic is 
air travel because of the much longer distances involved.

[Page 230--The official Committee record contains additional material here.]


    Mr. Olver. Mr. Downs, when you were talking about high-
speed rail in the Northeast Corridor, I was paying attention, 
but for a moment, I sort of drifted, and then I heard you say 
something about the high-speed rail stopping in Providence, and 
I nearly had a coronary, I think.
    Now, please, would you explain to me what you meant by 
that?
    Mr. Downs. Do you mean the stops on the high-speed rail? We 
have four designated stops on high-speed rail between Boston 
and New York, Boston-South Station, Providence, New Haven, New 
York.
    Mr. Olver. Oh. It was in the context of what Southwest was 
doing in using Providence as a hub, and people who had to come 
to Providence and so forth. I missed the connection there.
    This high-speed rail is not for some period of time going 
to stop, end at Providence.
    Mr. Downs. No, no.
    Mr. Olver. Is there some impediment to getting into Boston? 
Is it planned to get all the way into Boston?
    Mr. Downs. No. As a matter of fact, we are finishing the 
electrification of the line between New Haven and South Station 
in Boston. We should be finished with that mid-year next year, 
the first time in 80 years or 60 years that that will be 
electrified.
    The assumption that I made about Providence is the business 
opportunity with Southwest Airlines in that the majority of 
their traffic is not--the demand is not for Providence. The 
majority of their demand is the south of Boston traffic, Route 
128, et cetera, and that we have a logical connection for 
people who fly into Providence but still need to get to Boston.
    Right now, they rent a car or take a bus or take a 
limousine. Rail service can be a lot faster than any of that, 
and can deliver people to downtown Boston. We think it is a 
good future business.
    It is not intended as a high-speed rail. We need to have 
that be top-dollar and direct service, and the service that we 
would stop in Providence would continue on to Boston, stopping 
both ways, Providence into New York, and Providence into 
Boston, and it would be a direct feed, we hope, off of airlines 
serving Providence, joint ticketing on lower speed trains.
    If I could, one quick comparison about speeds. You had 
raised it earlier. Our best speed running on long-distance 
trains is 100 miles, now 90 miles an hour, along one of our 
western routes. We run as slow as 20 miles an hour on some of 
our long distance trains. On the Corridor, we run at 125 miles 
an hour on Metroliner service and Northeast direct.
    I believe the land speed record for a steel wheel passenger 
train is 352 miles an hour with the French TGV on the 
Atlantique line north of Paris.

              Washington to Boston Electrification Project

    Mr. Olver. Will you be able to achieve 125 miles an hour 
from Washington to Boston when this electrification is 
completed?
    Mr. Downs. We are buying trains that run at 150 miles an 
hour. We will be able to run at 150 miles an hour on portions 
of the line between New York and Boston because we are 
completely rebuilding it, electrification, signals, safety 
improvements, everything.
    South of New York, until we make some significant 
improvements on electric traction and the cantenary we will 
still be stuck at 125 because of the age of the infrastucture, 
but the trains themselves have the full capacity of running at 
150 miles an hour plus.
    In France, they regularly run at 200. This technology that 
we are buying runs regularly at 200 miles an hour.
    Mr. Olver. But we are still talking about conventional 
high-speed rail.
    Mr. Downs. Yes.
    Mr. Olver. So our speeds are towards the lower end of the 
achievable high speeds with conventional high-speed rail.
    Mr. Downs. Yes.

                              LABOR COSTS

    Mr. Olver. In your operating problems, what part does labor 
cost play here? I am sort of curious what the comparisons are.
    We are talking about a national rail passenger system where 
we have decided we are going to reduce our operating subsidy to 
this, and that puts enormous pressures on.
    Now, there are a number of state systems. The corresponding 
state systems, I suppose, are supported in states would be like 
SEPTA or the New York metropolitan area or MBTA in Boston and 
so forth, and the Chicago systems which are really state 
systems that they have decided for their economies that they 
must subsidize, and they are subsidizing them rather 
substantially, so there is at least some comparability 
conceptually here.
    What are the labor costs, comparative labor costs, for 
similar jobs in systems like those compared with what you have 
to deal with--which you are dealing with in Amtrak?
    Mr. Downs. We have 13 unions and 26 collective bargaining 
agreements. Our wage comparability between a freight railroad 
is that we are generally under freight railroad wages for 
comparable positions like engineers, conductors, carmen and 
mechanical.
    We had a very long and difficult set of negotiations in the 
late 1980s, early 1990s. We went four years without a contract, 
and we got significant rule changes from the unions by 
agreement. We got changes in operations that made our labor 
costs, I think, in a lot of areas less than a freight railroad.
    Our major cost on labor is excess railroad retirement. It 
is $150,000,000 a year for us. It turns out that it is an 
additional cost that we pay on the labor side of about $6,000 
per employee per year. That cost goes to the railroad 
retirement fund to pay for retired freight railroad employees. 
There are currently just about 800,000 retired railroad 
employees in the United States, and there are 180,000 working 
railroad employees.
    The Railroad Retirement Fund itself stands separate from 
Social Security, so it has to make its own chargebacks. That 
wage cost is sometimes borne by commuters, sometimes not, 
depending on when these commuter agencies were formed and how 
they assumed their operations.
    Some railroads are struggling to get out from the excess 
railroad retirement charges, because they believe those costs 
belong to the freight railroads that incurred those costs.
    Mr. Olver. I don't know how those would relate to the 
specific systems, but I was looking for more on the operating 
personnel, the current personnel, and wages.
    I think I have seen some data that shows that your wages 
are in fact under, for the most part, what they are in these 
commuter rail, fixed rail, systems that states run for 
economies of their own particular areas, maybe not under all of 
them but under most of them or the biggest ones. Is that true?
    Mr. Downs. I have some data that shows one craft, railcar 
mechanic, hourly rates of pay, and it shows that Amtrak is 
tenth after Chicago CTA, New York, Boston MBTA, BART, 
Washington Metro, Baltimore, Atlanta, New York, New Jersey, and 
then finally Amtrak.
    Mr. Olver. Would that be typical of the operating groups 
where they are fairly far down the list so that--I mean, I am 
looking for whether your problems are partly due to a pay 
structure, but that doesn't seem to be the case.
    My guess is that most of these state systems running 
commuter rail or what in a large metropolitan area which are 
obviously key to the economy of their areas are actually 
running at much higher subsidies than we are providing in the 
case of the national rail system.
    Mr. Downs. I couldn't tell you exactly across all crafts, 
but my sense is that we are towards the bottom in overall 
average representative employee pay against a commuter agency.

                        LABOR MEDIATION PROCESS

    Mr. Olver. Let me ask one other thing. One of your groups, 
I think it is the Brotherhood of Maintenance of Way, which has 
probably ten percent of all the Brotherhood of Maintenance of 
Way Employees in the country are Amtrak employees, and 
everybody but the Amtrak employees are working under contract.
    You have had a couple years in your case of no contract, 
and is it also true there that you are operating under a 
mediation process?
    Mr. Downs. Yes.
    Mr. Olver. What is the impediment here in these 
negotiations? How would you characterize them, and is the 
mediation process something that is working or is it stopping 
our getting to a contract there where one should be relieved of 
the mediation process and go on to hopefully a more open and 
hopefully fast-tracked kind of process in that group?
    Mr. Downs. The difference with the Brotherhood of 
Maintenance of Way Employees is cash, it is money. They want 
the freight railroad agreement. We have said over five years 
that the freight railroad agreement for all of our employees 
would cost us about $220,000,000. That is $220,000,000 more 
than we have. We have said that we would like to be able to pay 
freight railroad compensation levels.
    The freight railroad industry made about $4,000,000,000 
profit last year. We didn't; we lost money. We have a 
responsibility, I believe, about the long-term survival of the 
company to cut the best deals that we can with rail labor that 
ensures the continuity of their jobs as well as decent pay and 
working conditions.
    I believe that the Rail Labor Act is set up to draw out 
longer term contract negotiations. It is just structured that 
way, that the process is focused on long, drawn-out 
negotiations.
    We asked for mediation. I believe the Brotherhood of 
Maintenance of Way is probably getting ready to make a decision 
about asking for a release from mediation so that they can 
exercise what is euphemistically known as self-help in this 
process, which is a job action that would probably trigger the 
requirement for a presidential emergency board, and then 
finally, if that was unsuccessful, action by the Congress.
    Mr. Olver. That is enormous complexity, but it would appear 
that what you have described is a situation where it would add 
greatly to your bottom line which you are already in adverse 
negotiations with the people on this side of the table on your 
bottom line, in any case, at that level.
    On the other hand, you have also told me, and I guess the 
BMWE people would also be somewhere down that list of pay 
levels. We were talking about a pay level list which probably 
doesn't include the levels that you get to in the private 
freight rail system, but in the passenger rail systems, they 
are on the low side, I would infer from what you previously 
said. Would that be basically correct?
    Mr. Downs. I believe Brotherhood of Maintenance of Way 
Employees of commuter railroads are paid at a higher wage rate 
than they are----
    Mr. Olver. In yours.
    Mr. Downs [continuing]. At Amtrak, and I know that they are 
painfully aware of the disparity in pay between current levels 
of pay on Amtrak for Brotherhood of Maintenance of Way 
Employees and current pay levels on freight railroads for the 
exact same kind of work, and the difficulty they have in 
convincing their Amtrak members that there is any justification 
for a differential in pay between freight and Amtrak, a very 
difficult dilemma.
    Mr. Olver. As America's rail system--passenger rail system, 
it seems slightly ironic that they should be below what other 
passenger systems are in those places, though the others are up 
to the largess of the particular states and their economic 
circumstances.
    I don't think--I don't know that I can hold for a 
particular position in relation to the freight rail system. 
That is a somewhat different kettle of fish, I would guess.
    Thank you very much. I am done, and I appreciate both of 
you indulging me and allowing me to go on to my other meeting.

                  operating Fund Disbursement Schedule

    Mr. Wolf. Mr. Sabo.
    Mr. Sabo. Let me ask this one. Mr. Downs, let me just get a 
feel of what happens as you are short of operating funds. You 
have your revenue, you have our subsidy, and it doesn't meet.
    Do we pay the subsidy the first of the year?
    Mr. Downs. You pay it on a quarterly installment basis.
    Mr. Sabo. Quarterly installment.
    Mr. Downs. That costs us money. We have asked for a 
clarification. The administration did not ask for that. We have 
asked that we be able to receive our subsidy payment up front, 
something about a complex issue around how the funding is 
scored by fiscal year.
    In effect, we borrow money to anticipate some federal 
receipts. Having it all up front would at least get us six 
months into the year before we had any cash flow problems.
    Mr. Sabo. But you would end up with cash flow problems 
through the year.
    Mr. Downs. Our first payment is half of the subsidy, and 
the second is 25 percent, and 25 percent.

                          Borrowing Authority

    Mr. Sabo. Okay, but what has happened, let us say in fiscal 
year that ended last September 30. During that fiscal year, you 
got your revenue, you got your operating subsidy. You were 
short.
    Mr. Downs. We borrowed cash at the end of the year, and as 
soon as we receive our federal payment, we pay back that cash 
borrowing.
    Mr. Sabo. Loan.
    Mr. Downs. That loan which is a very short-term loan. It is 
only for cash flow purposes. It is not long-term debt.
    Mr. Sabo. Yes, but it is a cash-flow debt. So what you have 
been doing is escalating the amount that you are borrowing each 
year?
    Mr. Downs. Actually, we decreased it. The first year that I 
was here, we borrowed $68,000,000 at the end of the year to 
just make payroll. We repaid it the next year and we balanced 
our budget after we took that hit by significantly downsizing 
the corporation.
    That is the worst cash position that we have been in, I 
think, in the history of the corporation. We recovered from 
that in a 12-month period. I hate to go back into negative cash 
end right now, but at the end of last year, as I said, we were 
$8,500,000 in the red on cash end. That is what we borrowed 
from our banks.
    We repaid it on the second of October, I believe, with the 
first payment that we received on subsidy.
    Mr. Sabo. And what is your projection for this current year 
then?
    Mr. Downs. $70,000,000 to $120,000,000 negative cash.
    Mr. Sabo. For this year?
    Mr. Downs. For this year.
    Mr. Sabo. Which you will then borrow?
    Mr. Downs. We have currently borrowed because of some cash-
flow problems already, and I believe that we borrowed--Al.
    Mr. Altschul. We have borrowed as of today $40,000,000. We 
expect to pay down all of that through cash receipts and 
through the next 25 percent of the appropriation that we are 
getting on April 1, and then we will be borrowing relative 
amounts as we go through the remainder of fiscal year 1997.
    As Tom mentioned, we expect to end the year based on our 
current projections somewhere between $70,000,000 and 
$75,000,000, up to a little over $100,000,000. That will be 
repaid on October 1.

                             Rail accidents

    Mr. Wolf. Last year at this time, we were discussing a rash 
of railroad accidents including Fox River Grove MARC and other 
accidents. However, since last April, it appears that there has 
been a significant decline in rail accidents. Do you believe we 
have seen an improvement in rail safety throughout the U.S. in 
the past year and can you comment a little bit about that?
    Ms. Molitoris. I certainly can, Mr. Wolf. Again, I point to 
the chart because that is the most obvious indicator that when 
you can increase 39.3 percent in on-the-job casualties, when 
the train accident rate increase improves six percent, and 
fatalities by 20 percent, it certainly has a big impact across 
the country.
    I think that that rash of accidents last year was such a 
trauma to all of us and to the industry as a whole that we, as 
you know, instituted two emergency orders which are sort of one 
of our strongest tools. We worked directly with all the chief 
operating officers. We really began to attack the culture 
problem.
    If you recall last year, we talked about that somewhat, and 
people at first said what is the culture thing. The culture is 
safety is always first; is it what drives everybody first and 
foremost before profit, before getting a train out.
    Safety has to be first, and I think it is very interesting 
to note that over this year, the understanding by people 
throughout the industry is that the safety culture is an issue, 
and that we all have to work at it.
    In fact, Mr. Hall, who is chairman of NTSB, is holding a 
seminar forum just on the culture issue in just a few weeks.
    I think the whole safety assurance and compliance program 
where we are working interpersonally, not impersonally, on the 
issues of safety. We recognize that not all safety issues can 
be solved by money alone.
    There is technology that can be improved, there is 
infrastructure that can be improved, but the human decision-
making, the focus, the working together for everybody's safety, 
that is a key ingredient if we are going to reach that zero 
target that we have.

                      Safety Board Recommendations

    Mr. Wolf. Are there any safety board recommendations that 
have been made that you have not implemented?
    Ms. Molitoris. I think we are at the lowest in history. I 
will submit that for the record.
    We have increased our responses over the first four years.
    [The information follows:]

    The large majority of NTSB recommendations have been closed 
based on acceptable (implemented) action. During the past three 
calendar years only three recommendations have been closed 
based on ``unacceptable'' action. This means FRA did not 
implement the NTSB recommendation. Of the three, FRA found two 
of the recommendations, both related to track inspection 
procedures, were unnecessary because actions were underway that 
would meet the intent of the NTSB recommendations. Research is 
being conducted by the railroad industry, and track safety 
standards are being revised. The other recommendation is still 
an active project, however, NTSB ``closed'' the action due to 
time limits. FRA considers this action important but could not 
complete implementation within NTSB's time frame.

    Mr. Wolf. But we are a little slow. Where are you now? What 
ones are available? What recommendations have been made that 
you haven't implemented from the safety board?
    Ms. Molitoris. On all of the accidents last year, we have 
responded to their recommendations. I have a list here which I 
will submit, but I will review it for you. There are 41 
recommendations from NTSB that are classified as being open. 
There are in five major subject groups. There are five in the 
area of track; 24 in the area of motive power and equipment; 
five in signals, communications, and grade crossings; two in 
operating practices; and five in hazardous materials.
    A number of those have to do with research that we are 
doing in a particular area that we are working together on. 
Take, for example, in the signal area. I think the board has 
testified that for the first time in the last three years, they 
have seen movement on advanced train control systems, which we 
reported to Congress on, and I think that has been on their 
most wanted list for over 20 years.
    So I feel that our relationship with NTSB is very strong. 
We have them as a partner. I have a note here, 38 of 41 of 
these recommendations I just mentioned to you are covered in 
rule-making proceedings that are active and ongoing right now.
    Mr. Wolf. If you could bring the committee up to date on 
progress and the three that are not and when you expect to be 
dealing with them?
    Ms. Molitoris. Certainly.
    [The information follows:]

[Pages 238 - 241--The official Committee record contains additional material here.]


              Commercial Vehicle Grade Crossing Accidents

    Mr. Wolf. Thank you.
    Mr. Downs. Mr. Chairman, if I could, I know that it is 
probably not part of the question you asked, but I would like 
to put it on the table anyway since it is a safety concern that 
we share.
    We have not seen any significant decline in grade crossing 
accidents with commercial vehicles and Amtrak trains.
    Mr. Wolf. We are going to get to that. Go ahead.
    Mr. Downs. I am sorry.
    Mr. Wolf. No, go ahead.
    Mr. Downs. To the point, we had a grade crossing accident 
this morning in Poughkeepsie, New York, with a commercial 
vehicle, a tractor trailer fouled on the tracks.
    It is not unusual for states who all have now by federal 
law commercial drivers' license requirements to have penalties 
for commercial drivers who violate grade crossing of $20, $25 
as a fine. In that environment, they can kill hundreds of 
passengers on Amtrak trains.
    Our last grade crossing accident was as dumb as a tractor 
trailer operator with a low-boy carrier trying to make a U-turn 
across a grade crossing and got stuck without enough sense to 
get out of the area and then go down the track and set 
emergency flares and emergency communication.
    Those accidents cost us millions of dollars in damage to 
equipment, millions of dollars worth of medical bills for both 
employees and passengers.
    It is unconscionable that we let this kind of violation 
with commercial vehicles. When a family vehicle, a car, a 
pickup violates a grade crossing and one of our trains, it is 
very unfortunate, because it usually means that the person 
driving the car is killed. There is no way you can win a battle 
with one of our trains.
    Our trains travel faster than freight trains, so people 
misjudge the distance. In those circumstances, they are 
jeopardizing the lives of all of the passengers on board. 
Commercial vehicle drivers, who willingly or through ignorance 
or a lackadaisical sense about what they are putting at risk, 
violate grade crossings are putting at risk hundreds of lives 
every time they violate a grade crossing or get stuck on one 
without understanding the ground clearances requirements, the 
height requirements, their own capabilities of getting across 
it.
    We have had engineers killed. We have had passengers killed 
as a result of grade crossing accidents like this.
    Florida seems to have a particular problem about it. I have 
written the governor twice about grade crossing accidents in 
Florida. I have written to governors all over the country about 
trying to get better enforcement for commercial drivers' 
license violations and not $20 fines.
    If a locomotive engineer violates an operating rule, he can 
be off for 30 days. If he violates it twice, he can lose his 
job and never operate on another railroad again. A fine of $20, 
$25, or $30 for commercial drivers who are professionals and 
who continue to violate grade crossings jeopardizing lives is 
seemingly an unacceptable safety hazard in the United States.
    Mr. Wolf. Can FRA be of any assistance to you?
    Ms. Molitoris. This is in fact one of our top priorities.
    Mr. Wolf. Have you written to all the governors?
    Ms. Molitoris. Yes, we have. We followed up on your 
suggestion in that regard. We have received some very good 
responses, and as I mentioned in my opening statement, 
Secretary Pena at the time, in 1994, made grade crossing safety 
a transportation priority.
    We have 55 initiatives and several of those are focused on 
this problem of low-boys and trucks at crossings because it is 
unconscionable.

                     Commercial Driver Requirements

    Mr. Wolf. Have any or many states increased the fine as Mr. 
Downs was talking about?
    Ms. Molitoris. One very specific example is the state of 
Illinois where they have increased the fine to $500. We 
certainly are continuing to pursue the issue of the commercial 
drivers' license, because we think not only is education of 
truck drivers in awareness of what they are supposed to do 
crucially important, but there has to be some leverage.
    If in fact there is this danger that someone would put 
passengers and themselves into, there ought to be a penalty, 
and we continue to pursue that issue.
    There is no legislation yet at this time.
    Mr. Wolf. Is there something the committee could do?
    Mr. Downs. I understand the commercial drivers' license 
provision falls under the House Transportation and 
Infrastructure Committee. My suggestion to the administration 
and to everybody else was that there be a serious look at the 
context for commercial drivers' license requirements and 
liabilities on grade crossing violations enacted into law as 
part of the ISTEA reauthorization.
    Ms. Molitoris. We are working closely with FHWA. In fact, 
they met again just last week to come up with some proposals 
for newly installed Secretary Slater on this particular issue.

                       Railroad Hours of Service

    Mr. Wolf. You ought to be doing it soon, because that bill 
will be moving relatively fast, if that is the vehicle you are 
going to take advantage of.
    The Federal Highway Administration is currently revising 
the hours of service truck drivers can operate. Last year, Ms. 
Molitoris, you testified that railroad hours of service was a 
very important issue and the administration was pursuing 
corrective actions when noncovered activities commingle with 
covered ones, trains, dispatching, signal service, et cetera.
    What changes has FRA implemented during the past year to 
correct these problems?
    Ms. Molitoris. Mr. Chairman, as you know, we do not have 
authority in the issue of hours of service. What we have done 
is to work with railroads and labor to discuss ways of 
enhancing fatigue-related issues.
    We are encouraged by the steps that railroads are taking, 
self-initiated programs to explore ways to enhance vitality and 
limit fatigue.
    Burlington Northern-Santa Fe is one I could raise as a 
railroad that has instituted programs that labor and management 
are working together with us on. They seem to be very useful.
    We held a roundtable on fatigue with labor and management 
with experts around the country about the different data that 
has come to light as a result of research about what really can 
make changes. There are things called ``power napping'' that 
are now going on in a variety of railroads which give the 
authority to employees.
    Mr. Wolf. ``Power napping''?
    Ms. Molitoris. Yes. ``Power napping'' sounds like a 
humorous term, but it is the authority for employees, when in a 
siding, for example, if they are going to be in a siding for a 
certain amount of time that they are authorized to take a 20-
minute nap. This short time has shown to be very beneficial to 
your alertness and your ability to perform at peak performance.
    That is only one of the initiatives. There are different 
ways in terms of crew calling and other things that are being 
tried and we think it is a very, very important issue. Fatigue 
and the quality of life for high performance for employees is 
crucially important.

                     Action Plan on Grade Crossings

    Mr. Wolf. Winston Churchill would take a 20-minute nap and 
it would revive him. I understand Lyndon Johnson used to do the 
same thing.
    About 90 percent of railroad-related deaths occur at 
highway grade crossings. The department has implemented an 
action plan that seeks a 50-percent reduction in railroad 
crossing accident fatalities by the year 2004.
    Last year, you testified that between 1993 and 1995, there 
had been a 10.7 percent reduction. What has occurred this year?
    Ms. Molitoris. We are thrilled to be able to say it is a 
20-percent reduction. In fact, that is an average, Mr. 
Chairman, and in some states, Ohio for example, it is a 56-
percent increase.
    Mr. Wolf. Why is that? I know Ohio is a wonderful state, 
but why is that?
    Ms. Molitoris. There are a number of reasons. Also, 
Colorado and in many other states, there is a very strong 
coalition.
    Mr. Wolf. Is that the highest rate, 56 percent?
    Ms. Molitoris. I would have to check Colorado. At one point 
during the year, I think somewhere around August, in terms of 
fatalities, Colorado's improvement was 77 percent.
    Mr. Fine. I don't know about the other states, but with Mr. 
Downs here, Amtrak improved over 50 percent. They went from 63 
to 30 fatalities last year.
    Ms. Molitoris. In fact, Amtrak's overall safety record is 
laudable, but what we have learned, Mr. Chairman, first of all, 
different states have different challenges. Like Texas, Ohio, 
Illinois, Michigan have huge numbers of crossings, so it is a 
great big challenge for them.
    In some states, there is a tremendous coalition that is so 
committed to accomplishing it, Operation Lifesaver, the 
Department of Transportation, public utilities, a big awareness 
program. There is no silver bullet. It is all of them together 
working with us.
    We had a national awareness campaign called ``Always Expect 
a Train'' that got almost $4 million of donated time. The AAR 
and states have a highway or die-way program which is even more 
graphic than ours. Ours was for a more general audience, trying 
to get to these chronic violators, because 50 percent of the 
people who die at these things die at crossings that are 
protected. It is just such a tragic waste of life.
    We are very, very pleased that we got 20 percent. If we 
keep growing that number and continue that kind of safety 
increase, we are going to be able to reach our goal.

                       Rail Crossing Improvements

    Mr. Wolf. Last year, FRA testified that there were 3,411 
rail crossings that were similar to the Fox River Grove 
accident site. Has FRA been working with the states and 
affected jurisdictions to reduce these types of crossings?
    For the record, please highlight what specific actions your 
administration has undertaken with regard to these type of 
crossings like Fox River Grove.
    Ms. Molitoris. I will certainly do that for the record in 
detail, but let me just mention, it isn't even just FRA. Wehad 
a coalition, a task force appointed by the Secretary with four 
operating administrations, Federal Highway, Federal Transit, the 
National Highway Traffic Safety Administration and ourselves, because 
what we found in Fox River Grove specifically is that it wasn't just 
one thing. It was how a variety of state organizations worked together, 
communicated or didn't communicate, instituted change and didn't 
coordinate with another. So we understood that it couldn't be just FRA. 
We had to work together, and we are working in states specifically. We 
are working with DOTs, governors' offices.
    At the AASHTO conference, I meet individually with the 
secretaries, directors, and commissioners, not just on this 
subject. Certainly this is a very high priority for us, and I 
think that 20-percent increase helps to understand we are going 
in the right direction.
    [The information follows:]

[Pages 246 - 247--The official Committee record contains additional material here.]


                           Private Crossings

    Mr. Wolf. What about private crossings?
    Ms. Molitoris. Private crossings are a huge problem, Mr. 
Chairman. We continue to have our grade crossing managers. If 
you recall from last year, we have eight grade crossing 
managers, one in each region now, focusing only on this issue. 
Their job is to help states, local communities as I mentioned 
to Mr. Tiahrt, some problems like this as well as safety 
problems.
    We really are working to get crossings closed. Sometimes, 
it is very difficult, especially in private crossing areas, but 
deaths occur there and we know it is a huge component of the 
problem and we have to keep fighting it.
    Mr. Wolf. Mr. Downs, if you could for the record tell us 
what you are doing with regard to grade crossings to prevent 
accidents. You have already covered it, but I would like more 
detail.
    Mr. Downs. I would be glad to.
    [The information follows:]

    As you know, I believe one of the greatest threats to the 
safety of our passengers and crews is the reckless driver who 
ignores an approaching train or disobeys the grade crossing 
warning signals and drives in front of our trains. Given the 
destructive force of a car being hit by a 250,000 pound 
locomotive traveling 80 mph hitting, one would think that it 
would be a rare occurrence for someone to try and beat a train. 
Yet, not a week goes by without at least one grade crossing 
accident. Every day our crews watch cars drive around closed 
gates trying to beat our trains. Our nation has nearly 290,000 
grade crossings and each year nearly 600 people lose their 
lives in accidents involving trains.
    What is most unconscionable is commercial drivers--
professionals--who try to beat our trains at grade crossings. 
Truck drivers who ignore grade crossing warnings or who use bad 
judgment when moving over grade crossings are the greatest risk 
to our trains. These accidents not only risk the lives of our 
crews and passengers, but cause millions of dollars in damaged 
equipment and medical bills. What is most galling is that many 
states do little to sanction this type of reckless driving.
    Earlier this year, one of our New York to Miami trains 
struck a tractor trailer which was stuck on the tracks near 
Jacksonville. The impact derailed the locomotives and several 
cars. Thirteen people went to the hospital for treatment of 
injuries. The truck driver was not injured because, after 
getting stuck, he abandoned his truck. If he is cited, he will 
be fined a mandatory $100, because in Florida that is the 
standard sanction. Over the last few years, we have had a 
number of these type of accidents in Florida, which caused 
fatalities to our crews and passengers. In the past, our 
requests to Florida and other states have met with little 
success. I am attaching the recent letter I sent to Governor 
Chiles and his response to me regarding the latest incident.
    Despite these difficulties, Amtrak does work closely with 
the Federal Railroad Administration, Operation Lifesaver, and 
other trial safety organizations. Education about the dangers 
of recklessly driving through activated grade crossings has 
been a potent weapon in reducing the number of accidents and 
fatalities. In addition, as part of our joint inspection 
efforts with the host railroads, we work with them to help 
close particularly dangerous grade crossings.
    With regard to track that Amtrak owns, we have had an 
aggressive program to close grade crossings. On the Detroit-
Chicago corridor, Amtrak has reduced the number of grade 
crossings from 299 to less than 250 in the past four years. 
This summer we will begin an aggressive campaign aimed at 
reducing the number of grade crossings by another 10 percent. 
This will involve both public and private crossings. For 
instance, during the last two years, working with the town of 
Dowagiac, Michigan, we closed three public grade crossings 
through the downtown area. This allowed for an increase of 
speeds to 100 mph on this stretch of track.
    On the Northeast Corridor, as part of our High Speed Rail 
program, we are working to close or significantly modify the 
remaining 15 crossings that currently exist between New Haven 
and Boston. Thirteen of these crossings, one a pedestrian 
crossing, are in Connecticut and will receive modern grade 
crossing protection devices. There is support to close two of 
these crossings and Amtrak is working to identify funding for 
the creation of the grade separations. The other two crossings, 
one in Rhode Island and the other in Massachusetts, are 
scheduled for elimination.

[Pages 250 - 253--The official Committee record contains additional material here.]


                       Positive Train Separation

    Mr. Wolf. Is positive train separation available 
commercially yet or is it still being pilot tested?
    [The information follows:]

    At least two major manufacturers have expressed a 
willingness to take orders for positive train separation 
systems, even though they have not been fully developed and 
tested. Production and validation of the safety-critical 
software needed to operate these systems remains an area of 
development activity, as well as the integration of the train 
control system with the computerized dispatching systems being 
employed by several of the large freight railroads. Many of the 
hardware component parts which are needed for such systems are 
commercially available, such as digital radios originally 
developed under the Association of American Railroads' Advanced 
Train Control System (ATCS) program.

                  POSITIVE TRAIN SEPARATION TECHNOLOGY

    Mr. Wolf. FRA had contracted with the Volpe Transportation 
Center to develop a corridor risk model that would help 
identify where positive train separation technology would be 
beneficial. Has this study been completed? If so, which 
corridors would benefit from PTS technology?
    [The information follows:]

    This project is in its final phases under the management of 
the Volpe Center. A complex geographic information system has 
been constructed and a variety of data bases have been 
assembled to support the analysis. Preliminary data analysis is 
underway, focusing on historical accident patterns. Preliminary 
modelling has been attempted, and a mature strategy for model 
development has been identified. Issues regarding geolocation 
of accident sites using FRA accident/incident data have also 
been largely resolved. Initial results of the analytical effort 
are expected by June 1997. The Corridor Risk Analytical Model 
(CRAM) will assist FRA's analysis of rail corridors by their 
specific characteristics, (i.e., types of operations, density, 
hazardous materials, proximity to population areas, etc.) for 
the potential benefit of positive train control (PTC) systems. 
FRA is also conducting a ``business case'' review of positive 
train control using illustrative corridors with a variety of 
characteristics. Integration of the safety and business 
analysis for illustrative corridors is also due this summer.

               GRADE CROSSING EFFORTS TO REDUCE ACCIDENTS

    Mr. Wolf. Last year, Ms. Molitoris, you testified that FRA 
was targeting 16 states with the most grade crossing accidents. 
What notable successes have been achieved from this intensive 
effort? Has there been a statistically significant reduction in 
grade crossing accidents in these 16 states based on FRA's 
efforts?
    [The information follows:]

[Pages 255 - 262--The official Committee record contains additional material here.]


                       GRADE CROSSING REDUCTIONS

    Mr. Wolf. Ms. Molitoris, what is the status of FRA's 
efforts to close redundant grade crossings and reduce the 
number of grade crossings by the national target of 20 percent?
    [The information follows:]

    The ``frontline'' effort for consolidating crossings is 
more often accomplished by State and railroad officials, though 
the FRA has had some success as well. FRA Regional Managers for 
Crossing and Trespass Programs work with community and rail 
officials, actively promoting programs and reviews of crossings 
in a community or on rail corridors to assess traffic patterns 
and the need(s) for each crossing. By looking at a locale's 
total transportation needs, the potential for crossing 
consolidation becomes more apparent and more defensible. The 
Managers often assist in the presentation of arguments and 
positions during local and State meetings.
    Currently, U.S. Code, Title 23, Section 104 requires the 
Secretary to set aside $5 million of the surface transportation 
program for use in the elimination of hazards of railway-
highway crossings in not to exceed five railway corridors 
selected by the Secretary as high-speed rail corridors. These 
requirements were formerly mandated under ISTEA's Section 1010.
    NEXTEA retains 100 percent funding eligibility for projects 
which close or eliminate one or more crossings, and retain the 
$7,500 per crossing bonus program eligibility for communities 
that close crossings when the bonus is matched by the railroad.
    Since the goal to close crossings was first pronounced in 
1991, the number of public and private crossings has been 
reduced 24,163 (8.25 percent) to a total of 268,676 crossings.

    Mr. Wolf. Mr. Downs, is Amtrak working with the affected 
areas to install any preventative measures that would reduce or 
eliminate access to grade crossings?
    [The information follows:]

    Amtrak is an active nationwide participant in the crossing 
closure process along with the freight carriers and state 
highway/rail representatives. In those areas where we own the 
right of way, we have taken the following action:
    Amtrak owns 100 miles of track between Kalamazoo, Michigan, 
and Porter, Indiana. On this route, there are 101 public 
crossings--99 have active warning devices and 2 have 
crossbucks. The state of Michigan has been very aggressive in 
upgrading highway-rail grade crossings and funded $1.1 million 
for a highway-grade crossing elimination project on Amtrak's 
Kalamazoo-Porter route. The state has also upgraded the lamps 
on the crossing lights and the signage to make them more 
visible to motorists. They used high-intensity reflective 
materials to improve motorist visibility both during the day 
and at night. Forty-four crossings were upgraded during this 
project.
    Where we do not own the tracks, our role in reducing or 
eliminating access to grade crossings is not as clearly 
defined. Also, state laws vary in the level of sanctions 
imposed on those who recklessly violate grade crossings. For 
instance, in the state of Florida, I have learned that they 
have implemented a maximum fine of $100 for grade crossing 
violations. This fine is insignificant for a crime that could, 
in the case of a derailment, cost Amtrak (and potentially the 
nation's taxpayers) millions of dollars and possible loss of 
life. Amtrak continues to urge states, such as Florida, to 
adopt stricter sanctions and penalties, especially for 
commercial drivers and their companies, when driving recklessly 
through highway-rail grade crossings.
    We continue to assist the railroads, states, and the 
Federal Railroad Administration in their efforts to close 
crossings, and take an active role in community outreach. We 
believe it is in our best interests to be a strong participant 
in this process, and have evidenced that belief in these 
actions:
    We have worked with the City of Wallingford, Connecticut, 
and the state of Connecticut to close one crossing in 
Wallingford. We are also working with the state of Connecticut 
to install a demonstration project involving four-quadrant 
gates at School Street in Mystic, Connecticut.
    Since December 15, 1996, Billy Parker, an Amtrak locomotive 
engineer and Operation Lifesaver spokesperson, has been 
conducting an intense media campaign in the state of Florida. 
Stories on grade crossing safety will be featured in the 
Florida Times Union, the Tampa Tribune, the Orlando Sentinel, 
and the Miami Herald, as well as many smaller newspapers 
throughout the state. Also, Amtrak has received recent 
television coverage, and Billy will be featured in an upcoming 
story on ``Dateline NBC'' to focus on the problem of grade 
crossings. This kind of media focus will help in our efforts to 
educate the public about how to be safe around highway-rail 
grade crossings.

                               USER FEES

    Mr. Wolf. In the President's budget request, FRA is seeking 
the reinstatement of the rail safety user fee. It is my 
understanding that even though railroads have been paying the 
user fee through fiscal year 1996, now the railroad industry is 
opposed to the fee because they do not receive any identifiable 
regulatory benefit from FRA's inspection and enforcement 
activities. What are your comments about that, Ms. Molitoris?
    Ms. Molitoris. Mr. Chairman, the administration believes 
that to the fullest extent possible, those who benefit from the 
work of the government should contribute to its cost coverage.
    As I mentioned earlier, the budget this year covers the 
safety work of FRA 100 percent as well as $2,800,000 of chief 
counsel which is 69 percent of all the chief counsel's 
expenses, which is specifically the safety law division. They 
work very closely with the safety office on all of the 
enforcement issues.
    Mr. Wolf. Mr. Downs, did Amtrak ever pay rail safety fees?
    Mr. Downs. We did.
    Mr. Wolf. The staff asked, Mr. Downs, do you favor the 
reinstatement or what is your feeling?
    Mr. Downs. I hate mandatory costs. If the administration 
imposes them on the entire railroad industry, I would guess 
that we would have to pay them. My budget people tell me we 
paid about $1,500,000 a year into that fund.
    Mr. Wolf. Are you aware of other modes within the 
Department that charge user fees for inspection and enforcement 
activities? If so, which ones are they?
    [The information follows:]

    The Omnibus Reconciliation Act of 1990 established railroad 
safety user fees for Fiscal Years 1991 through 1995. The fees 
were imposed on railroads subject to the Federal Railroad 
Safety Act of 1970 (FRSA), and were designed to cover the costs 
of the railroad safety program conducted by the FRA under the 
FRSA (other than research and development and certain training 
activities).
    The following is Appendix A from the Final Report to 
Congress on Transportation User Fees, dated October 1996, 
details safety program expenditures by transportation agency 
for Fiscal Year 1995.

[Pages 265 - 268--The official Committee record contains additional material here.]


                   COMMERCIAL FEASIBILITY DEFINITION

    Mr. Wolf. On August 21, the Federal Railroad Administration 
presented its report on the commercial feasibility of high-
speed ground transportation. This report reviewed eight new 
corridor options, not including the Northeast Corridor and two 
incremental corridors.
    This report concluded that the options analyzed in this 
report do not meet the private sector's definition of 
commercial feasibility in that the project pays for itself.
    Why do you believe this definition should not be used?
    Ms. Molitoris. Mr. Chairman, what we used and what we 
talked about in the report was that in every area that we 
studied, there was at least one corridor that we termed 
commercially viable. That meant that it would cover all its 
operating costs, somewhat like the high-speed train sets, all 
of its operating costs and in most cases, a significant portion 
of its capital once it was instituted, but it could not cover 
all of its capital costs.
    I think what it brings to any region in terms of benefits, 
mobility for passengers, safety, congestion relief, relief on 
the highway and other transportation systems is the ability to 
have clean air. A number of other benefits can be figured in 
that really make these very strong contenders for 
transportation investment. Mr. Chairman, the NEXTEA proposal 
that we have offered really says that states, localities, and 
regions should have an opportunity to make these decisions 
because they know best what they need in their regions. If you 
look at places like California, the northwest, Florida, you see 
states that have said, we think high-speed rail is very 
important.
    The Fox Overland Express project, the state of Florida has 
made a commitment of dollars and policy. They have said that 
over the next 40 years, they will contribute over $4 billion to 
a high-speed system, because they think that is best for moving 
their people, for protecting their land, for responding to 
their tourist trade which is so very big.
    We think in a number of areas throughout the country, it is 
a very good investment with a very good return on that 
investment.
    Mr. Wolf. We will have some other questions. We are coming 
close to the end. I have to go to something else, but let me 
just submit them for the record.

                           RAIL TRACK UPGRADE

    Mr. Wolf. Of the options considered in this report, which 
ranged from high-speed rail operating at 90 miles-per-hour to 
Maglev, the three most viable options appeared to be operating 
at speeds between 90 and 125 miles-per-hour. Are only 
incremental changes required to upgrade rail track to operate 
at these speeds? If so, is it feasible for states to pay for 
these upgrades?
    [The information follows:]

[Pages 270 - 271--The official Committee record contains additional material here.]


                     TRACK SPEED LIMITS/SEPARATION

    Mr. Wolf. At what speed does freight and passenger traffic 
need to operate on separate track?
    [The information follows:]

    Amtrak presently operates passenger trains in the Northeast 
Coridor at 125 mph and plans to increase this speed to 150 mph 
on right-of-way shared with freight trains. The FRA does not 
envision mixed passenger and freight operations at speeds 
higher than 150 mph. The Commercial Feasibility Study assumes 
that speeds greater than 150 mph would prohibit simultaneous 
passenger and freight operations.

    Mr. Wolf. At what speed can there no longer be highway-rail 
grade crossings?
    [The information follows:]

    It is presently FRA's policy that no crossing will be 
permitted where trains operate at greater than 125 mph. The 
commercial feasibility study assumes that tracks over which 
passenger trains operate at speeds greater than 125 mph would 
need to be completely free of grade crossings.

                      COMMERCIAL FEASIBILITY STUDY

    Mr. Wolf. Of the eight new corridors discussed in the 
commercial feasibility study, what are the most likely 
corridors to implement high-speed rail within the next five 
years? How long will it be before these corridors will be self-
sustaining?
    [The information follows:]

[Pages 273 - 276--The official Committee record contains additional material here.]


                         LONG TERM PROJECTIONS

    Mr. Wolf. The commercial feasibility study used a 40-year 
time frame for considering project costs and benefits, which 
include the continuing investments required over the period to 
maintain, replace, and expand the infrastructure. Are there 
significant capital replacement costs associated with 
infrastructure components whose useful life is greater than 40 
years? If so, do the projections include set-asides for those 
future funding requirements?
    [The information follows:]

    Long-lived items like concrete ties and rail would 
ultimately require replacement after the end of the 40-year 
cycle. The projections do not include set-asides for these 
because (1) their impact on the analysis would be relatively 
small (the present value of one dollar spent 40 years from now 
at 10 percent interest is about two cents) and (2) to fairly 
assess the period beyond 2040 would also require estimates of 
revenues, operating expenses, and operating surpluses, which 
would likely counterbalance the effect of the future continuing 
investments.

    Mr. Wolf. Large projects such as these tend to 
substantially exceed their original construction cost 
estimates. The commercial feasibility study includes 
contingencies for such increases at the rate of 30 percent of 
the more modest technology options and 41 percent for the new 
high-speed rail and maglev options. How were these numbers 
determined? How do they compare with final versus planned costs 
for recent rail or other public works projects in these 
corridors?
    [The information follows:]

[Pages 278 - 279--The official Committee record contains additional material here.]


                       HIGH SPEED RAIL CORRIDORS

    Mr. Wolf. The report also discusses two incremental options 
off the Northeast Corridor--extending the Empire Corridor from 
New York City to Buffalo and linking Washington, D.C. to 
Richmond and points in North Carolina. I know that New York 
state has been actively pursuing high-speed rail on the Empire 
Corridor. Could you please bring the committee up to date on 
the status of these two proposals?
    [The information follows:]

[Pages 281 - 282--The official Committee record contains additional material here.]


               NORTHEAST CORRIDOR HIGH SPEED RAIL PROJECT

    Mr. Wolf. Both FRA and Amtrak have estimated that 
$2,000,000,000 is needed over the next three to five years to 
recapitalize the southern end of the Northeast Corridor, and 
$1,400,000,000 is needed to complete the high-speed rail 
project in the northern end of the Corridor. This totals to 
$3,400,000,000 in the next five years. Mr. Downs and Ms. 
Molitoris, because you may have differences in opinions, could 
you both discuss how much of this total you envision will be 
provided from federal sources?
    [The information from FRA follows:]

    Phase I of the joint FRA/Amtrak ``Northeast Corridor 
Transportation Plan'' for the Washington/New York City segment 
of the Corridor, published in July 1996, identified $675 
million in recapitalization investments that should be 
completed in the next five years. The Plan also identified $1.3 
billion in tunnel modernization and either a restoration-in-
kind or replacement of the power supply system which dates to 
the 1930's. The study projected a need over the next 10 years. 
Phase II of the Plan will be completed this summer and will 
include a discussion of methods and options for allocating 
these investment costs among intercity, commuter and freight 
operators. The exact amount of the Federal Share will become 
clearer with publication of the second phase of transportation 
Plan.
    Amtrak has allocated approximately $300 million of the $570 
million NECIP appropriations for Fiscal Years 1995, 1996, and 
1997 to Northend improvements.

    [The information from Amtrak follows:]

    Amtrak is in general agreement with the Chairman's 
statement regarding Northeast Corridor Southend needs over the 
next five years. Amtrak has identified nearly $2 billion in 
recapitalization investments which include infrastructure and 
signal upgrades, tunnel modernization, and other actions to 
achieve the highest rate of return on high speed rail. Amtrak 
has worked closely with FRA in establishing the various phases 
of modernization and investment on the corridor and agree, in 
general, in the funding needs.
    Specifically, Amtrak was appropriated $570 million in 
Federal NECIP appropriations for Fiscal Years 1995, 1996, and 
1997 including an $80 million high speed rail grant in FY 1997. 
Of these appropriations, $268 million have been directed to 
improvements on the northend of the Northeast Corridor.
    NECIP funding in detail:
    Fiscal Year: 1995, $200; 1996, $115; 1997, $175, and $80 
(HS Rail Grant).

                             rail prospects

    Mr. Wolf. On innovative financing, the department is 
requesting $100,000,000 for a new transportation infrastructure 
program which will provide seed money for new transportation 
infrastructure projects, including direct loans and other 
innovative funding mechanisms. Will any of this funding be 
available for rail projects? If the answer is yes, what types?
    Ms. Molitoris. The recommendation of the administration is 
that publicly owned facilities would be eligible for this kind 
of funding.
    Mr. Wolf. Give us the type.
    Ms. Molitoris. For example, a connection to a port. Any 
project, take for example, the Florida project is a very 
obvious one.
    The money that the state is contributing means that they 
own the right-of-way, and so that would be a publicly owned 
right-of-way and would be eligible.
    Mr. Wolf. Is Amtrak eligible? They are really publicly 
owned.
    Ms. Molitoris. The opportunity to be part of a project 
really comes through the state DOTs and regional planning 
organizations. I would suppose if Amtrak partnered with any of 
these organizations and they wanted to have Amtrak as part of 
their proposal, I don't see why they couldn't be.

                           bankruptcy charges

    Mr. Wolf. Mr. Downs, before we end, I wanted you to explain 
for the record the bankruptcy charges.
    Last year, we were talking in terms of $3,000,000,000, and 
now you are talking in terms of $5,000,000,000.
    Mr. Downs. We have $1,500,000,000 more debt this year than 
we had last year after we completed the acquisition of all of 
the new GE P-40 and P-42 locomotives. We finalized the delivery 
of all of the Superliner IIs, the bi-level passenger cars. We 
executed the agreement for $750,000,000 worth of financing for 
high-speed rail.
    There are lots of ways of assuming the cost of all of 
those, but in effect, it is the cost of increased debt.
    Mr. Wolf. So it would have jumped from $3,000,000,000 to 
$5,000,000,000 in one year?
    Mr. Downs. Signing a $700,000,000 agreement for the 
delivery of 18 high-speed train sets and all of its maintenance 
and operational facilities, add $750,000,000 to the exposure.
    I believe the Superliner IIs were $400,000,000 and I 
believe the GE locomotives were about $500,000,000 or 
$400,000,000.
    Mr. Wolf. So you are about $500,000,000 short? Can you 
explain it for the record?
    Mr. Downs. Yes, I will break it down for you.
    [The information follows:]

    Attached to the FY 1995 Legislative Proposal and Grant 
Request in an analysis done by Amtrak and scored by CBO that 
estimated the one-time costs to ``shut-down'' at approximately 
$5.0 billion. Approximately $2.4 billion of these costs were 
associated with payments for labor protection which are 
mandated by law. Approximately $1.2 billion were long-term debt 
liquidation which has doubled to approximately $2.2 billion 
since this paper was done.
    If we backed out the labor costs--estimated at $2.4 
billion--then the shut-down costs are approximately $3.0 
billion. Since this assessment was completed and evaluated by 
CBO, our long-term liabilities have increased by approximately 
$1.0 billion. In other words, total liquidation costs, 
including labor protection are now closer to $6.3 billion ($3.9 
billion without labor protection costs).
    With regard to Amtrak's outstanding long-term debt, the 
following estimates show our year-end outstanding debt balance 
based on our current commitments:

                                      OUTSTANDING DEBT HISTORY AND FORECAST                                     
                                              [Dollars in millions]                                             
----------------------------------------------------------------------------------------------------------------
    FY95          FY96           FY97           FY98          FY99         FY2000        FY2001        FY2002   
----------------------------------------------------------------------------------------------------------------
836.972.....     986.995       1209.725       1438.835       1391.479      2184.714      2120.568      2053.352 
----------------------------------------------------------------------------------------------------------------

                       oregon/vancouver corridor

    Mr. Wolf. Would a multi-state high-speed rail corridor such 
as that being proposed between Oregon and Vancouver, British 
Columbia, be a strong candidate?
    [The information follows:]

    It is very likely that a multi-state high-speed rail 
corridor project would be eligible for consideration under the 
proposed Transportation Infrastructure Credit Enhancement 
Program, which would cover only projects of national 
significance whose eligible costs are $100,000,000 or 50 
percent of a state's apportionment, whichever is lower. Whether 
such a project would be a strong candidate could not be 
determined until a specific proposal was developed and compared 
to other competing projects.

                            nextea proposals

    Mr. Wolf. It is my understanding that the NEXTEA proposal 
includes a provision that would allow state and local officials 
to use National Highway System and Surface Transportation 
Program funds to improve publicly owned freight rail 
infrastructure. The federal government is trying to reduce 
corporate welfare programs. Why should the federal government 
subsidize rail companies, which made $1,000,000,000 in profit 
last year?
    [The information follows:]

    The use of funds under NEXTEA for publicly owned freight 
rail infrastructure would provide no subsidy to private 
railroads. Rather, by allowing public agencies to use Surface 
Transportation Program (STP) and, to a limited extent, National 
Highway System (NHS) funds for projects on publicly-owned 
infrastructure, local planners would be given another tool with 
which to address transportation issues, allowing a more multi-
modal approach. Under the Congestion Mitigation Air Quality 
program of ISTEA, states and localities can sponsor projects on 
both publicly owned and privately owned infrastructure, if the 
project helps a non-attainment area meet its air quality goals 
under the Clean Air Act. A number of rail-related projects, 
some involving cost-sharing partnerships with freight railroads 
and some solely on publicly-owned infrastructure, were funded 
under CMAQ. In selecting and developing these projects, state 
and local governments determined that they reduced highway 
congestion, enhanced highway safety and improved air quality in 
a more cost-effective manner than competing conventional 
highway projects. Our proposal builds on the success of the 
CMAQ program by expanding some of its flexibility--the ability 
to develop projects on public infrastructure--to localities 
that are not non-attainment areas. By broadening the NHS and 
STP programs to include publicly-owned rail infrastructure, we 
propose to allow states and localities additional options to 
address problems such as congestion regardless of the 
``attainment'' status of the area in which the project is 
located.

    Mr. Wolf. In NEXTEA, the department proposes supplemental 
capital funding for Amtrak, above that appropriate for Amtrak's 
capital programs, including the Northeast Corridor. This 
funding is to begin in 1999. Ms. Molitoris, could you please 
explain this proposal?
    [The information follows:]

    The supplemental capital funding proposed in NEXTEA is 
designed to provide a strong incentive for Amtrak to take the 
necessary actions to reduce spending, increase revenues and 
operate in the most efficient and effective manner. This 
includes developing the partnerships with the stakeholders in 
Amtrak's future necessary to achieve our goal of eliminating 
Amtrak's dependence on Federal operating subsidies. Under this 
proposal, if Amtrak meets or is projected to meet the operating 
subsidy glide path target for a specific year, then the 
Secretary will propose in the next budget submittal to Congress 
that Amtrak receive the supplemental capital funding available 
that year.

    Mr. Wolf. It appears that if supplemental capital funding 
is approved, it will replace any declines in federal operating 
assistance. For example, in fiscal year 1999, NEXTEA proposes 
$292,000,000 in operating assistance, a $50,000,000 decline 
from the administration's request in 1998. However, the 
department also suggests providing $130,000,000 in supplemental 
capital funding. In totality, Amtrak could receive $80,000,000 
more in 1999 than in 1998. Are we replacing operating 
assistance with supplemental capital funding?
    [The information follows:]

    Amtrak will require enhanced levels of capital investment 
to eliminate its dependence on Federal operating subsidies. Our 
NEXTEA proposal provides that increased capital funding, 
although it is only available if Amtrak meets the downward 
glide path in operating subsidy requirements. If Amtrak does 
not meet those targets, then it does not receive the 
supplemental funding.

    Mr. Wolf. How does providing additional capital funding 
allow Amtrak to become independent of federal operating 
subsidies in the year 2002?
    [The information follows:]

    Capital investment is an essential part of the strategy of 
eliminating Amtrak's dependence on Federal operating subsidies 
while preserving its national system. Capital is required for 
Amtrak to replace or modernize aging equipment and facilities, 
enhance its services, and pay down some high cost debt taken on 
when Congress did not appropriate capital funding. All of these 
factors have positive impacts on Amtrak's bottom line.

    Mr. Wolf. I appreciate both of you coming. I will tell you 
that this is going to be a very difficult year. You can see the 
concern.
    My feeling is that I think a base closing concept where we 
can put all these concerns together would be helpful. We will 
have to see how we work it out, but I appreciate both of you 
coming before the committee.
    Mr. Downs. Thank you, Mr. Chairman.

[Pages 287 - 904--The official Committee record contains additional material here.]






                               I N D E X

                              ----------                              

                    Federal Railroad Administration

                                                                   Page
1-800 Computer Answering Service (Grade Crossings).............293, 481
Accidents:
    Avoidance....................................................   438
    Grade Crossing...............................................   297
    Hazardous Material...........................................   377
    Rail.........................................................   235
    Rates, Class I...............................................   363
    Rates, Class II/III..........................................   364
    Train......................................................389, 399
Action Plan on Grade Crossing....................................   244
Alaska Railroad..................................................   480
Amtrak:
    1998 Budget Request..........................................   650
    1998 Grant Proposal..........................................   657
    Accidents and Injuries.......................................   647
    Administrative and Staffing Costs............................   638
    Available Cash...............................................   620
    Bankruptcy.................................................150, 284
    Capital Budget...............................................   136
    Capital Funds................................................   443
    Capital Needs................................................   548
    Competition..................................................   161
    Competition--Commuter Rail...................................   176
    Competition--Low Cost Air Fares..............................   161
    Contracts with Freight Railroads.............................   574
    Debt History and Forecast....................................   284
    Debt Status..................................................   115
    Employment...................................................   625
    Equipment....................................................   576
    Expenditures.................................................   633
    Expenses.....................................................   635
    Federal Employers Liability Act..............................   621
    Financial History............................................   626
    FRA Budget Requests.........................................26, 441
    Funding Needs................................................   147
    Glidepath to Self Reliance (Chart)...........................   120
    Grade Crossings..............................................   652
    Inflation Estimates..........................................   639
    Maintenance..................................................   588
    Non-Core Business Activities.................................   660
    Northeast Corridor...........................................   586
    NTSB Recommendations.........................................   646
    Opening Remarks..............................................   111
    Operating Subsidy............................................   621
    Owned Infrastructure.........................................   158
    Priorities...................................................   155
    Railroad Retirement..........................................   655
    Revenues.....................................................   616
    Rhode Island Rail............................................   651
    Ridership..................................................202, 610
    Self Sufficiency Plan........................................   137
    Staffing.....................................................   572
    State Contributions..........................................   658
    User Tax.....................................................   202
Arrestor Net.....................................................   302
Automated Track Inspection Program.............................534, 537
Bankruptcy, Amtrak.............................................150, 284
BN/UP Train Control Projects.....................................   450
Borrowing Authority..............................................   235
Bridges, Railroad................................................   514
Budget Deficit.................................................147, 148
Capital Needs....................................................   147
Charts:
    Amtrak's Glidepath to Self Reliance..........................   120
    Comparisons for Passenger Railways in Industrialized 
      Countries..................................................   165
    Federal Capital Appropriations: FY 1976-1997.................   114
    Original Operating Support Glidepath.........................   112
    Outstanding Debt/Capital Lease Obligations...................   116
    Principal and Interest Expense: FY 1987-2002.................   118
    Safety Improvement...........................................     3
Class I Accident Rates...........................................   363
Calss II/III Accident Rates......................................   364
Commercial Driver Requirements...................................   243
Commercial Feasibility Definition................................   269
Commercial Feasibility Study...................................272, 530
Commercial Vehicle Grade Crossing Accidents......................   242
Commuter Rail:
    Competition from.............................................   176
    Safety Project...............................................   527
Competition from:
    Commuter Rail................................................   176
    Low Cost Air Fares...........................................   161
Consulting Services..............................................   439
Cost Savings.....................................................   159
CSX/Norfolk Southern/Conrail Merger..............................   661
Debt/Capital Lease Obligations: FY 1997-2002 (Chart).............   116
Debt History and Forecast, Amtrak................................   284
Decreased Federal Support Impact.................................   202
Dedicated Capital Funds........................................156, 174
Dedicated Revenue..............................................162, 163
Diesel Electric and Turbine/Flywheel Locomotive..................   467
Downs, Thomas--Prepared Statement................................   123
Dynamic Brakes...................................................   504
Electrification--Amtrak..........................................   568
Electrification Project, Washington to Boston....................   231
Emergency Hatches................................................   507
Emergency Order 20...............................................   505
Emergency Training...............................................   512
Employee Casualty Rates..........................................   378
Enforcement Cases................................................   420
Environmental Impact Statement, Rhode Island Rail................   350
Environmental Mitigation--Amtrak.................................   567
Excepted Track...................................................   375
Fatalities:
    Grade Crossing...............................................   297
    Rail.........................................................   395
Federal Capital Appropriations: FY 1976-1997 (Chart).............   114
Federal Railroad Administration:
    Amtrak Budget Requests.......................................   441
    Authorized FTEs/On-Board Strength............................   349
    Budget Submission:
        Amtrak...................................................    26
        Next Generation High Speed Rail..........................    39
        Overview.................................................     8
        Research and Development.................................    22
        Safety...................................................     9
    Inspector Procedures.........................................   226
    Office of the Administrator Information......................   337
    Opening Remarks..............................................     2
    Political Appointees.........................................   347
    Prepared Statement...........................................     7
    Project Coordinators.........................................   171
    Railroad Merger Process......................................   216
    Report to Congress--FRA's Safety Programs and Initiative.....    46
    ``Sick Building'' Problem....................................   404
    Unobligated Funds............................................   359
Federal/State Inspection Resources...............................   365
Flammability Standards...........................................   511
Flexible Highway Infrastructure Safety...........................   316
France High-Speed Rail...........................................   196
GAO Testimony on Amtrak Financial Condition....................140, 149
Gates, Locked....................................................   303
Grade Crossings................................................322, 542
    I-800 Computer Answering Service...........................293, 481
    Accidents and Fatalities...................................297, 306
    Action Plan..................................................   244
    Commercial Vehicle Accidents.................................   242
    Efforts......................................................   254
    Enhancements.................................................   304
    FRA Opening Remarks on.......................................     4
    Funding...............................................312. 314, 317
    Illinois.....................................................   455
    Innovations..................................................   305
    Reductions...................................................   263
    Safety Enhancements..........................................   300
    Violations...................................................   296
Hazardous Material Accidents.....................................   377
High-Speed Rail..................................................   565
    Corridors....................................................   280
    Focus........................................................   465
    France.......................................................   196
    Ground Transportation: The International Context (Essay).....   179
    Interoperability.............................................   456
    Investments..................................................   165
    Locomotive Investments.......................................   468
    Next Generation Projects.....................................   462
    Northeast Corridor...........................................   283
    Providence...................................................   229
    State Investments............................................   328
Highway Trust Fund...............................................   200
Hours of Service...............................................243, 292
Human Factors....................................................   502
IG Report on Inspectors..........................................   219
Illinois Train Control Project...................................   453
Information Technology...........................................   489
Injuries to Employees on Duty....................................   379
Inspectors:
    By Position..................................................   368
    State Participation..........................................   369
    Workload.....................................................   367
Intermodal Freight...............................................   518
Intruder Detection...............................................   325
Labor Costs......................................................   232
Labor Mediation Progress.........................................   233
Legislative Proposals............................................   138
Local Rail Freight Assistance....................................   403
Locked Gates.....................................................   303
Locomotive Risk Assessment.......................................   513
Locomotive Technology............................................   466
Locomotives, Non-Electric........................................   478
Low Cost Air Fares, Competition from.............................   161
MAGLEV...........................................................   499
Mail and Express Expansion.....................................153, 157
Mail and Express Revenues......................................160, 207
Merger...........................................................   166
Michigan Train Control Project...................................   452
Molitoris, Jolene--Biographical Summary..........................    44
Molitoris, Jolene--Prepared Statement............................     7
Need to Subsidize Amtrak.........................................   201
Next Generation High-Speed Rail Projects.........................   462
    (See also High-Speed Rail)
NEXTEA Proposals.................................................   285
Non-Electric Locomotives.........................................   478
Northeast Corridor:
    Capital Expense Transfer.....................................   216
    Capital Needs................................................   137
    High-Speed Rail Project......................................   283
    Ridership Projections........................................   203
Omnibus Appropriations Act, Effect on Amtrak Plan Actions........   206
Operating Fund Disbursement Schedule.............................   234
Operating Subsidy, Amtrak Opening Remarks........................   111
Operation Lifesaver:
    FY 1998 Funding..............................................   323
    State Participation..........................................   320
Operation Respond................................................   491
Oregon/Vancouver Corridor........................................   284
Outstanding Debt History and Forecast, Amtrak....................   284
Outstanding Debt/Capital Lease Obligations: FY 1997-FY 2002......   116
Penn Station Redevelopment Project...............................   208
Placement of Rail Cars...........................................   522
Positive Train Control:
    Illinois Project.............................................   453
    Manassas/Harrisburg Corridor.................................   458
    Michigan Project.............................................   452
    Projects...................................................447, 448
    Regulations..................................................   460
    Ubran Areas/Flexible Blocks..................................   459
Positive Train Separation............................254, 290, 444, 539
Principal and Interest Expense: FY 1987-2002 (Chart).............   118
Private Crossings................................................   248
Process Used for Eliminating Routes..............................   159
Profitable Routes................................................   207
Rail:
    Accidents....................................................   235
    Car Placement................................................   522
    Crossing Improvements........................................   245
    Fatalities...................................................   395
    Prospects....................................................   283
    Safety Institute.............................................   411
    Safety Issues................................................   218
    Safety Staffing..............................................   492
    Track Upgrade................................................   269
Railroad Bridges.................................................   514
Railroad Safety, Budget Request..................................   524
Railroad's Use of Contractors....................................   517
Realignment......................................................   154
Record Review Actions............................................   226
Regulatory Priorities............................................   414
Research and Development:
    Advisory Support.............................................   431
    Cost Sharing.................................................   422
    Environmental Impact Analysis................................   528
    FRA Budget Submission........................................    22
    FRA Opening Remarks..........................................     6
    FY 1998 Projects.............................................   425
    Program Oversight............................................   432
    Stress and Fatigue...........................................   435
Rhode Island Rail Project:
    Bond Referendum..............................................   355
    Environmental Impact Statement...............................   350
    Federal Funding..............................................   357
    Impact of Delay..............................................   352
    Record of Decision...........................................   354
    Third Party Contributions....................................   358
    Use of CMAQ Funds............................................   356
Routes:
    Amtrak.......................................................   568
    Closures.....................................................   169
    Profitable...................................................   207
    Profits......................................................   167
    Restructuring and Cost, Status...............................   203
    Viability....................................................   217
RSAC Funding.....................................................   493
RTL Trainsets....................................................   469
Rulemakings Finalized............................................   418
Running Red Lights (Stop Signals)................................   287
Safety:
    Action Plans.................................................   370
    Board Recommendations........................................   236
    Enhancements, Grade Crossing.................................   300
    FRA Budget Submission........................................     9
    Improvement (Chart)..........................................     3
    Inspections..................................................   226
    Institute, Rail..............................................   411
    Issues, Rail.................................................   218
    Programs and Initiatives, FRA Opening Remarks................     4
    Staffing, Rail...............................................   492
    Trends.......................................................   373
    Violations...................................................   223
Serious Injuries to Employees on Duty............................   379
Sick Building Problem............................................   404
State Buy backs, Status of.......................................   204
Stop Signals.....................................................   287
Stress and Fatigue.............................................401, 435
Surface Shelling.................................................   508
T-6 Inspection Railcar...........................................   436
TASC FY 1997-1998 Estimates......................................   406
Telecommuting....................................................   319
Track Safety Standards...........................................   536
Track Speed Limits...............................................   272
Track Upgrade....................................................   269
Train Accidents................................................389, 399
Train Control:
    Illinois Project.............................................   453
    Manassas/Harrisburg Corridor.................................   458
    Michigan Project.............................................   452
    Other Projects...............................................   447
    Urban Areas/Flexible Blocks..................................   459
Transportation Technology Center.................................   408
TRB Study on Passenger Rail Safety...............................   434
User Fees........................................................   264
Video Conferencing and Imaging Systems...........................   484
Violations, Grade Crossing.......................................   296
Washington to Boston Electrification Project.....................   231
Wichita Merger...................................................   216

            National Railroad Passenger Corporation (Amtrak)

Amtrak Competition...............................................   161
    Commuter Rail Competition....................................   176
Amtrak's Need for Subsidy........................................   201
Consulting Services..............................................   640
Contracts with Freight Railroads.................................   574
Downs, Thomas:
    Formal Statement.............................................   123
    Verbal Statement.............................................   111
Electrification Update...........................................   568
Environmental Mitigation.........................................   567
Federal Employers Liability Act..................................   621
Finances:
    Amtrak Bankruptcy............................................   150
    Available Cash...............................................   620
    Budget Deficit Forecast......................................   147
    Budget Request 1998........................................130, 650
    Capital Budget...............................................   136
    Capital Needs..............................................147, 568
    Debt Status..................................................   116
    Dedicated Capital Funding.............................156, 174, 200
    Expenditures.................................................   633
    Federal Capital Appropriations...............................   114
    Financial History............................................   626
    Grant Proposal 1998..........................................   657
    Inflation....................................................   639
    Northeast Corridor Capital Needs...........................137, 561
    Operating Subsidy..........................................121, 621
    Self-Sufficiency......................................119, 128, 137
GAO Testimony on Amtrak..........................................   149
Half-Cent Gas Tax................................................   553
High Speed Rail Project...................................229, 565, 587
Highway Trust Fund...............................................   200
Labor:
    Administrative and Staffing Costs............................   638
    Employment...................................................   625
    Mediation Process............................................   233
    Staffing.....................................................   572
    Union Agreements.............................................   642
Maintenance......................................................   588
    Facility Upgrade.............................................   597
    Maintenance of Way...........................................   592
    Station Operating Costs......................................   603
    Station Renovation...........................................   601
    Workload Data................................................   589
Mail and Express..........................................153, 157, 207
Non-Core Business Activities.....................................   660
Northeast Corridor Improvement Project...........................   586
NTSB Recommendations...........................................236, 646
Penn Station Redevelopment Project...............................   208
Railroad Mergers..........................................166, 216, 661
Railroad Retirement..............................................   655
Revenues.........................................................   616
Rhode Island Rail................................................   651
Ridership......................................................202, 610
Routes...........................................................   568
    Profits...............................................167, 207, 217
    Elimination...........................................159, 169, 204
Safety:
    Grade Crossings.......................................242, 263, 652
    Accidents and Injuries.......................................   645
Service..........................................................   562
State Contributions..............................................   658
User Fees........................................................   264

                           Tables and Charts

Amtrak Appropriations History....................................   631
Amtrak Employment (state by state)...............................   625
Amtrak FY 1998 Capital Needs.....................................   550
Equipment Delivery Schedule......................................   580
Federal Capital Appropriations...................................   114
Federal Funding..................................................   553
Federal Funding History..........................................   629
FELA Payments and Expenses.......................................   621
FELA Payouts.....................................................   624
Fleet Average Age................................................   584
Operating Statistics.............................................   582
Operating Support Glidepath......................................   112
Outstanding Debt.................................................   116
Passenger Miles Per Operating Subsidy............................   634
Planned Maintenance of Way.......................................   593
Principal Interest...............................................   118
Revenue in Constant Dollars......................................   627
Ridership Trend..................................................   612
Route by Route Performance.......................................   570
Self-Reliance Glidepath..........................................   120
Station Operating Costs..........................................   604
Station Renovations..............................................   601
Strategic Capital Plan...........................................   556
Union Agreements.................................................   642

          Research and Special Programs Administration (RSPA)

Back Logged Projects.............................................   808
Budget and Administrative Issues.................................   790
Civil Penalties Assessed and Collected...........................   682
Damage Prevention Quality Team...................................   715
Emergency Preparedness Grants....................................   764
Emergency Transportation:
    Office of Emergency Transportation...........................   815
    Crisis Management Center, Use of.............................   816
Hazardous Materials Safety:
    Hazardous Materials Budget Increase..........................   787
    Hazardous Materials Incidents by Mode........................   774
    Hazardous Materials Incidents................................   766
    Hazardous Materials Inspections..............................   784
    Hazardous Materials On-Board Staff...........................   768
    Hazardous Materials Training Resources.......................   785
    Hazardous Materials Travel Expenses..........................   787
    Hazardous Materials Workload Indicators......................   788
    New Mandates.................................................   767
    NTSB Recommendations.........................................   788
    Open NTSB Recommendations....................................   770
    Serious Hazardous Materials Incidents........................   786
    Significant Hazardous Materials Regulations..................   776
Inspections/Inspectors:
    Hazardous Materials Inspections..............................   784
    Risk-Based Pipeline Inspection...............................   696
    RSPA Offshore Pipeline Inspections...........................   688
    RSPA Onshore Pipeline Inspections............................   686
    RSPA Pipeline Inspections....................................   674
    RSPA Pipeline Inspectors.....................................   672
    RSPA Pipeline Safety Inspections.............................   677
New Mandates.....................................................   767
Non-Destructive Evaluation Research..............................   697
NTSB Recommendations.............................................   788
Obligational Authority From Outside DOT..........................   804
Office of Emergency Transportation...............................   815
Oil Pollution Act Programs.......................................   735
One-Call Legislation.............................................   715
One-Call Systems.................................................   712
Open NTSB Recommendations........................................   770
OPS Reorganization...............................................   720
OPS Risk Management Program Employees............................   744
OPS Work Load Analysis...........................................   735
OPS Work Load Measures...........................................   678
Pipeline Safety:
    Civil Penalties Assessed and Collected.......................   682
    Damage Prevention Quality Team...............................   715
    National Pipeline Mapping System.............................   699
    Non-Destructive Evaluation Research..........................   697
    NTSB Recommendations.........................................   788
    Pipeline Incident Summary....................................   676
    Pipeline Incidents Due to Flooding...........................   742
    Pipeline Risk Management Initiative........................690, 745
    Pipeline Safety Fund--Reserves...............................   702
    Pipeline Safety Regulatory Program...........................   726
    Pipeline Safety User Fees....................................   741
    Oil Pollution Act Programs...................................   735
    One-Call Legislation.........................................   715
    One-Call Systems.............................................   712
    OPS Reorganization...........................................   720
    OPS Risk Management Program Employees........................   744
    OPS Work Load Analysis.......................................   735
    OPS Work Load Measures.......................................   678
    Responsiveness to NTSB Recommendations.......................   720
    Risk-Based Pipeline Inspection...............................   696
    RSPA Offshore Pipeline Inspections...........................   688
    RSPA Onshore Pipeline Inspections............................   686
    RSPA Pipeline Inspections....................................   674
    RSPA Pipeline Inspectors.....................................   672
    RSPA Pipeline Safety Inspections.............................   677
    RSPA Pipeline Incident Investigations........................   675
    RSPA Oversight of Hazardous Liquid Pipelines.................   722
    RSPA Staffing................................................   791
State Compliance Program Support.................................   716
Political Appointments...........................................   791
Research and Technology..........................................   746
Responsiveness to NTSB Recommendations...........................   720
RSPA Staffing....................................................   791
State Compliance Program Support.................................   716
Statement of Research and Special Programs Administration........   666
Use of Crisis Management Center..................................   816
Volpe Center:
    Back Logged Projects.........................................   808
    Investing Volpe Center Funds.................................   814
    New Volpe Center Obligational Authority--DOT.................   803
    Obligation Authority From Outside DOT........................   804
    RSPA Contracts with the Volpe Center.........................   810
    Ten Largest Volpe Projects by Mode...........................   798
    Volpe Center FTE.............................................   813
    Volpe Center Unobligated Balances............................   808
    Volpe Center, The............................................   798

                      Surface Transportation Board

Acquisition Proposals............................................   868
Abandonments.....................................................   869
Board Members and Terms..........................................   865
Budget Request:
    Comparison of Budget Requests................................   844
    FY 1988......................................................   827
Caseload.......................................................884, 899
Case Processing Timeframe........................................   885
Comparison of Board's and President's Budget Requests............   844
Comparison of Board's and ICC's Workload.........................   900
Conrail Merger...................................................   892
Earnings:
    Class I Railroads............................................   897
Exempted Commodities.............................................   871
Funding:
    Feasibility of Funding by User Fees..........................   843
    Options Paper................................................   848
    Other Services...............................................   861
    Reimbursable Services........................................   861
    User Fee Funding Alternatives................................   846
    User Fee Increases...........................................   859
    User Fee Shortfall...........................................   860
    User Fees....................................................   903
Goals and Accomplishments......................................820, 834
ICC Termination Act:
    Rulemakings Imposed by.......................................   878
Independent Regulatory Body Within DOT...........................   899
Managerial and Supervisory Positions.............................   863
Mergers:
    Conrail......................................................   892
    Final Procedural Schedule....................................   892
Other Services...................................................   861
Organization.....................................................   830
Proceedings:
    Motor, Rail, Pipeline........................................   884
Publication of Proposed Regulations..............................   902
Railroad:
    Acquisition Proposals........................................   868
    Abandonments.................................................   869
    Rate Complaints..............................................   880
    Revenue Adequate.............................................   893
    Earnings, Class I............................................   895
Railroad-Shipper Transportation Advisory Council.................   886
    Annual Report................................................   888
    Policy Recommendations.......................................   887
Rates:
    Complaints...................................................   880
    Regulation...................................................   882
Regulation:
    Exempted Commodities.........................................   871
    Rate Regulation..............................................   882
    Independent Body Within DOT..................................   899
    Publication..................................................   902
Reimbursable Services............................................   861
Relocation of Board..............................................   867
Revenue Adequate Railroads.......................................   893
Rulemakings:
    Estimated Completion Date....................................   872
    Imposed by the ICC Termination Act...........................   878
    Priorities...................................................   877
Staffing:
    By Function..................................................   866
    Managerial and Supervisory Positions.........................   863
Statement of Chairman Morgan.....................................   821
    Budget Request...............................................   819
    Goals and Accomplishments....................................   820
    Summary......................................................   823
    Workload.....................................................   821
User Fees:
    Feasibility of Funding.......................................   843
    Funding......................................................   903
    Funding Alternatives.........................................   846
    Increases....................................................   859
    Options Paper................................................   848
    Shortfall....................................................   860
Workload:
    Comparison to ICC............................................   900
    FY 1997 and FY 1998..........................................   821
    Pending Case.................................................   899
    Summary......................................................   826