[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                    DEPARTMENT OF TRANSPORTATION AND

                    RELATED AGENCIES APPROPRIATIONS

                                FOR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
 SUBCOMMITTEE ON THE DEPARTMENT OF TRANSPORTATION AND RELATED AGENCIES 
                             APPROPRIATIONS
                    HAROLD ROGERS, Kentucky, Chairman
 FRANK R. WOLF, Virginia             MARTIN OLAV SABO, Minnesota
 TOM DeLAY, Texas                    JOHN W. OLVER, Massachusetts
 SONNY CALLAHAN, Alabama             ED PASTOR, Arizona
 TODD TIAHRT, Kansas                 CAROLYN C. KILPATRICK, Michigan
 ROBERT B. ADERHOLT, Alabama         JOSE E. SERRANO, New York
 KAY GRANGER, Texas                  JAMES E. CLYBURN, South Carolina
 JO ANN EMERSON, Missouri
 JOHN E. SWEENEY, New York          
                         
 NOTE: Under Committee Rules, Mr. Young, 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.
  Richard E. Efford, Stephanie K. Gupta, Cheryle R. Tucker, and Leigha 
                      M. Shaw, Subcommittee Staff
                                ________
                                 PART 5
                                                                   Page

   DEPARTMENT OF TRANSPORTATION:

     Federal Railroad Administration..............................    1
       Grants to Amtrak...........................................    1
     Research and Special Programs Administration.................  911
     Surface Transportation Board................................. 1049

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 80-360                     WASHINGTON : 2002





                      COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New York
 ZACH WAMP, Tennessee                LUCILLE ROYBAL-ALLARD, California
 TOM LATHAM, Iowa                    SAM FARR, California
 ANNE M. NORTHUP, Kentucky           JESSE L. JACKSON, Jr., Illinois
 ROBERT B. ADERHOLT, Alabama         CAROLYN C. KILPATRICK, Michigan
 JO ANN EMERSON, Missouri            ALLEN BOYD, Florida
 JOHN E. SUNUNU, New Hampshire       CHAKA FATTAH, Pennsylvania
 KAY GRANGER, Texas                  STEVEN R. ROTHMAN, New Jersey    
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     
   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
 DEPARTMENT OF TRANSPORTATION AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2003

                              ----------                              

                                      Wednesday, February 27, 2002.

                      DEPARTMENT OF TRANSPORTATION

                               WITNESSES

GEORGE WARRINGTON, PRESIDENT & CHIEF EXECUTIVE OFFICER, AMTRAK
ALLAN RUTTER, ADMINISTRATOR OF THE FEDERAL RAILROAD ADMINISTRATION
KENNETH MEAD, INSPECTOR GENERAL FOR THE DEPARTMENT OF TRANSPORTATION
GILBERT E. CARMICHAEL, CHAIRMAN, AMTRAK REFORM COUNCIL
    Mr. Rogers. The committee will come to order. Good 
afternoon to all of you. Thank you witnesses for being here 
today.
    In 1971 Amtrak's enacting legislation stated that the 
railroad would be the country's only intercity passenger 
railroad and it would be profitable. Ever since then the 
President of Amtrak has repeatedly told the Congress that 
Amtrak only needed a few more years of federal assistance 
before it would be profit making.
    Most recently in 1997 Amtrak, as we all know, was given 
five years or until December of this year to become 
operationally self sufficient. Like past attempts, Amtrak has 
failed to achieve that goal and now some 31 years after 
Amtrak's inception the Congress is still subsidizing a private 
railroad with hundreds of millions of dollars. Whether the 
subsidy remains in the future and at what level may be decided 
this year when Congress reauthorizes Amtrak, if that takes 
place.
    Amtrak is in dire financial shape. Within the last year 
Amtrak has had to mortgage Pennsylvania Station to obtain 
sufficient funds to remain operational for the last three 
months of fiscal 2001. And in early February, Amtrak announced 
$285 million in operating cuts, capital deferrals and 
maintenance actions so that it would have enough money to get 
through this fiscal year.
    These actions may not be enough because Amtrak has not been 
able to control expenses even during periods of record revenue 
growth.
    There are two very different budget requests in front of 
this Subcommittee for Amtrak. The Administration has asked for 
an appropriation of $521 million and has said that this amount 
is a placeholder until Congress decides how Amtrak should be 
structured in the future.
    In comparison, Amtrak has asked for more than double that 
amount, $1.2 billion for fiscal 2003. And on February 1, Amtrak 
announced that if the railroad did not receive this entire 
appropriation it would stop all long distance service, 18 
trains in all, on October 1 of this year.
    Amtrak also noted that this request does not allow for any 
new growth in service. It just takes care of current needs. It 
is startling that those needs could more than double in just a 
year.
    Amtrak has failed to meet its legal mandate to achieve 
operational self-sufficiency. They blame conflicting policy 
mandates and inadequate capital investment. And while some of 
that may be true, Amtrak cannot ignore the fact that they have 
tried to grow an unprofitable system without adequately 
controlling expenses, and they have failed to identify or 
request more than the bare necessities of funding to support 
long term capital investments.
    Now after over-extending itself and failing to control 
costs, Amtrak says it can no longer run as a commercial 
enterprise, moreover a profitable one if it is expected to 
provide intercity passenger transportation and develop new high 
speed rail corridors without a stable funding source. That 
term, ``stable funding source'', we think we know what that 
means. It is a euphemism for a direct tap into the U.S. 
Treasury.
    It is clear that significant decisions must be made about 
this railroad and how it will operate in the future.
    The Inspector General and the Amtrak Reform Council have 
been monitoring Amtrak's financial health and the corporation's 
ability to reach self-sufficiency. Both have reported 
negatively on these prospects in the past few months.
    In addition the Amtrak Reform Council issued a report on 
February 7 recommending ways to restructure national passenger 
rail travel in the U.S.
    The Federal Railroad Administration represents the 
Secretary of Transportation on Amtrak's Board and will be 
intimately involved in the issues of how Amtrak should be 
restructured. According to their grant request, the 
Administration believes that ``Amtrak cannot continue 
indefinitely under current circumstances and that the 
Administration is eager to work with the Congress to develop 
solutions that result in a cost effective, financially stable 
system that can help meet the public's travel needs.'' While 
the budget request does not provide any recommendations on how 
we do this, and perhaps inadequately funds the future system, I 
am hopeful that the Administration will step up to the plate 
and shortly submit a long term restructuring and financial plan 
for financial rail.
    But it seems no one wants to tackle this subject. The 
Authorizing Committees of the Congress has expressed no 
interest; the Administration expresses no interest; and so it 
very well may depend upon this Subcommittee. So be it.
    Today before the Subcommittee we have four witnesses who 
are well versed in Amtrak's financial condition. Each has a 
very different opinion about the railroad's needs and what type 
of service should be provided in the future.
    We are pleased to welcome Mr. George Warrington, the 
President and Chief Executive Officer of Amtrak; Mr. Allan 
Rutter, Administrator of the Federal Railroad Administration; 
Mr. Kenneth Mead, Inspector General for the Department; and Mr. 
Gil Carmichael, Chairman of the Amtrak Reform Council. We 
welcome each one of you here and thank you for your time and 
the testimony you are about to give. We will have you testify 
in the same order as I introduced you if that is agreeable, and 
we will enter your written statements in therecord. We would 
appreciate hearing from you an oral summary of your written testimony.
    But before I go to President Warrington let me yield to my 
friend Mr. Sabo.
    Mr. Sabo. Thank you Mr. Chairman, and welcome to all the 
witnesses.
    As I have indicated at other hearings, in the 24 years of 
service on the committee this is the year that an 
Administration budget leaves me the most bewildered ever. In 
other years we have had marginal problems, at least in 
comparison to this year. We have major problems with funding 
for a new security agency, we have major funding and policy 
decisions as it relates to highway funding, and we have major 
issues relating to the future of Amtrak which involve billions 
of dollars that are not reflected in the Administration's 
budget.
    Somewhere, somehow, we are going to have to come to some 
conclusion about the sources of money, by the time we mark up 
bills this spring. I am not sure where it is going to come 
from.
    I listened to recommendations. Mr. Warrington, we know what 
you think is needed for next year. I guess I read the 
Administration's request as simply a placeholder. Mr. Rutter, I 
do not know what you really mean. I find analysis and facts but 
no conclusions. To the Reform Commission, I do not know how 
reshuffling boxes solves the problem in putting a budget 
together for 2003.
    So we have a real dilemma. I think from everyone we have to 
know realistically what happens if we simply fund at the budget 
request, what happens to Amtrak service in this country. And 
what options are by increments, and what we can and cannot do.
    I might say that we have this fiction that other modes of 
transportation pay for themselves, but that clearly is not the 
case. We have put an incredible amount of general revenue into 
FAA operations over the years. I understand the request this 
year is something like $4 billion of general revenue for the 
operations of FAA. In other years it has been more modest, but 
there has been a significant amount of money other than user 
fees that helps pay for FAA operations in this country.
    And while it may be true at the federal level that only gas 
tax receipts go primarily for paying for roads, on a nationwide 
basis, particularly at the local level, property taxes fund an 
incredible amount of the infrastructure and the operations for 
maintaining the road system in this country. So we clearly have 
lots of public subsidies that go into other modes of 
transportation.
    On the other hand, Mr. Warrington, the question we have is 
if we are providing subsidies, how do we make judgment that 
they are effectively being used?
    I look forward to the wisdom of the four of you to give us 
some guidance on what we should do and I welcome you here.

      Statement of George Warrington, President and CEO of Amtrak

    Mr. Rogers. President Warrington, you are invited to 
testify.
    Mr. Warrington. Thank you very much, Mr. Chairman. Thank 
you for the opportunity to appear here before the committee 
this morning. As you have said, we have some very critical 
policy issues before us today. I will be completely straight 
and honest and transparent as possible about the dilemma we 
have ourselves in. Ultimately there are a whole host of serious 
public policy questions that do have to be addressed by the 
Congress and the Administration and we will help to inform that 
discussion as we move forward.
    Meanwhile my focus and our focus is on managing the 
business this year, to get through this year, and to manage the 
business through next year as Congress decides and debates that 
much bigger question about what the role of rail service in 
this country is and what the appropriate funding level should 
be.
    As you said, Mr. Chairman, over the last couple of years we 
have worked hard to manage the business within the context of 
conflicting policy mandates. We have been expected to run a 
national public service network not unlike essential air 
service and at the same time drive toward commercial self-
sufficiency. We tried to move down both of those paths at the 
same time while also coping with both historical and relatively 
recent undercapitalization of what really is the most capital 
intensive business certainly in this country and in the Western 
world, the railroad business.
    Many of our key indicators have in fact moved in the right 
direction. Since the start of 1997 ridership has grown by 19 
percent and overall revenues close to 40 percent. We have had 
to, we have been forced to diversify our revenues by forming 
partnerships with the private sector, with states and commuter 
agencies, in order to generate income to help underwrite the 
costs of and expenses associated with what always has been and 
always will be an unprofitable network of long distance trains.
    I will tell you we have also worked very hard on the cost 
side around those costs that we could get our arms around and 
control, and there are a whole host of uncontrollables out 
there as well. I would add that a substantial portion of the 
growth that we have seen has been attributable to depreciation 
which is a non-cash expense, and a portion of it has been 
attributable to interest expense. The interest expense flows in 
part from the undercapitalization which forces us to finance in 
private markets.
    As a matter of fact virtually every piece of equipment that 
Amtrak owns has been privately financed over the years in 
private markets and that has resulted in non-defeased debt 
service of about $3 billion.
    The combination of all of those cost management and cost 
cutting initiatives which I testifiedbefore you last year were 
well underway, and they are systemic and they take time to execute 
thoughtfully and rationally, and particularly in a business where you 
have to be safety sensitive.
    I will tell you that the first quarter of this year 
compared to the first quarter of last year, our actual 
expenses, when you subtract depreciation, have been reduced, 
first quarter of last year versus first quarter of this year.
    Despite our best efforts on all of these fronts and some 
tangible signs of progress here, as you say, Mr. Chairman, this 
entire system has reached a critical crossroads. On top of the 
long term constraints and conflicts that we have been 
confronted with and that we are already dealing with, we have 
had to face over the past years several very serious short term 
challenges that really are beyond our own control.
    First of all, the weakened economy has had about $120 
million impact on us over the past 12 to 15 months. Clearly 
September 11th has had some impact, a bit of positive impact, 
actually, on the Northeast Corridor, but across the system 
September 11th plus the recession have cost us dearly and we 
have had to substantially beef up our security costs around the 
entire network as a consequence of 9/11.
    The Amtrak Reform Council (ARC) finding itself technically 
has had a consequence. As a result of triggering the formal 
liquidation process under the law, the consequence of the 
formal action has technically been to create uncertainty in 
private markets. This has the regrettable result of limiting 
our access to capital or private markets which causes some of 
the financing which we had been counting on to evaporate. As a 
result we have had to invest Amtrak cash in what would 
otherwise have been financed transactions. That has had an 
impact over the past year as well.
    Once again we have done everything we can through self help 
internally to try to confront these latest challenges. Last 
year as the recession began to take its toll we intensified our 
core management efforts and we executed last year $258 million 
of expense reductions. More recently, in response to rising 
security costs, the impact of the ARC finding, we announced 
another $285 million in spending cuts and capital investment 
deferrals. That adds up to a combined total of $543 million in 
cuts or deferrals over two fiscal years. Frankly, Mr. Chairman, 
as we run the entire system and continue to run that entire 
system within the context of what I believe are conflicting 
mandates, we are running out of tools in the tool box to be 
able to hold this together.
    Going forward, as you said, the minimum federal funding 
that is needed to manage this network through fiscal year 2003 
without service eliminations, route reductions or adding to our 
capital backlog is about $1.2 billion. An appropriation at this 
level would cover basically $160 million of Excess Railroad 
Retirement payments, those are taxes; $840 million is the 
minimum need around basic capital investment, a substantial 
portion of which includes debt service as well as mandatory 
investments that are required either under safety regulations 
or under other environmental type requirements and which we 
have an obligation to move forward with; and basic 
infrastructure or renewal. You know we have a substantial 
backlog on the system. Third, $200 million to cover the net 
operating losses of unprofitable long distance trains.
    I will tell you that these are not the total losses from 
running these trains. It is what is left after internal cross-
subsidies from both profitable services, particularly on the 
Northeast Corridor, and other lines of business that we engage 
in to generate revenue streams to help underwrite an inherently 
unprofitable system.
    As you examine the request, Mr. Chairman, it does not 
include several things such as capital backlog, accumulating 
for over 30 years and which has been well documented at about 
$5.8 billion. The request also does not include the development 
of high speed corridors or any portion of those 11 federally 
designated corridors in 38 states around the country; and, 
finally, it does not include incremental security costs which 
separately have been requested through the security legislation 
which we submitted to Congress last fall.
    Each of these unmet needs--the capital backlog, high speed 
corridors and security--really are central to whatever future 
outcome the Congress and the Administration define here and 
they do really need to be addressed in connection with the 
upcoming reauthorization. They will have a clear impact on the 
system's future appropriation needs.
    It is also important to understand that the $1.2 billion 
request is not significantly higher than the total amount of 
federal appropriations from a cash point of view that we 
received this fiscal year. This fiscal year is total federal 
funding for Amtrak was $939 million from a cash point of view, 
and cash matters to us a lot because we did not have any 
working capital at all.
    United Airlines lost $2 billion last quarter and they can 
handle that easily because they are sitting on cash reserves. 
Amtrak has never had cash to be able to deal with 
uncontrollables or uncertainty. So this is, from our point of 
view, cash is king here.
    This year we have available through the federal government 
$939 million from a cash point of view. That is 60 percent of 
last year's appropriation, the fiscal 2001 appropriation, $313 
million; 100 percent of our 2002 appropriation of $521 million; 
$100 million for life safety upgrades in the New York City 
tunnels; and $5 million provided for additional security after 
September 11th.
    While this level of funding might have been adequate for 
Amtrak's minimum needs before unforeseen circumstances such as 
the economic slowdown, September 11th, and private market 
consequences, these recent events have had significant 
financial impacts and this is why we have had to defer capital 
investment, cut operating expenses and covering some of our 
needs through private financing.
    Another way of restating this issue is to recognize that if 
we are level funded in 2003 at $521 million the entire 
appropriation would be consumed by Excess Railroad Retirement 
payments and mandatory capital investments before a single 
dollar is invested in other capital needs, in long distance 
trains which are unprofitable, or in any kind of modernization 
of the system.
    Mr. Chairman and members of the committee, those are the 
highlights of the FY 2003 request. I would just like to leave 
you with two additional points.
    First, by any standard inter-city passenger rail in this 
country has been underfunded for decades. The General 
Accounting Office, the DOT Inspector General and all 
international comparisons converge I believe around that point.
    We have worked very hard to maintain and improve the 
current system despite underfunding by increasing revenues from 
every conceivable source and working hard to control 
discretionary spending. But as I have explained we simply 
cannot continue to manage that current system unless we receive 
the $1.2 billion in 2003.
    A lesser appropriation would require a series of business 
plan actions that depending upon that shortfall could include 
one of a number of steps such as continuing to defer important 
capital investments or some combination of capital deferral and 
service elimination.
    Since the 2003 funding level is uncertain, simply as a 
contingency, on or about March 29 we will regrettably provide 
the states notice of possible service discontinuance later this 
year simply to maintain flexibility as we construct our budget 
through this summer for fiscal year 2003.
    First, I hope we will not have to continue capital deferral 
actions or service elimination actions later this year, but we 
simply need the flexibility in the face of uncertain funding 
levels and uncertainty around both the appropriation process 
and the reauthorization process.
    Second, there is a critical need, as we discussed earlier, 
for the Congress and the Administration to look beyond the 2003 
appropriation cycle and fix the underlying policy model for 
passenger rail which clearly is broken. Neither Amtrak nor any 
other entity can operate unprofitable public service trains and 
be expected to generate a profit. I think it is a myth. Some 
have called it the big lie that circulated around Amtrak and 
this issue for 30 years. Undercapitalization in its own way 
drives up operating expenses because you are not able to secure 
the kind of efficiency in the day-to-day operation that capital 
investment would allow you to secure.
    Thus we urge the Congress and the Administration working 
with governors, mayors and all interested parties to make 
Amtrak's reauthorization an urgent priority. During the debate 
we clearly need to find the answers to three fundamental 
questions.
    First, what kind of inter-city passenger rail system does 
America really want and really need? Second, how much capital 
and operating support is required to support such a system? And 
third, what will be the sustainable sources of government 
public funding to meet these needs?
    Until these questions are answered any policy that relies 
primarily on short term business actions or structural 
reorganization which does not provide adequate or reliable 
funding sources will only perpetuate the current problem.
    Mr. Chairman, with the actions we have taken this year 
internally and the level of funding requested in next year's 
budget we will be able to maintain the current level of service 
and give Congress the time to adequately deal with the 
fundamental issues that need to be addressed here.
    However it is important to reiterate that we are in fact, 
as you have said, running out of time here. As Congress moves 
forward with the reauthorization debate I want to assure you 
that we are prepared to inform that discussion and provide the 
expertise we have developed over 30 years of operating 
America's rail system. We have given a significant amount of 
thought to these very important questions. There is no doubt we 
can build a system of rail passenger service which our nation 
can in fact be proud of and that can help address a national 
transportation crisis.
    I know it will not be easy. I know the financial resources 
are extremely constrained. But we are prepared, to help inform 
that debate and help shape that outcome. I understand, Mr. 
Chairman, this is a very difficult task.
    Thank you.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Rogers. Thank you.

                          FRA Opening Remarks

    Administrator Rutter.
    Mr. Rutter. Thanks. Thanks for the opportunity of appearing 
before you this afternoon.
    I think it is a fairly unique thing that all four of the 
people you have before you are agreeing on one basic point and 
that is that the current system we have is unsustainable and 
needs to be fixed. That has not been the case in the 30 years 
we have been talking about Amtrak.
    We may have different ideas on how we got here and 
different ideas on where to go next, but there is unanimity on 
the fact that the problem is significant and has reached a 
crisis situation.
    Before we respond to questions about written testimony I 
want to make three additional points. First, as the Chairman 
and Congressman Sabo have talked about, it is an incredibly 
complicated issue. The complications are the result of 30 years 
of accumulated decisionmaking and that complication will not be 
easily resolved or quickly resolved. For that reason the DOT 
and the Administration continue to work out the best way for us 
to work with Congress on identifying possible solutions to our 
current situation.
    I want to assure you that we are neck deep in trying to get 
to the bottom of examining all of the possible permutations and 
possible solutions, some of which have included transferring 
the Northeast Corridor to federal ownership or to ownership by 
the states or a compact of states; changes to the governance of 
passenger rail by new boards, new responsibilities for current 
entities or new federal entities; changes in how trains are 
operated; changes in who owns them; changes in who operates 
those trains.
    The breadth and variety of solutions that have already been 
suggested, there are at least two or three different 
restructuring bills in Congress right now as well as two to 
three bills that deal strictly with capital funding.
    As complex and broad the variety of solutions that have 
already been suggested, that kind of pales compared to the 
possibilities for funding and restructuring that we are 
studying right now.
    The fact that our testimony was as detailed as it was I 
hope should indicate the depth of our commitment to deal with 
the issues, although I certainly understand your frustration 
about the language in the budget the President proposed.
    Second, this unlike wine, is a problem that is not going to 
get better with age. Waiting for real change is only going to 
worsen the underlying fundamentals which make it harder to fix 
later. Those problems of high cost will not go away on their 
own, and increasing expenses associated with debt service for 
capital needs will continue to get worse.
    Third and finally I would point out that this is an 
exceptionally difficult time for the people who work on the 
railroad, for Amtrak. A torrent of unrelenting negative 
publicity and press over the last six or seven months makes it 
difficult for them to do their jobs, to show up for work every 
day. My own experience prior to joining Governor Bush's staff 
involved working in high speed rail in Texas which was a wildly 
unsuccessful possibility. I understand what it is like to tell 
people what you do and have them react with a mixture of 
sympathy and tongue tiedness, not knowing what to say.
    The fact that the folks are showing up to work and offering 
quality service to customers on the line speaks to their 
dedication and it is really for them that we are committed to 
trying to find some solutions to making it work.
    Thanks for inviting me again, and we will look forward to 
responding to questions as they come. Thank you.
    [The prepared statement of Mr. Rutter follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
  Statement of Kenneth M. Mead, Inspector General U.S. Department of 
                             Transportation

    Mr. Rogers. Mr. Mead.
    Mr. Mead. Thank you, Mr. Chairman.
    It ought to be clear at this point that Amtrak will not 
meet its operating self-sufficiency deadline by this December. 
Last year at about this time you will recall that we expressed 
some real reservations about whether it was possible for them 
to meet it, but I did withhold judgment at that time. It is now 
a mathematical certainty, save doing things of a serious nature 
like mortgaging the Northeast Corridor.
    And you may recall, you say you heard this before in your 
years on the subcommittee, Amtrak's perils and financial woes. 
So what is different this time?
    What is different this time is that there are few options. 
Amtrak has mortgaged most everything there is to mortgage and 
sold and leased back most of its assets, so there is not much 
left. There are some station properties and there is also the 
Northeast Corridor, but beyond that Amtrak does not have any 
sort of options.
    As for the budget, it will not be able to operate on a 
subsidy of $500 to $600 million. It is that simple. Amtrak 
cannot do it. I have the numbers in front of me and we will 
explain them later during the Q&A period.
    I would like to walk through some slides. I think you all 
have some slides in your packets there that have a bluish 
cover. They basically highlight some financial and operating 
performance issues that I would like to point out.
    Slide one is entitled System Wide Passenger Revenue and 
Ridership. For those who have the testimony but not the 
individual slides, they are set forth in the testimony as well.
    There is an irony on slide one, that the revenues and 
ridership for Amtrak have shown marked growth. Since the self-
sufficiency mandate was established in fiscal year 1998, 
system-wide ridership, which is represented by the blue line on 
that chart, grew over 11 percent. System-wide passenger revenue 
which is represented by the red line, grew 26 percent. The 
revenue growth trend that began in 1995 has brought Amtrak the 
highest passenger revenue levels in its history.
    Another note on revenue that is fairly interesting, Amtrak 
is increasingly relying on revenue from sources other than 
passengers. So that today, nearly 43 percent of the revenues 
that Amtrak takes in do not come from passengers. They come 
from sources other than the fare box.
    If you turn to slide two, this is where the picture becomes 
somewhat dispiriting. Amtrak's revenue growth was more than 
matched by the growth in expenses. In fact, since the self-
sufficiency mandate was established, for every dollar in new 
revenues Amtrak's cash expenses increased by about $1.05. An 
area worth noting: interest on borrowing which was $24 million 
in 1994 is now approaching $185 million and it is expected to 
go to $225 million in 2005.
    If you go to slide three, slide three represents the growth 
in operating and cash losses. Amtrak's operating loss in 2001 
which is represented by the dark blue line was a little over $1 
billion. That is about $129 million higher than its 2000 loss 
and is in fact the largest loss in Amtrak's history.
    The dark blue line needs to be put in context, though, 
because that also is rising because of the acquisition of 
capital equipment and infrastructure improvements from the 
infusion of capital funding that Amtrak received several years 
ago. But the cash loss, which is the basis for measuring self-
sufficiency, that is the line that should have disappeared. 
That is the light blue one with the number $585 million on it. 
That is now $24 million worse than Amtrak's cash loss in 1998 
which was the first year on this five year glide path.
    If you turn to slide four, this tells the story of Amtrak's 
debt. Between September 2000 and 2001, Amtrak's long term debt 
and capital lease obligations grew by 30 percent or a total of 
over $800 million.
    Since 1997 Amtrak's total debt has grown 155 percent from 
$1.7 billion to over $4 billion. What that translates into, 
when you combine interest payments and principle payments, it 
is now approaching $300 million in debt payments. You bump that 
up against the current subsidy level of $521 million and I 
think you can see the picture as well as I can.
    If you turn to slide five, slide five is where we have 
attempted to measure in a fairly crude way what is happening in 
the Northeast Corridor as a result, at least in part, of 
inadequate capital investment. And what you see there is an 
increase in delays.
    Amtrak has about a $5 billion backlog of repair needs in 
the corridor and the total minutes of delay for Amtrak trains 
in the Northeast Corridor has gone up nearly 75 percent between 
1998 and 2001. That is somewhat scary when you stop and think 
about what we are trying to do in the Northeast Corridor. We 
are trying to go faster. If that blue bar chart gets much 
higher you are going to see reduction in the speed that the 
trains can go.
    The last slide deals with the budget. The Administration 
has a placeholder budget that is $521 million as the Chairman 
pointed out. That is less than half of what Amtrak has 
separately requested. What Amtrak is requesting, I think they 
would characterize it fairly is a limp-along, tight budget just 
to get them through '03.
    You will see that of the $1.2 billion, $160 million will be 
for excess railroad retirement payments, $200 million for net 
operating subsidies, and $840 million for capital investment. 
That may be a bit more than they need to just get through 2003. 
If the goal is just to get them to the end of 2003, I think 
they probably can get by with somewhat less than that. But if 
the idea is to position the railroad for the future, you are 
going to need probably more than that.
    A few closing points. I think the focus on the operating 
subsidy has been a distraction and that the real issue is the 
capital issue. In fact, the annual operating subsidy that is 
required to continue operating the most unprofitable trains in 
the Amtrak system is less than one-third of the money that is 
needed for capital in the Northeast Corridor to keep the trains 
running there. And that is where the most profitable trains 
are.
    I have heard suggestions that one of the solutions may be 
cost sharing with the states, where the states will be expected 
to provide a greater level of contribution. A couple of issues 
there.
    If I were one of those states, I would want to know what I 
was going to get for my money and how much it was going to 
cost. Amtrak is going to have to provide you with more detailed 
analysis than is currently available if you want to achieve 
that.
    The second issue is how are you going to divvy it up among 
states. Take the Northeast Corridor as an example, most of the 
money that is needed is in the Northeast Corridor. The 
Northeast Corridor states will likely say that they are an 
economicengine, and they are. And the corridor, if it were to 
shut down in the Northeast, would cause real problems with the airports 
and the roadways. It really would.
    So there is going to be an issue about how much should the 
Northeast Corridor states contribute in relationship to other 
states in the country.
    Finally, I know there are a number of proposals on the 
table to reorganize Amtrak, to split it up into three pieces, 
to create three separate Amtraks called something else, and 
create an agency that would handle infrastructure. I am telling 
you, do not be fooled into thinking that that is going to solve 
the problem. If we are not going to come to grips with the 
capital situation at Amtrak, we are fooling ourselves if we 
think we are going to continue with the status quo or that we 
are going to expand passenger rail in this country.
    Thank you, Mr. Chairman.
    Mr. Rogers. Thank you, Mr. Mead.
    [The prepared statement and slides of Mr. Mead follow:]

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                          ARC Opening Remarks

    Mr. Carmichael. This is kind of an interesting position to 
be in after these three conversations.
    Thank you Mr. Chairman and members of the subcommittee. I 
am Gil Carmichael. I am Chairman of the Amtrak Reform Council, 
the council you created made up of citizens. And those citizens 
have worked very hard for the last three years with a very 
small staff--a good staff of professional people.
    We have a message, and we are bringing you the message, and 
it is kind of fun to see how people react to the message. There 
was quite an attempt to kill us before we ever got here, but we 
made it.
    So I am here to present the council's view on near to mid 
term budget issues that affect the funding of inter-city rail 
passenger service.
    Also with me today, Mr. Chairman, are three other members 
of the Reform Council, Nancy Connery, I think sitting behind 
me, and Jim Coston, and Charlie Moneypenny. And Tom Till, the 
Executive Director, who has been managing this staff for the 
last three and a half years.
    I will present the council's views, Mr. Chairman, in 
context with the council's action plan for restructuring and 
rationalizing the national inter-city rail passenger system.
    When Congress passed the 1997 Amtrak Reform and 
Accountability Act, they created the trigger that President 
Warrington was talking about a while ago, and they created this 
council and charged us to monitorAmtrak's progress towards 
operational self-sufficiency.
    We submitted our recommendations to Congress for reform. We 
are sure that other reasonable reforms will be proposed. The 
most important thing is that the council believes that reform 
is no longer an option, and I think we have heard that from the 
three previous speakers. Reform is an imperative. An imperative 
for an effective, modern passenger rail program.
    We have held hearings all around this country and there is 
a strong support for a national rail passenger system, almost a 
passionate support for it.
    But there is also an imperative for how better to fund our 
rail passenger program.
    Over its lifetime the increase in Amtrak's ridership has 
barely kept pace with the growth rate of the U.S. population. 
Contrary to popular belief in the period between September 11, 
2001 and the end of last year Amtrak carried fewer passengers 
than it did in the comparable period in 2000. Amtrak is 
burdened with debt, as you have heard, and debt service, and 
its assets are in poor condition and, I am afraid, getting 
worse.
    The continuing deterioration of Amtrak's performance since 
the council was established led the council to its finding that 
Amtrak could not achieve self-sufficiency by December 2, 2002 
as required by the Reform Act.
    Sadly, Amtrak is no closer to self-sufficiency today than 
it was in 1997, despite the appropriations to Amtrak of more 
than $5.5 billion during the past five years including $2.2 
billion in capital funding under the Taxpayer Relief Act.
    Its announcement on February 1, 2002 that it needed $1.2 
billion for 2003 or it will shut down 18 long distance streams, 
is business as usual for Amtrak. Lower revenues, higher costs, 
greater losses than it promised.
    Amtrak as it is organized, as it exists today, has proven 
that it cannot concentrate on its core mission of running 
trains. It has too much to do and does little of it well. As it 
is chartered and organized today, no agency has effective 
oversight of Amtrak's business plans, its funding requests, or 
its financial operation and performance. No program can be 
successful without good oversight.
    The action plan that the ARC council sent to the Congress 
on February 7 thus recommends a fundamental restructuring of 
the way we organize, fund and operate the national rail 
passenger service program. If we are to have a modern rail 
passenger program that works, we have to separately organize 
and fund the passenger train operations from the 20,000 miles 
of nationwide rail infrastructure that supports them. That 
includes the 400 miles or so that Amtrak owns in the Northeast 
Corridor.
    The Council proposes that the two new companies [train 
operations and Northeast Corridor infrastructure] be 
administered by a small federal agency. We call it the National 
Rail Passenger Corp., NRPC. The Council recommends that the 
NRPC be modeled after the USRA, United States Railway 
Association, created by Congress in 1972 to restructure Penn 
Central and six other bankrupt northeast and midwest railroads. 
USRA planned Conrail.
    U.S.R.A. enforced strict accountability on Conrail, 
shielded Conrail from political interference, and by working 
closely with Conrail management, contributed to Conrail's 
success.
    The Council believes the national rail passenger program 
needs and would benefit from a similar oversight organization.
    In this framework a new national train operating company 
could concentrate strictly on the business of running trains, 
carrying passengers, mail and express. With the resources to do 
so under contract and with no unfunded mandates and without 
political pressure on its management decisions.
    To ensure that there are adequate incentives for efficiency 
the Council proposes a national passenger train operating 
company, for the train operators, and recommends introducing 
the possibility of competition into the provision of passenger 
train services after a transition period.
    In many countries around the world reforms in the 
provisions of both passenger and freight rail service have 
involved competitive bidding for contracts to provide public 
service at lower cost and with better service.
    Our recommendation also deals directly and strongly with 
the parts of the Northeast Corridor and other infrastructure 
that Amtrak owns. Today's Amtrak is a minority user of the 
Northeast Corridor. They run about 150 of the corridor's 1200 
trains every day but Amtrak finances and management cannot bear 
the burden of maintaining and improving what is largely a 
commuter facility.
    The main evidence of the infrastructure's physical 
deterioration, as was mentioned by Ken Mead a while ago, is 
increasing minutes of train delay under Amtrak's stewardship, 
from 134,000 minutes in 1998 to 234,000 minutes in 2001, or 
more than 160 days of train delays.
    The Northeast Corridor, a high speed corridor, is literally 
slowing down. This is reported in the January 2002 report that 
Ken referred to a minute ago.
    The council's final major recommendation is that the 
Congress enact measures to provide stable and adequate sources 
of funding--separate sources for train operation and separate 
sources for infrastructure for a new national rail passenger 
program.
    There are those who say that putting more money into the 
existing Amtrak is all we need to do. The council strongly 
rejects that notion. What we have today is an institution that 
through more than 30 years of existence has never had the full 
confidence of Congress or the Executive branch regarding 
Amtrak's ability to spend money properly and to produce a 
modern rail system, regardless of which party controls either 
of those branches. Effective structural reform will go far to 
correct the lack of confidence.
    Even then the reality of government funding today poses 
important challenges to effective funding of passenger and 
freight rail infrastructure needs. As you know, guaranteed 
spending programs have been very beneficial for highways, 
transit, and aviation, but the rail mode of transportation is 
having a tough time raising funds or having funds appropriated. 
Today guaranteed spending programs predetermine the 
appropriation of 75 percent of all the federal transportation 
funds. As a result there is no room in the transportation 
appropriation bills to fund major facilities such as the 
Northeast Corridor infrastructure, which needs a minimum of $1 
billion a year.
    Clearly the Northeast Corridor infrastructure needs to be 
shifted to a federal agency or authority that has better access 
to federal, state, and local guaranteed funding than Amtrak 
has.
    More important for the infrastructure needs of the improved 
passenger rail program are several bond bills that have been 
introduced. One is the High Speed Investment Act cosponsored by 
Senators Daschle and Lott. A bill sponsored byHouse 
Transportation and Infrastructure Committee Chairman Don Young, RIDE-
21, provides $36 billion in tax-exempt bonding authority and $35 
billion in loan guarantees for railroad investments.
    Under appropriate safeguards the council also recommends 
that the states have flexibility to use highway and aviation 
funds for investment to improve intermodal connectivity of the 
passenger network or to fund rail investments that would 
relieve highway or aviation congestion in the short haul 
corridors.
    The federal fuel tax revenue shortfall for 2003, 
approximately $8.6 billion, is not only bad for highway 
infrastructure, but it will also have a devastating impact on 
the flexible provisions of TEA21.
    Pending House and Senate bills would restore $4.4 billion 
above the Administration's request for highways. If the funding 
is restored, the likelihood that the flexibility provisions 
will be exercised is greater because the highway program would 
be funded to the levels projected in TEA-21.
    When such a program is enacted, and I say when, not if, 
these funds will be the engine for an effective federal/state 
rail infrastructure program in cooperation with the freight 
railroads to support and improve intermodal freight and 
passenger rail service, both of those--intermodal freight, the 
container freight, and passenger rails--need higher speeds.
    The systematic and continuing improvement of railroad 
rights of way and tracks that this program would support is an 
essential element of the sound national rail passenger and 
freight program that America needs across the country as well 
as in the Northeast Corridor.
    The issue of funding for operating facilities and other 
needs for Amtrak's long haul trains, as well as the capital 
requirements of corridor trains and operating assistance during 
the transition period, is more difficult. The council's action 
plan recommends that the government provide funding on the 
basis of a formula that will promote its efficient use, not 
simply fund cash shortfalls resulting from inefficient, 
deficit-ridden operations.
    Funding under such a program structure might be provided 
through appropriations or through some dedicated source of 
funds. Some have suggested a new penny might be added to the 
federal motor fuel tax that could go for rail uses if it was 
matched by a new state penny.
    Under the program structure that the council recommends, in 
which train operations would be provided under contract, much 
of the funding for the passenger equipment investment needs of 
the operating company should or could come from the private 
capital markets.
    Let me go back and address the Northeast Corridor 
infrastructure. Separating the Northeast Corridor 
infrastructure both organizationally and financially from 
Amtrak's nationwide train operation is another way of narrowing 
the gap between the subsidy needs of Amtrak's national train 
operations and the uncommitted funds available in the budget. 
There is little or no chance that Amtrak will be able to get 
the capital it needs to maintain and improve the Northeast 
Corridor out of appropriated funds. It has not been able to do 
so.
    Why not? One major reason is Amtrak has demonstrated that 
it has to use whatever cash is available to offset operating 
losses of its trains. To fund operations Amtrak raised $300 
million for operating expenses last year by mortgaging 16 years 
of future income from two concourses in Penn Station in New 
York. It regularly charges portions of its large management 
overhead costs to capital projects and it has deferred 
maintenance on the Northeast Corridor infrastructure below 
levels needed for minimum operational reliability. And despite 
the $3.8 billion backlog of critical fire and life safety and 
other urgent capital projects on the Northeast Corridor, Amtrak 
did not request the full amount of appropriations authorized by 
Congress under the Amtrak Reform Act.
    Amtrak as it is presently structured cannot be an effective 
public steward for this vital toll road known as the Northeast 
Corridor.
    The council's action plan describes a variety of funding 
sources that, while not all directly available to Amtrak, are 
all accessible to the Northeast Corridor state governments (and 
the other states with emerging corridors) to assist in 
providing the investments to support their large Northeast 
Corridor commuter operations as well as Amtrak's high speed 
operations.
    Indeed there is no single source that could provide all the 
necessary capital for the Northeast Corridor. Thus the Congress 
should look at a variety of sources which may include the bond 
bills that are pending before Congress, RIDE-21 and high speed, 
HSRIA. They will help. And I think the bond bills may be the 
key way to fund the Northeast Corridor and the emerging 
corridors.
    A federal appropriation, perhaps through a reauthorized 
Northeast Corridor improvement program account, would help the 
new Northeast Corridor authority fund some of the life safety 
projects that must be addressed.
    And just a quick sideline here. I come from the deep south 
and I recognize that the Northeast Corridor is an extremely 
vital corridor and artery for the economy of this part of the 
country.
    My own research in working with our staff is the Northeast 
Corridor needs to raise and spend $20 billion in the next seven 
to 15 years, as quickly as it can, to get the Northeast 
Corridor up to the standards it ought to meet. If they do that, 
it has an awful lot more speed and capacity ability.
    And congressmen, I go back to this. The Northeast Corridor 
is vital and it is also a model for the rest of the country. 
Other areas, like the Midwest group, need their corridor and 
want their corridor. So as we do the Northeast Corridor, if we 
spin it off into a separate organization it should be a model 
for how to develop the rest of the corridors around the 
country.
    The Congress might also consider providing part of the 
funding needed to establish a trust fund to pay off bonds for 
these vital Northeast Corridor life safety improvements. You 
need bond money to build and develop the corridor. You need 
emergency money to take care of the life safety problems that 
are there.
    Loans and guarantees under TIFIA or RRIF may be employed in 
various ways. One way would be to work with the regional 
transmission organizations, the RTOs, in partnership with a 
restructured national rail passenger corporation and the 
states, to undertake one of the major infrastructure projects 
south of New York, the replacement of the electric traction 
system. Amtrak has already considered entering in such 
anarrangement with the Northeast RTO.
    As mentioned above, and I am almost finished, Mr. Chairman, 
expanding the flexibility provisions and current transportation 
trust funds to include the Northeast Corridor project that 
would reduce highway and air traffic congestion. Civil works 
projects under the Army Corps of Engineers are often undertaken 
with federal transportation funds. And, under an expanded role 
of the Northeast Corridor states through special purpose 
mechanisms for ownership and control, assets such as the Penn 
Station complex, whose needs have been neglected for decades, 
might be effectively handled under some kind of appropriate 
regional umbrella.
    Federal and state tax incentives--such as tax incentives--
might be developed to encourage the private sector to make 
investments in the corridor, an approach the Association of 
American Railroads has suggested for broader rail 
infrastructure financing purposes.
    Mr. Chairman, the council believes its recommendations are 
strong and sound after three years of hard work and really 
studying this problem. The chronic difficulties that Amtrak 
experiences year in and year out are not due principally to 
lack of funding. They spring primarily from an organization 
that desperately needs to be redesigned. Effective reform will 
beget funding. Funding does not beget reform.
    For these reasons the council strongly recommends that the 
Congress first adopt broadly needed institutional reform before 
providing major new funding for the passenger rail service.
    I will be pleased to answer any questions.
    Thank you, sir.
    [The information follows:]

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          IS AMTRAK SOLELY TO BLAME FOR ITS FINANCIAL TROUBLES

    Mr. Rogers. Thank you for your testimony.
    President Warrington, earlier this month you attributed 
Amtrak's recent financial troubles to, and I quote here, 
``conflicting policy mandates, inadequate federal capital 
funding, economic recession, additional security costs, and the 
actions of the Amtrak Reform Council.''
    I do not see anywhere in there where Amtrak shares in any 
of that blame. Is there a place for Amtrak to share some of the 
blame?
    Mr. Warrington. Yes, I think so. Mr. Chairman, I think we 
have been focused on staying on that federal glide path. It has 
been a one-dimensional focus as I have frequently testified to 
you and other members of Congress.
    By focusing virtually all of our attention on adherence to 
that glide-path because we needed to under the law--we have 
certainly created, and I have created an expectation that we 
would do everything possible to achieve that objective. 
Therefore, we have worked very hard on both the cost and the 
management side to get there. And as a number of uncontrollable 
events occurred that we did not have much or any discretion 
around it became clear to me, about a year ago, that this was 
going to be difficult if not impossible to do. From that point 
forward the uncontrollables continued to mount and it became 
even clearer that this would be very difficult to do.
    I think we have worked hard to try to use every tool that 
we have on both the cost and expense side as well as the 
revenue side. As Ken testified, we have scratched and clawed to 
find revenue from every conceivable source to help make this 
work.
    As I have said, I think underpinning all of this is a 
fundamental structural flaw around the economic model here. I 
think it has always been there. If anything, what we have done 
is enabled the perception that the model could work in order to 
get to the goal. I think it has become increasingly clear that 
the model just does not work. Even if we could have achieved 
self-sufficiency, all things would have had to work near 
perfectly and with the events that have occurred over the past 
year or so it just made it impossible to do.
    As soon as that became clear to me, Mr. Chairman, I was 
very clear that this was becoming an increasingly difficult 
task.
    [The information follows:]

    As I indicated in my testimony before the Subcommittee, we 
have worked very hard to manage the business within the context 
of conflicting policy mandates. We have been expected to run a 
national public service network, and drive toward commercial 
operational self-sufficiency, while also coping with inadequate 
levels of federal capital investment. And many of our key 
indicators have moved in the right direction. Since the start 
of 1997, we have boosted ridership by 19 percent and overall 
revenues by 38 percent. We have diversified our sources of 
revenue and forged more partnerships with the states, commuter 
agencies and the private sector.
    We have also worked very hard on the cost side. Over the 
last four years, a substantial portion of cost growth has been 
attributable to depreciation--which is a non-cash expense--and 
interest, which is the result of inadequate federal capital 
investment. Excluding depreciation, our costs have actually 
fallen over the past year.

         IS ACHIEVING OPERATING SELF-SUFFICIENCY STILL POSSIBLE

    Mr. Rogers. So you now agree with the rest of us that 
Amtrak is not going to make it.
    Mr. Warrington. Self-sufficiency technically could be 
achievable, but it would be extraordinarily destructive and I 
would not recommend it. Clearly, as I have pointed out, it is 
not sustainable, I have not built the budget for next year to 
achieve that.
    Mr. Rogers. This time last year you told us that Amtrak was 
on a glide path towards self-sufficiency and all was rosy and 
then a few days later, frankly, in May of last year you 
mortgaged Penn Station to cover about three months of operating 
expenses.
    Did you not know last year when you told us you were on the 
right path to self-sufficiency that you were in such dire 
straits that you would have to mortgage Penn Station to pay for 
three months of operating costs?
    Mr. Warrington. The measuring stick, Mr. Chairman, has 
always been the glide path and the amount of appropriated funds 
that we use to support operations. During the course of last 
year and the prior year our original business plans for those 
years assumed a whole host of financing transactions including 
the Penn Station transaction.
    As a matter of fact, the Penn Station transaction was in 
our business plan about a year earlier. Frankly, if we had 
moved forward with it at that time it would have been to create 
some working capital to deal with uncertainty and not use it to 
cover operating needs.
    What occurred over the course of last year, which I 
testified to, was the combination of factors principally the 
delay in the delivery of the high speed train sets making what 
I would have preferred to be a source for working capital 
become a critical requirement for cash through the balance of 
the year.

    Mr. Rogers. Mr. Warrington, don't you agree that Amtrak has 
been particularly disingenuous about its financial condition 
over the past 5 years, particularly regarding achieving 
operational self-sufficiency when it was clear to outside 
observers, such as the Inspector General and GAO, that your 
company was making no significant progress in this area?
    [The information follows:]
    By following the operational self-sufficiency measure as 
set within the Reform Act, Amtrak was set to only use $40 
million of its FY02 $521 million federal grant to support its 
daily operations with the expectation that it could reduce that 
number to zero in FY03, thereby meeting the self-sufficiency 
mandate. However, since I last testified before your committee, 
Amtrak has had to face several new challenges that were beyond 
its control: the weakened economy; September 11; the continued 
delay in Acela Express; and the Amtrak Reform Council's 
finding.

                      CAUSES OF AMTRAK COST GROWTH

    Mr. Rogers. The Inspector General in his slide two that he 
presented to us showed the growth in Amtrak's expenses for the 
last ten years. In essence, he has reported that for every 
dollar of revenue that you have generated, you have incurred a 
dollar and a nickel in expenses. Can you tell us why it took 
you until February 1st of this year to finally announce some 
significant cuts to try to gain control of the escalating cost 
side of the business?
    Mr. Warrington. Because it became clear to me toward the 
end of calendar year 2001 that events were conspiring to make 
it difficult and my responsibility was to get us through the 
year. It was a combination of the recession and its impact on 
revenues, September 11th, and the financial consequences of the 
trigger being pulled by the Reform Council that we had an 
immediate cash impact through the balance of the year and put 
at risk private financing that had been assumed.
    So my focus and our focus turned immediately to managing 
for cash and managing the business through the balance of the 
year, Mr. Chairman.
    On the broader subject of expense growth, Ken is right. One 
of the difficulties here is that a substantial portion ofthe 
expense growth that we experience is uncontrollable. And I will tell 
you that on those that are controllable and those that we can manage I 
think we have done a very good job of managing and managing the costs 
down.

                IS CUTTING ROUTES AN OPTION TO CUT COSTS

    Mr. Rogers. The Amtrak Reform and Accountability Act of 
1997 gave you the ability to add and cut routes, but you have 
consistently said that you would grow to self-sufficiency, 
emphasizing the importance of the interconnectivity of routes. 
In looking at the Reform Council's report of February 7, 2002, 
on page 98 in Appendix 5, at the profit/loss statement for 
individual routes and the amount of loss per rider cost, and I 
notice for example, I am just picking one of these out. The 
Sunset Limited, Route 33 which runs LA to Orlando. The loss per 
rider is $347.45, i.e. the subsidy that we are paying you to 
haul a passenger that distance is $347.45.
    On the other side of the equation, you are making $19.33 
for a passenger on the Metroliner Acela route, route number 
one. Then there are differing subsidies, a few profits here and 
there, not many. But mostly losses per rider, some of them 
quite significant. And yet those routes are still being run. We 
gave you the power to cut away some routes to try to save some 
money and yet we have seen none, to my knowledge.
    Mr. Warrington. Let me give you a couple of answers, Mr. 
Chairman. You are right. Our clear strategy has been to take 
that network and try to find opportunities to incrementally add 
revenue to the existing network. In some cases we have been 
successful, although not as successful as we wanted to be 
frankly, and there are a number of constraints that limited our 
ability to do that, one of them is capital. Some of the costs 
associated with some of those incremental services that would 
have grown revenue became capital cost prohibitive.
    As I testified to you last year, Mr. Chairman, we are 
charged with running a national system. Frankly, the political 
constituency around this is just a fact of life. I told you 
that I will be completely straight with you. The facts are that 
Amtrak is and has always been a creature of the political 
process. Congress has made very clear that there is an 
expectation that we would run a national system, even one that 
is actually a skeleton of what it once was before Amtrak was 
formed. It is very clear to me that this skeleton of a system 
number one, is important to maintaining a political support 
across this nation for America's passenger railroad system. 
That is just a fact, and that is the way this process works.
    Number two, I and we made a judgment that that skeleton of 
a system really does constitute a basic essential network of 
services not unlike essential air service which the government 
directly subsidizes through contracts.
    My objective was before eliminating that national system I 
had a responsibility, a management responsibility, to use every 
tool in the tool box to enable us to continue to run that 
system by increasing revenues and reducing costs to hold it 
together.
    What I testified about last year before this subcommittee, 
Mr. Chairman, was that I would not hold out that network as a 
Washington monument cut in order to extract money from this 
Congress. Instead I believed, I had a responsibility which I 
have worked very hard at for three, three and a half years 
here, to use every other tool at my disposal including 
generating financing and income from other sources, from other 
commercial revenue streams, and managing down costs where I 
could control them, and eliminating service only as a matter of 
last resort.
    The difficulty we have right now is that we are out of 
tools in that tool box.
    I will tell from my experience that for that model to have 
worked over the last several years does in fact require, and I 
have testified to this fact, internal cross subsidies. In other 
words, it is around self help also to underwrite the cost of 
money-losing trains with profitable trains or profitable lines 
of business. Next year the actual cross-subsidies within the 
company that flow from both the Northeast Corridor operation on 
a cash basis, particularly since Acela has been introduced, and 
from other profitable businesses, in particular seven large 
commuter contracts we operate around this country, and real 
estate development revenue streams and the like combine to 
contribute $265 million which literally is directed to cover a 
portion of losses on that long distance train network.
    What I am saying is that after we subtract passenger 
revenue and after we subtract internally generated revenue that 
moves over to help underwrite the long distance train network 
because they do not cover their costs. It is the reason the 
freight railroads got out of this business in 1970. Bottom 
line, we generate internally $265 million to help underwrite 
and cross-subsidize those trains. After we cross-subsidize 
internally at a rate of about $265 million, the net loss next 
year is about $200 million for that network of trains.
    Mr. Rogers. Which network?
    Mr. Warrington. The unprofitable long distance train 
network. That is the net operating loss.
    But I will tell you, Mr. Chairman, that is after we 
internally, largely from the Northeast Corridor and other 
businesses, apply about $265 million of positive contribution 
to the long distance network.
    Mr. Mead. Mr. Chairman?
    Mr. Rogers. So the total is about $475 million.
    Mr. Warrington. The total loss. The total loss is much more 
than the $200 million. In fact the total loss, Mr. Chairman, on 
that network of trains, if you give me a minute here.
    [Pause]
    Mr. Warrington. The total loss on the long distance train 
network of those 18 trains on a fully allocated basis which 
includes the allocation of all overhead costs that support that 
network like reservation centers and the like and our shops, 
the total cost of that network, all in, is about $1.036, okay?
    When you subtract from that passenger revenue of about $396 
million, other revenue relating to those trains of $118 
million, you basically get a net loss of $521 million.
    Mr. Rogers. And that is for all of the long distance----
    Mr. Warrington. Yes. Yes.
    Mr. Rogers [continuing]. That lose money.
    Mr. Warrington. Yes, $521 million. Then, what we do 
internally is generate from the Northeast Corridor and other 
profitable businesses positive contributions. That, by the way, 
is after the Northeast Corridor, for example, covers all of 
itscorporately allocated overhead and those other profitable 
businesses. We apply internally $265 million against that $521 million 
loss.
    In addition, we apply $35 million of excess railroad 
retirement, which is the government's contribution, for a net 
subsidy need of $200 million.
    Mr. Rogers. I want to get to other members. I do not want 
to hog the time here.
    [The information follows:]

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    Mr. Mead, you had something you wanted to interject?
    Mr. Mead. Yes. Just two quick points.
    I want to go back to your original question. I think your 
original question had to do with the period preceding the 
announcement that Penn Station was going to be mortgaged and 
the closure of routes and things of that nature.
    You will recall in the closing days of the Clinton 
administration, there was a bill up here called the bond bill 
and if you walked around and asked members of Congress what 
that bond bill provided, many of them would have told you that 
they were going to get high-speed rail in their backyard, that 
the bill was going to provide that.
    That is not a fair characterization of what was really 
going to happen and I think part of the problem here is the 
raising of expectations of people as to what is possible.
    Just looking back, and I think Mr. Warrington's point is 
right, too, that politically one of the things that holds the 
network together is everybody getting rail service and when you 
see the glimmer of a high speed train coming through your 
state, that kind of reinforces that and that was one of the 
phenomena that I saw playing out with the bond bill.
    The second point is on the money. Most of the money that 
Amtrak is asking for, and that its capital requirements are 
for, is right here in the Northeast Corridor. It is not those 
long distance trains because we do not own that track. The 
rolling stock, yes, but not the track.

          ESSENTIAL AIR SERVICE AS POSSIBLE RAIL SERVICE MODEL

    Mr. Rogers. Before I yield to Mr. Sabo, let me ask you, Mr. 
Warrington, you earlier--I think twice, even--made reference to 
the essential air service subsidy as a model for one that you 
were thinking of. You compared Amtrak to the essential air 
service, in fact, several times.
    However, with essential air service, we impose a cap on the 
per passenger subsidy that we give them. If it exceeds a 
certain amount, we do not subsidize. Is that a good model?
    Mr. Warrington. I think that is the type of model that 
needs to be worked with here. I thoroughly understand that any 
subsidy needs to come with an appropriate measurement, as Mr. 
Sabo has said. I agree with that completely. I think the 
difficulty here is, frankly, when the act in 1997 was put in 
place what we all grabbed for was a concept called operational 
self-sufficiency and I think it is an inappropriate set of 
measurements around the business that we are dealing with here.
    I thoroughly agree with you, Mr. Chairman, that the concept 
of subsidies here for what could be determined, I believe, are 
essential services is appropriate, measurement is appropriate 
and necessary and could be the basis for determining what are 
or are not essential services within a reasonable price tag.
    I think a concept like that could also be constructed in a 
way so that there is a very clear set of both operating and 
financial measurements tied to it. I think there could be caps 
on it. I think there could be efficiency expectations clearly 
articulated and those services could be performed by Amtrak on 
a contract basis, not unlike the way we are the contract 
operator of seven large commuter rail systems across this 
country where we compete for contracts. They include a clear 
set of expectations about performance, both on the operating 
side and on the financial side.
    Mr. Rogers. I was not here in 1971 when this act passed, 
but I do not know how anyone in their right mind could have 
figured that we could segregate the passenger service off of 
the freight service, lose that cross subsidy, not own the track 
and still make a go of it. The freight railroads were unable to 
make it hauling passengers and subsidizing passenger operations 
with freight revenues and they owned the track, the same 
equipment, the same stations and so forth. The freight 
railroads did quite well, thank you very much. They got rid of 
a loser and expected you to pick it up and make it go. We 
deluded ourselves, the Congress, and used that phrase, 
operational self-sufficiency, to sell ourselves and more 
importantly our constituents that, yes, this is only a short 
time we are going to subsidize this thing, it will make money 
in due course of time.
    Here we are 31 years later and we have finally come to the 
conclusion, which you have agreed with, that it does not work, 
cannot work.
    Mr. Warrington. Mr. Chairman, I think we have all deluded 
ourselves into that. I think Amtrak has been a part of that as 
well over the years and it is the nature of the political 
process.
    I will tell you that we have done extensive work around the 
economics of not only our operation, but comparable operations 
in the world and we would be happy to share that with you. 
There are lots of experiences around the world that could be 
appropriate models, but fundamental to all of this, I think, is 
a recognition that within reasonable economic boundaries, there 
is a public responsibility associated with passenger train 
service in all instances around capital investment for 
capacity, speed andreliability and, in some instances where the 
services are deemed to be essential services connecting communities in 
less densely populated areas they will clearly require a subsidy.
    I think your point, though, is right on about subsidies 
being tied to very clear sets of economics and performance 
measures around efficiency.
    Mr. Rogers. You do not disagree much with the Chairman of 
ARC, then, do you?
    Mr. Warrington. I do not know whether I want to say that.
    Mr. Rogers. Oh, come on. Can we be friends here?
    Mr. Warrington. We are friends.
    Mr. Rogers. You wanted to say something?
    Mr. Carmichael. Yes, sir, Mr. Chairman. I will try to add a 
dimension to this discussion.
    When we first started looking at Amtrak and the type of 
entity it was, our first report showed that it was a 
conglomerate of everything, it was a federal agency, it was a 
real estate company, it was a manufacturing company, and in 
there somewhere was an operating railroad passenger company.
    And we first off went to Amtrak and asked them, you have 
24,000 employees, you have two major assets, one is your trains 
running across the countries and the other is your real estate 
called the Northeast Corridor, with tracks and signal systems 
and everything on it: of the 24,000 employees that you have, 
how many does it take to run the trains and how many does it 
take to run the infrastructure company in the northeast? Give 
us those figures, how many dollars does this operating company 
generate, how many people does it employ and what does it need?
    We asked the same thing about the Northeast Corridor 
because the previous blue ribbon committee had come up with the 
same proposal to separate the Northeast Corridor from the 
operating company.
    We do not know to this day. After February 7th, when we 
submitted our report, we did get some information on this 
thing, but we have not been able to assimilate it. Congress 
needs to know what it takes to run this national rail passenger 
system that we have out here, how many employees, and how much 
budget.
    And they ought to be submitting to Congress every year a 
budget for running the national passenger system and how much 
in revenues and subsidies it needs, because I do not believe 
those darn figures that were given to us a while ago, the ones 
that you read and the ones that they have.
    Now, until we know that, it is going to be hard for 
Congress to decide what to do, so the only way we can do that 
is separate it (the nationwide train operations from the NEC 
infrastructure).
    Now the federal role: Amtrak plays a rail policy role. It 
is a federal agency, too. It does not need to be that. It 
oversees itself. All we have done is simply say, create this 
small federal agency for oversight, tell us what this train 
operating company costs to run and how many people you need, 
and spin off that Northeast Corridor--AT&T has done this. It is 
nothing new. Restructure and divide it so that we can see what 
it is.
    Until you know what they need for these trains and how many 
employees and how much money it needs and generates, it is 
going to be very difficult to make it work.
    Mr. Rogers. You raise a very essential point. We have been 
unable to get the same kind of information and yet we are 
expected to dole out this year $521 million, or Mr. 
Warrington's request, $1.2 billion. I do not know of any other 
entity that Congress doles out that kind of money to without 
having strict accountability.
    Now, those tax dollars are being spent and yet we do not 
have that in this case. I am new as chair in this Subcommittee, 
I am just getting my teeth into this problem, but I cannot 
bring myself to the point of continuing to do that and feel 
that I am responsible to the people that sent me here or the 
taxpayers of the whole country.
    So we are going to have to shake things up big time on the 
accountability to the Congress if we are going to dole out huge 
tax dollars. I do not know how else to say it. I want to be 
nice and courteous, but we are going to be damn frugal.
    Mr. Carmichael. I think the Northeast Corridor as a toll 
road is strong enough and has enough revenue generating itself, 
it is generating enough revenue that it could probably sell 
bonds and fix itself up. It has that magnitude of business on 
it. And Amtrak's trains could pay a fee for using the tracks. 
So I think you are going to find when you get down there that 
the Northeast Corridor, if it was set up as a separate 
authority, is not the problem. The problem is how much does it 
cost to run and build a modern, new, national rail passenger 
system.
    Mr. Rogers. In other parts of the country.
    Mr. Carmichael. All across this country. I am from the 
south. I want to be involved in this thing.
    Mr. Rogers. Okay. Well, to make it work over distances, to 
effectively compete with airlines or interstate highways, you 
are going to have to build tracks that can go fast, right? And 
if you are like what we saw in France, you are going to have to 
own the track so that you do not have freights on there as 
well, otherwise, you cannot go very fast, can you?
    And, to have tracks that are capable of going high speed, 
you cannot use existing tracks, frankly, because of the grade 
crossings, freight trains, bad trackage and everything else----
    Mr. Carmichael. You can use existing right of ways that 
connect our major cities and you can double track them and 
signal them and grade separate them and you can move high speed 
freight trains and high speed intercity passenger trains. That 
is what this Young bill is about.
    Mr. Rogers. And with that kind of an investment, you are 
talking zillions of dollars of investment, are you not?
    Mr. Carmichael. That is right. You are talking about an 
interstate program for railroad passenger service, too. Another 
mode of high speed transportation service.
    Mr. Rogers. And I am told that will cost $30 to $50 billion 
dollars.
    Mr. Carmichael. A hundred billion. And we will have 
something very good, too, within 15 to 20 years.
    Mr. Rogers. You are the last of the big time spenders.
    Mr. Carmichael. Yes, sir.
    Mr. Rogers. And you can make this thing work financially?
    Mr. Carmichael. I am old highway lobbyist. I came out of 
the highway lobby a long time ago. I think the bonds are a step 
in the right direction.
    Mr. Rogers. Can you make this thing pay for itself if you 
do that?
    Mr. Carmichael. What you are saying is will the freight 
railroad boys help pay for those bonds? Yes, sir. And I think 
the passenger train service properly set up can help pay a good 
share on the bonds, too.
    Mr. Rogers. You think the freight railroads are going to 
want to spend that kind of money?
    Mr. Carmichael. Yes, sir. They cannot go in the marketplace 
any more now. They are very interested in this tax-exempt bond 
program. They tried to get the state of Mississippi to pass a 
$100 million GO bond issue down there so they could build track 
and take some kinks out of the bad tracks down there and the 
state came real close to doing it and they pledged their 
revenue to do it.

                      HIGH-SPEED PASSENGER SERVICE

    Mr. Rogers. Can you run a fast train with passengers over a 
track with grade crossings every few miles?
    Mr. Carmichael. FRA will let you--with proper signaling, 
they will let you run up to 125 miles an hour.
    Mr. Rogers. Tell us.
    Mr. Rutter. Well, that depends on what you define as high-
speed.
    Mr. Rogers. One hundred eighty-five miles an hour.
    Mr. Rutter. No. No grade crossings.
    Mr. Carmichael. That is very high-speed. That is France's 
speed. That is very high-speed.
    Mr. Rogers. That is an average of French speed where you 
can compete with airplanes. If you cannot compete with 
airplanes, you are out of business. Right or wrong?
    Mr. Carmichael. Well, what is happening to my small city is 
the airplanes are disappearing, the commuter planes are going 
away. And so we are fighting for high speed trains going into 
airports.
    Mr. Rogers. How fast can you go with grade crossings every 
whip stitch?
    Mr. Rutter. There are different standards for grade 
crossing protection between 79 and 110, 110 to 125, and 
anything over 125 there should be no grade crossings.
    Mr. Rogers. I have exceeded my time, Mr. Sabo, I apologize 
to you.

                      Amtrak's Allocation of Costs

    Mr. Sabo. There are great expectations about what those 
bonds would do, and somehow they also have to be repaid.
    Do you have the same problems sorting out the allocation of 
costs between the Northeast Corridor and the long distance 
trains?
    Mr. Mead. Yes. Over the years, people have suggested that 
these long distance trains that are unprofitable, let's just 
get rid of them: the idea being they are not profitable, and if 
you are supposed to operate like a business, get profitable.
    What I was trying to point out was, when you add up the 
shortfall between the revenues that we are getting for the long 
distance trains and the deficit there and you compare that to 
how much money you are being asked to put into the Northeast 
Corridor, the trains outside the Northeast Corridor are like 
chump change.
    That is sort of a different way of looking at it, but when 
somebody is coming to the table and saying they need $1.2 
billion, you want to know, well, what exactly is that for? And 
when you take it apart you will find that a very, very 
substantial percentage of that will go into the spine. And one 
of the big reasons for that is because outside the Northeast 
Corridor we do not own anything except the trains that are 
rolling.
    So does that answer your question?
    Mr. Sabo. Well, I am not sure where I am going with it. Let 
us assume that Amtrak closed all long distance trains on 
October 1st. How much money would they need next year?
    Mr. Mead. Oh, I see where you are headed. Let us take the 
administration's budget, $521 million and the long distance 
service that Amtrak says, as of October 1st if they do not get 
the $1.2 billion, they will have to stop. Okay. Well, that 
frees up in theory about $300 million and that money would 
presumably go to capital, except that under the labor laws, it 
would end up going to pay severance payments to employees. I 
think in the first year, it would be about $250 to $300 
million.
    So if you cut off the trains, you save $300 million, which 
presumably you would want to go to capital, but you have to 
come up with another $300 million from somewhere to pay the 
employees. That is how it would effectively work.
    If you take the administration's proposal and you apply it 
to the current system, you first have about $160 million that 
would go to excess railroad retirement payments, another $200 
million would go to the long distance trains, the subsidy. The 
reason I was using a number of $360 million for the subsidy is 
because the Northeast Corridor cross-subsidizes the long 
distance trains. Debt payments, and that is principal only, 
that would be $105 million. Mandatory environmental and 
Americans with Disabilities Act capital investments, matters 
that are legal obligations, would be another $48 million, for a 
total of $513 million. That leaves by my math $8 million from 
the administration's request for capital for the entire Amtrak 
system. It is not possible to do it. The railroad just cannot 
operate under those circumstances.

              AMTRAK'S LABOR COSTS VERSUS INDUSTRY AVERAGE

    Mr. Sabo. In Mr. Rutter's testimony he indicates that the 
labor costs are high in Amtrak. How does compensation in Amtrak 
compare with other freight railroads. Are levels of pay 
comparable?
    And a second question, I notice in testimony that 
indications are the capacity system wide is down from 50 
percent to 45 percent. Is that accurate? I assume by capacity 
we mean percentage of the passenger seats that are occupied.
    Mr. Warrington. I would have to check that number, Mr. 
Sabo. Could you ask the first question again?
    Mr. Sabo. My question is relative costs of Amtrak labor. 
The railroad administrator indicates that it is comparably 
significantly higher than other modes of transportation.
    Mr. Warrington. Right.
    Mr. Sabo. It has been increasing. What your levels of pay 
are in comparison to freight rail?
    Mr. Warrington. On average, they are actually below the 
industry as a whole and I would say they are below by probably 
somewhere in the neighborhood of 10 to 15 percent--20 percent, 
my staff is telling me. About 20 percent less.

                     MEASURING AMTRAK'S LOAD FACTOR

    Mr. Sabo. What about the capacity question?
    Mr. Rutter. By that you mean load factor?
    Mr. Sabo. Yes. Yes.
    Mr. Rutter. How many of those seats are being----
    Mr. Sabo. Yes.
    Mr. Rutter. That is the information that we have, that 
system wide, load factors are around 45 to 50 percent.
    Mr. Warrington. Let me address that for a moment because 
the railroad business is not like the airline business, where 
you are going from end point to end point and your origin and 
your destination encapsulate the entire trip. For Amtrak, when 
we measure seats and available or filled seats, they are for 
the entire trip with multiple stops and we consist our trains 
for the expected peak load segment generally, within reason.
    For example, our Acela high speed train service is 
scheduled to a regular density of traffic, hourly departures. 
Now, we designed the number of seats on those train sets to be 
able to handle the peak periods, which are 6:00 in the morning, 
6:30, 7:00, 8:00, 9:00, in both directions. We also run those 
trains on a regular frequency, on an hourly basis.
    Now, we know that the share of those seats are going to be 
filled during the peak periods and we know that they are not 
going to be completely filled during the off peak periods, but 
you need to run those trains to provide a sufficient density of 
service and flexibility for people who want to leave early or 
travel--you know, it is about choice and alternatives. We have 
to offer a sufficient density in order to make the overall 
service attractive.
    When you average in the number of seats that are available 
during the off peak that are not going to be filled like they 
are on the peaks, it brings your overall average seat 
utilization down. But in this business, the nature of it is to 
run those seats much more frequently than you know every one of 
them will be used. Do you follow?
    Mr. Sabo. Mr. Chairman, I have several questions about how 
capital budgets are----
    Well, he went to vote.
    Ms. Kilpatrick. Thank you, Mr. Ranking Member, soon to be 
Chairman.
    Thank you very much, it has been very instructive. I have 
been on the subcommittee--I think this is my fourth year now, 
and I knew four years ago that Amtrak was not going to be self-
sufficient in December 2002 for many of the reasons that we 
talked about then and this morning, nothing on you personally.
    Mr. Mead----
    Welcome, Mr. Rutter, let me say that to you first.
    Mr. Rutter. Thank you.

                      2003 AMTRAK FUNDING REQUEST

    Ms. Kilpatrick. Is it coincidental that the loss of $521 
million happens to equal the place setter $521 million you gave 
us in our budget or is there some correlation there?
    Mr. Rutter. No, ma'am. The 521 is what was there last year 
and it really is literally a place holder while we are trying 
to identify this system and solutions of making this a going 
forward, long term way of providing these services.
    Ms. Kilpatrick. And is the administration going to present 
to our subcommittee some plan or proposal, either the 
commission's report or some variance of it of your own, that we 
might respond to as we put this budget together?
    Mr. Rutter. I have heard loud and clear, both today and in 
previous hearings, that this committee expects us to have some 
ideas on what to do next. And that is what we are working on. 
Yes, ma'am.
    Ms. Kilpatrick. Okay. We look forward to that and welcome 
to our subcommittee.
    Mr. Mead, my favorite person on this subcommittee, you have 
been here longer than I have. You knew they were not going to 
be self-sufficient. We have heard all this and the commission 
has made some mention in three recommendations. We always knew 
the Northeast Corridor was the corridor that Amtrak really had 
any hopes of saving as they went into real estate and managing 
other lines and other things to produce the $200 plus million 
dollars of revenue.
    It is scary to me because Amtrak is an economic engine to 
many families and employees and the like. The Northeast 
Corridor by far is the most outstanding across the country. We 
would like to see more in the northeast, I heard the gentleman 
say he would like to see something in the south. Where do we go 
from here?
    And, by the way, the chairman and the ranking member have 
me holding you, they do not want you to leave, I am going to 
vote, they just went to vote, they will be right back, and they 
asked me to ask you to stay.
    Mr. Mead? I mean, yours is to do the critiques and you have 
done that. It seems like the next step, and we need to get into 
that soon, what do we really do now with Amtrak? I mean, I 
heard the chairman say they are not about to get a billion two 
unless he knows where it is going. You know, I do not know.
    Mr. Mead. Let me say that my response is the response of 
the Inspector General, not the administration. I am not the ARC 
and certainly not Amtrak. I think where we go from here is 
that--I am not sure I would even appropriate the $521 million 
that the administration has asked for if we do not deal with 
the capital situation, the capital requirements of the 
railroad, at least for the one or two years that it might 
require until we ultimately decide what to do with intercity 
rail because things are so serious in the Northeast Corridor.
    I think we need to come up with a source of capital. Now, 
what does that mean?
    Do we have a Bond Bill where really the states come up with 
20 percent and the taxpayers come up with the rest by giving a 
tax credit as interest on the bonds and you are cut out of the 
picture as an appropriator?
    Or do we tap the general fund where you are very much in 
play?
    Do you authorize the states to have the discretion to use 
their Highway Trust Fund dollars?
    You have heard the suggestion of a penny of the fuel taxes. 
I think there is a substantial amount of opposition to the 
penny idea.
    Ms. Kilpatrick. And the Highway Trust Fund idea, too. Most 
states, like my own, of this $9 billion that has been reduced 
by the slow economy, there is no money in the Highway Trust 
Fund to fund railroads. We want roads. We want transit systems 
and we want other things. Railroads added onto that--and the 
penny that Mr. Chairman mentioned----
    Yes, Mr. Carmichael, I am sorry?
    Mr. Carmichael. It is a new penny.
    Ms. Kilpatrick. A new penny?
    Mr. Carmichael. Yes. It has nothing to do with any of the 
trust fund pennies.
    Ms. Kilpatrick. It is also a tax increase.
    Mr. Mead. It raises taxes. Right. But actually, the Highway 
Trust Fund right now can be used under the special provisions 
for the use for commuter rail and is used by a number of 
states.
    If you decide that you want to try high-speed rail outside 
the Northeast Corridor, that you do not want to just keep 
ithere, you think that we should foray off into some other areas, I 
would limit it to one or two other corridors in the country. I would 
stop leading people to believe that there is going to be a high-speed 
train in every state because it is not going to happen.
    Ms. Kilpatrick. Okay. Please excuse me. And, again, the 
chairman and ranking member are on their way back, they have 
asked that you stay. Thank you for coming.
    Mr. Mead. So we should stay?
    Ms. Kilpatrick. Yes, please stay.
    [Recess.]

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                SUFFICIENCY OF 2003 AMTRAK GRANT REQUEST

    Mr. Rogers. Mr. Warrington, over the years, we have not 
been able to really rely on the word of Amtrak about what your 
real needs have been. You know, sometimes you say $521 million, 
sometimes $1.2 billion, to remain essentially on track in 2003.
    If we provided the $1.2 billion that you say is essential 
to remain viable in 2003, would you not be back hat in hand six 
months later asking for more, as has been the case in the past?
    Mr. Warrington. No. I would not be back. We have very 
carefully gone through the construction of those numbers, Mr. 
Chairman, and I know that you want accountability and you want 
to understand exactly where every one of those dollars would go 
and I can assure you that $1.2 billion is the right number and 
that will enable us to manage this business safely and the 
entire operation through next fiscal year.
    Mr. Rogers. But that just operates it as it is.
    Mr. Warrington. Yes, Mr. Chairman.
    Mr. Rogers. No changes?
    Mr. Warrington. Well, yes, it does include changes with 
respect to expenses and revenues. Implicit in that number are a 
set of actions that we have well under way.
    Mr. Rogers. Which is what?
    Mr. Warrington. Around expense reduction, around revenue 
generation. There are a whole host of assumptions that go with 
that number and, in the end, that is the number that does work.
    Mr. Rogers. But would the taxpayers still be paying $377 to 
haul a person from Orlando to L.A.?
    Mr. Warrington. Yes, Mr. Chairman. We would continue to run 
that existing system.

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    Mr. Rogers. Your request of $1.2 billion is, as you say, 
``essential for keeping a national rail service network intact 
during the next fiscal year.'' Included in that figure is $286 
million for operational reliability investments.
    The last three years, even while the Inspector General has 
been criticizing, Amtrak has been spending less than $100 
million a year. How is it now that Amtrak's bare minimum needs 
for one year are greater than what you invested for the past 
three years combined?
    Mr. Warrington. We have been spending over the past couple 
of years on average $100 to $120 million on the Northeast 
Corridor around basics and what I am suggesting is that the 
consequence of that is, as Ken has pointed out, a substantial 
increase in minutes of delay. The number that is in this 
program enables us to not continue to lose ground there.
    Mr. Rogers. Mr. Mead, Amtrak says the $1.2 billion is 
essential to keeping the rail service network intact. Have you 
had a chance to look at their current request for 2003 and can 
you give us your thoughts about whether or not that amount is 
essential for those purposes?
    Mr. Mead. I can tell you that of the three elements of the 
grant request, one of them is for excess railroad retirement 
payments. I give them a passing grade on that. I think those 
numbers are sound. That is about $160 million.
    There is $200 million for subsidy for trains outside the 
Northeast Corridor. I think that is sound--well, if anything, 
that is a low ball number. It may be a little bit higher, but 
it is a plausible number.
    That leaves $840 million. Of the $840 million, about $370 
would go to things that they have to do by law and that leaves 
about $400 million, $400 odd million, and I would liketo know 
more about what that exactly would be used for.
    I know the Amtrak situation is somewhat analogous to a 
house where the plumbing is bad, where the roof is leaking, and 
one of my staff said just about everything is going wrong with 
your house all at once, but I still would like to know exactly 
what this money was going to go for and where.
    Also, what you pointed out, We have been reporting in our 
statutory report for several years now that Amtrak is not 
putting its capital in some of the areas where it really needs 
to, and what their minimum needs are all of a sudden has 
increased. I guess their theory is, well, the backlog has 
caught up with us.
    Well, I want to know exactly what that money is needed for.

              DETAIL OF AMTRAK'S CAPITOL REQUEST FOR FY'03

    Mr. Rogers. I know somebody that knows.
    Mr. Warrington.
    Mr. Warrington. I can tell you that we have this program in 
excruciating detail and I will provide it to both Ken and 
yourself, Mr. Chairman.
    When you get beyond the $370 million that are for mandatory 
requirements, we have about $140 million of basic subsistence, 
safety and operating reliability on the Northeast Corridor, the 
Keystone Corridor, the Empire Corridor through New York, 
Springfield and our Michigan and Indiana lines. And this is 
pretty basic stuff and where we continue to lose ground on 
reliability.
    We also have about $75 million relating to agreements on 
non-federally owned or non-Northeast Corridor infrastructure, 
and that includes investments on the Metro North Commute 
Railroad between New York and New Haven where our own trains 
now run at about 90 miles an hour because of serious 
infrastructure-related constraints and restrictions. And we 
have a longstanding arrangement around investing in that 
railroad, which we do not own, which affects our high speed 
service but would shave minutes off our trip times.
    We also have as part of that program partnerships with 
states and commuter agencies all around this country and on the 
West Coast, in Los Angeles, in the state of Washington, 
California, and we have arrangements with freight railroads 
such as the Burlington Northern Santa Fe. All of these 
arrangements are around funding partnerships, existing 
agreements relating to either improving reliability or 
improving capacity of our own railroad service on their assets.
    We can provide, Mr. Chairman, to you and Ken details of 
those agreements along with where the investments would go and 
what the benefits are.
    Mr. Rogers. Would you do that for us?
    Mr. Warrington. Absolutely.
    [The information follows:]

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                       2003 AMTRAK GRANT REQUEST

    Mr. Rogers. Now, Mr. Rutter, if the Congress adopts your 
current request of $521 million, how long could Amtrak survive 
on that and in what form?
    Mr. Rutter. Not long and not well.
    Mr. Rogers. So are you saying let us let it die?
    Mr. Rutter. No, sir.
    Mr. Rogers. What are you saying?
    Mr. Rutter. We are saying that if anything the calendar 
about budget submission got in the way of us being able to get 
to the bottom of all the issues associated with what to do 
next. When we say it is a placeholder, that is what it is.
    We are committed to working with this committee, Chairman 
Murray's committee and Chairman Young's and Chairman Holling's 
committee to try to determine what needs to happen next in the 
large scheme of things before we talk about what is a good 
investment in the short term.

             ADMINISTRATION PROPOSAL ON AMTRAK/RAIL SERVICE

    Mr. Rogers. But do you not think you have an obligation to 
put forward a proposal? I mean, you are the executive branch, 
you are the experts, we are part-time soldiers up here. None of 
us are experts on railroad. You have spent a career doing that.
    Do you not think the administration ought to come forward 
with a proposal for how they think Amtrak and rail passenger 
service in the country ought to be done?
    Mr. Rutter. That is what we are working on and what Ican 
do, Mr. Chairman, is convey that expectation which you have already 
explained to the secretary and deputy secretary back to them and to the 
folks we are working with in the administration as a whole to say that 
is what your expectation is, that is what you want out of us.
    Mr. Rogers. We have already passed that word pretty 
strongly to the Deputy Secretary when he testified. We said we 
want an answer. We told the Secretary we need an answer. I 
mean, this is a significant national question that needs to be 
resolved. It is a huge part of the transportation problem of 
the country and I would think the Department of Transportation 
would be constructive and come forward with a recommendation 
for the Congress to chew around on. Do you not think so?
    Mr. Rutter. Yes, sir. And given----
    Mr. Rogers. When can we have it, then?
    Mr. Rutter. Given the fact that this is the result of 30 
years of choices, we are going to do our best to come up with 
something in the short term, in part because of the needs of 
appropriators and in part because of the reduced amount of 
legislative days that face this particular Congress. We are 
well aware of those time deadlines.
    Mr. Sabo. Mr. Chairman, if I might?
    Is there any proposal in process right now at OMB or at the 
White House?
    Mr. Rutter. We are working together with the entire 
executive staff at the White House and within the department to 
identify the possible alternatives which are not only a 
restructuring of what to do about delivering services in a 
different way but how to pay for it, where the money is going 
to come from and how much we are going to need.
    As you have said, both of you, that is the toughest problem 
and that is what we are struggling the hardest with how to come 
up with those dollars.
    Mr. Rogers. Well, you know that unless you get it up here 
in the next two months, it is DOA. I mean, this train is going 
to leave the station and unless that gets up here quickly so 
that we can digest it and process it, it will be useless.
    Mr. Rutter. Yes, sir.
    Mr. Rogers. Two months?
    Mr. Rutter. I hear that your expectation is that you want 
something in two months.
    Mr. Rogers. And what do you say about that?
    Mr. Rutter. I say that I desperately want to meet your 
deadline.
    Mr. Rogers. I am trying to find something to be optimistic 
about and this all reminds me--you know, we are digging around 
in the muck of a horse stall, and President Reagan once said, 
being the optimist that he is, he was sure there was a pony in 
there somewhere.
    Mr. Carmichael. It is in the Amtrak Reform Council report. 
The pony is in there. The pony is there.
    Mr. Rogers. It very well may be.
    Mr. Sabo. An expensive pony.
    Mr. Rogers. That is right. An expensive pony. And it very 
well may be.

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    Mr. Carmichael. Mr. Chairman, the railroad mode is only 
operating at about 25 percent of its capacity.
    Mr. Rogers. The what?
    Mr. Carmichael. The railroad mode, this big huge railroad 
right of way system across this country. And it is the only 
mode right now that is not carrying a decent number of 
passengers. The highway mode is as congested as ever, the 
airline mode was and is still pretty full. And this railroad 
mode sitting out here of 130,000 miles of track across this 
country going to our center cities, and the freight railroads 
are asking for some help in developing the corridors, they want 
to participate in increased speed.
    And we are sitting here with a debate that I think is as 
healthy as the dickens I was part of the previous Bush 
administration, and we need a new railroad policy. You are 
asking for it, and the Reform Council's report is pointing 
toward a new policy on this thing. And I think there is a very 
nice national rail passenger system in there that will work 
with a very good intermodal freight system.
    I just encourage you in this next two months to really 
study what we have recommended in here.
    Mr. Rogers. We will do that. But I want you to talk to 
Administrator Rutter and convince him.
    Mr. Carmichael. I have been trying.
    Mr. Rogers. Of your scheme or some scheme. You know, we are 
not experts in this business. We are trying to figure out how 
to make some things happen in order to have a viable rail 
passenger program in the country. And yet we cannot continue to 
pour money down a sink hole without hope of something coming 
from it. And we are at that point with Amtrak and President 
Warrington, who has worked hard and his staff is devoted, but 
so was the staff on the Titanic.
    Mr. Carmichael. And that is why he has to restructure 
himself. The Amtrak board needs to restructure itself.

            THE APPROPRIATE ROLE FOR RAIL POLICY DEVELOPMENT

    Mr. Warrington. Mr. Chairman, could I say a couple of 
things, please?
    Mr. Rogers. Yes, sir. You are entitled to.
    Mr. Warrington. Amtrak is the vestige and a skeleton of 
what was once an operation that the freight railroad industry 
in this country did not want. It was a huge burden to 
theindustry. Amtrak, from day one, was handed obsolete assets. It was 
never effectively capitalized. And, as you know better than I, we have 
struggled about that and I am not going to go through all of that 
history here today. We have struggled with trying to meet the self-
sufficiency deadline and in a political context also meet as many 
political expectations as we could about the reach of this system, 
because that is just the way this works.
    And, you know, we have as a practical matter never been in 
the power structure in this town around resource allocation. 
Amtrak has been an outsider. Amtrak has quite clearly been a 
target all of that time and the difficulty here is that Amtrak 
has never been at the center of the power structure around 
resource allocation or policy in this town. All this time we 
have in the United States Department of Transportation a set of 
mechanisms and institutional apparatus for designing what the 
appropriate development responsibilities are for the 
transportation highway system in this country and the aviation 
system in this country.
    At the DOT there is a power structure, there is a resource 
availability associated with it and there is no 
misunderstanding about the role of the federal government and 
it has clearly accepted that role for the development of this 
nation's aviation and this nation's highway system.
    In the absence of having within this government a clear set 
of policy responsibilities for developing the railroad asset 
and the railroad capabilities of this nation, Amtrak has 
carried the ambitions of every American around the development 
of rail service in this country because there has been a policy 
void for 30 years.
    A couple of messages. Number one, we cannot carry that 
burden on our back any more. I cannot carry that burden on my 
back any more. I have to manage this business through this year 
and I have to manage the business through next year, so I would 
urge that the Congress and the Administration come to grips 
with the fundamental issue here.
    There is a fundamental issue about whether this government 
wants to, can afford to and will accept responsibility for the 
development of an intercity rail system in this nation that is 
comparable to the level of policy involvement and investment 
that exists in virtually every developed country certainly in 
the western world.
    We spend more money in this nation annually on salt for 
snow removal and cleaning up road kill than we do on intercity 
passenger rail service. The investments that are made in the 
intercity passenger rail system in this country pale compared 
to the level of investment and the satisfaction and the 
competitiveness that flows from intercity rail services all 
around this world.
    Hopefully you can see your way clear, to secure the right 
level of effort to continue to be able to sustain this over the 
next year, but these are difficult public policy questions. 
Frankly, I am not optimistic that in the next several months or 
in the next six months or eight months these fundamental issues 
will be addressed in the political process, so I would urge you 
to, if at all possible, consider our request.
    I very much want to furnish you and Ken and everyone else 
with all of the detail supporting that. This is not about 
making threats. I do not want to do that, I do not intend to do 
that. We would be very careful with the decisions we make as we 
go forward here in connection with the level of appropriation 
effort.
    I have to manage the basic business over the short haul, 
the short haul being the next six months and the next 12 months 
beyond that, that is the focus. The bigger set of policy 
questions, though, really need to be addressed and we cannot 
continue to carry everyone's ambitions on our back. There has 
to be a policy responsibility in this town for deciding what 
those ambitions are and figuring out how to execute them. I 
personally believe that has to be a federal responsibility. 
Amtrak cannot do that.
    Mr. Rogers. Well, you are exactly right. You are exactly 
right. We need to have this discussion, the nation needs to 
decide if it wants to subsidize passenger rail service. I 
personally do not think we are going to make money at it, 
except on a few places, but on intercity traffic, I do not see 
the profit in it, so we have to decide whether or not we want 
to subsidize it or not.
    At this point in time, it is not a hugely relevant matter 
because you only haul one half of one percent of all travelers, 
and that is not a significant number of people. Nor, I think, 
could it ever be, contrary to what the chairman has said. We 
will talk about that.

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    Mr. Sabo.

         METHOD FOR ALLOCATION OF COSTS TO LONG DISTANCE TRAINS

    Mr. Sabo. Thank you. Just a couple of questions.
    When you allocate the costs of the long distance trains, 
how are you allocating general overhead for Amtrak? Is that 
part of that?
    Mr. Warrington. Yes. There is a formula for allocating 
overhead cost to the Northeast Corridor and to--and it varies 
depending upon what the service is that is being provided. But 
there is a very clear set of formulas for allocating overheads.
    Mr. Sabo. If those trains stopped, would the overheaddrop 
correspondingly?
    Mr. Warrington. No, that is the difficulty here because 
they are formula allocated overheads. The chairman asked me 
before: Why do you run a train like a Sunset Limited that loses 
the money it loses.
    And one of the difficulties with eliminating that train or 
any particular train, if that is something we wanted to do, is 
that the direct revenues associated with that train would be 
lost as well. When you eliminate an individual train or one or 
two or three trains, unless you are able to claw out all of the 
overhead costs associated with it much of which has to stay in 
place because it supports the rest of the operations the 
savings are limited. The difficulty with eliminating a train 
here or a train there is that you tend to not be able to claw 
out all of that overhead.
    In fact, Amtrak tried to do that in the mid 1990s, you may 
recall, when it had about a 20 percent reduction in intercity 
train service in connection with a budget issue then. What we 
learned then was that it is very difficult to claw out all of 
that overhead.
    The allocation includes all of those costs, some of which 
is fixed costs and will never get it all out.
    Mr. Sabo. They do not disappear.
    Mr. Warrington. Yes.
    Mr. Rutter. The other thing, Congressman, if I might, it is 
not just about whether you are going to get rid of a route or a 
series of routes, it is what are you going to do about the 
fundamental cost structure of the entire operation.
    Taking one line out does not address those underlying 
issues and I think that is what we were trying to get at in our 
testimony and on a short-term basis it does not really save you 
money because you are going to have to pay separation costs to 
those people anyway.

             INTERESTS COSTS AS PART OF THE CAPITAL BUDGET

    Mr. Sabo. How are capital costs handled? I notice in 1990 
there was hardly any interest cost and that is something that 
has been creeping up. I understand everything is mortgaged, in 
effect.
    The money that came from the tax code changes, my 
assumption was that money would have gone directly to buying 
capital equipment.
    Mr. Warrington. Mostly in infrastructure. A lot of it was 
invested in the high speed program in the northeast and in 
overhauls of equipment all across this country.
    You know, we have thousands of pieces of equipment. When I 
first came to Amtrak, actually, that equipment was on what was 
called a progressive maintenance cycle where if something broke 
it was brought in and when you had it in the shop for a couple 
of days you would try to attack everything around it.
    We moved to a much more formal overhaul program on a four-
year cycle which was programmed and that is a fairly 
substantial part of our capital program.
    Part of it is about safety and mandatory required work on 
equipment and some of it is around overhaul of systems, like 
air conditioning systems and toilet systems and the like. That 
money was primarily invested in those kinds of projects.
    Mr. Sabo. Rolling stock.
    Mr. Warrington. Mostly rolling stock overhauls, as well as 
infrastructure.
    Mr. Sabo. But then have those pieces of equipment been sold 
and leased back?
    Mr. Warrington. In some cases. In some cases, using our 
equipment we have derived benefits, such as safe harbor and 
leveraged leasing, which is a common practice in the transit 
and transportation business. For example, as in the transit 
business, we are able to sell those tax benefits and secure 
income from them. We have done some of that.
    Mr. Mead. When Congress passed that law, Mr. Sabo, the one 
you are referring to, it was about a $2 billion infusion of 
capital. Congress thought--I think the community generally 
thought--that was a one-time deal, that was a one-time infusion 
of $2 billion, that things would get better.
    Well, what happened was that $2 billion got consumed pretty 
fast by investment needs. They ran out of new capital, in 
effect, and so they had to sell the things they had bought and 
lease them back. So then they took the proceeds from the sale 
and they plowed it into other capital in the railroad. But now, 
all these things, as you point out, have started adding up and 
you have to start paying it back. And that is why the interest 
tab is so substantial and why it is spiraling up. That is how 
we have gone from $1.7 billion in debt to over $4 billion.
    Mr. Carmichael. And we found that over $500 million of that 
TRA money went into operating expenses.

                 PROCESS FOR ALLOCATIONS INTEREST COSTS

    Mr. Sabo. How is the cost of that interest allocated?
    Mr. Warrington. Going back to Ken's point, most of the TRA 
money was not devoted to acquiring equipment. Most of it went 
into assets, hard assets and infrastructure and a substantial 
piece of it went into the Northeast Corridor high speed and 
electrification program.
    The company has always been short of Capital and so 
generally has always financed its equipment. For example, the 
20 high speed train sets, the Acela train sets, were entirely 
privately financed, $800 million. Our entire Viewliner fleet, 
which we use for example between New York and the south and 
Florida, completely and privately financed. Our acquisitions of 
Superliner, double-deck cars for our long distance train 
network have entirely been over the years privately financed.
    That is where much of the interest cost flows from and why 
it has been escalating. The only tool we have had to acquire 
equipment has been financing and we have taken capital and 
primarily invested it in very aged infrastructure.
    Mr. Sabo. Of your future capital needs, what is the 
relative ratio between rolling stock versus----
    Mr. Warrington. I would say a substantial piece of it is 
infrastructure, once again, and a piece----
    Mr. Sabo. Non-rolling stock?
    Mr. Warrington. Non-rolling stock. And the equipment piece 
of it is not about acquisition of equipment, it is about 
overhauls of equipment.
    Mr. Carmichael. Mr. Sabo, what you are hearing is the same 
problem that we had. We do not know how much is infrastructure 
investment or cost and we do not know how much is a train 
operating company cost. So that is why we kept insisting you 
are going to have to separate this Northeast Corridor out with 
a separate budget and a separate board,or something like that, 
so that we know what it needs and wants and has to have. And we cannot 
evaluate these 18 trains or anything else like that until we know what 
the train operating company wants. Because, as you hear it, it is all 
mixed together and, as a result, Congress and our reform council never 
could separate it and define it.
    And so the only thing we could come up with is, for God's 
sake, when you re-authorize Amtrak, set it up as two separate 
divisions and make them submit two separate budget requests so 
we know what that real cost is.

                AMTRAK ACCESS COSTS FOR NON-OWNED LINES

    Mr. Sabo. Let me ask this question. On the rail lines which 
you do not operate, I assume you are planning on paying the 
freight lines a certain amount of rent or lease?
    Mr. Warrington. Yes, we pay access fees. We are entitled 
under the law to operate over these lines and we pay for 
access.
    Mr. Sabo. There in effect the capital costs are being 
reflected in your lease payment, which I assume is counted as 
operating cost.
    Mr. Warrington. Well, there is very little capital cost 
included in those payments. Those lease payments are 
primarily--or those access fees we pay the freight railroads 
primarily flow from--and it is a complicated formula which is 
then negotiated, but it is primarily the incremental costs 
associated with operating or maintaining our train on their 
track and the incremental costs associated with handling that 
train at perhaps higher speeds or higher class of railroad than 
is necessary for a freight operation.
    Mr. Sabo. But then in effect, whatever capital costs are 
associated with that line is reflected in the operating costs 
for the long distance lines.
    Mr. Warrington. Yes.
    Mr. Sabo. While in the Northeast Corridor it is considered 
separately.
    Mr. Warrington. Yes. On the Northeast Corridor, the flip 
side is in play, where Amtrak----
    Mr. Sabo. Some of these numbers are not comparable.
    Mr. Warrington. Yes. And on the Northeast Corridor, we as 
the owner and the base user incur the base costs and the 
commuters that operate on there which we manage in trust for 
them, basically, pay the incremental costs, just as we pay the 
incremental costs on the freight railroads. And this goes back 
to the original Interstate Commerce Commission Ex Parte 417 
cost allocation methodology for owners and then operators over 
railroads.

                   ACCESS COST AND INCENTIVE PAYMENTS

    Mr. Rutter. And one of the points, Congressman, is that 
access cost does not really pay for capital. Right now, Amtrak 
is paying a little over $100 million in access fees and 
incentive payments to the freights. That does not even begin to 
explain or go to the underlying capital costs of keeping up 
those freight lines, any more than the access fees that 
commuters pay for the use of the Northeast Corridor go to help 
offset the underlying costs of providing that Northeast 
Corridor capital base.
    Mr. Sabo. I understand, but they are to a certain degree 
reflected and considered operating in one case and in the case 
of the Northeast Corridor, not.
    Mr. Rutter. Yes, sir.
    Mr. Sabo. And when we see the subsidy by train, to a 
certain degree, we are comparing apples and oranges.
    Mr. Carmichael. Under our reform council recommendations, 
Amtrak does not even own a train station in the system. The 
cities own the train stations, just like they do airports. 
Amtrak is constantly having to put money into city stations 
around the country and they are having to invest money with the 
freight railroads on certain pieces of track or something else 
like that.
    What we were trying to do in our report is we were trying 
to put Amtrak on the same level playing field, with an airline 
(an airline). It does not own the infrastructure, it does not 
have to maintain the airports. All it has to do is lease planes 
and pay for ticket agent space or something else like that. Our 
report puts Amtrak in a very competitive position with the 
airlines so that when we look at this national operating 
company, we know exactly what the trains cost, how many people 
it takes to run it and what it needs, and it can submit a 
budget every year for the national system and Congress can vote 
lines up or down, or whatever they want to do.
    Mr. Sabo. But the airlines pay significantly in fees for 
the capital of an airport and they have significant property 
that they own individually for maintenance facilities.
    Mr. Carmichael. That is right. And Amtrak can own 
maintenance facilities. That is fine. But to put it on a 
competitive level field, it needs to get out of all this 
infrastructure stuff and it needs to concentrate on its core 
business of carrying passengers, mail and express. So our 
report says that and, hopefully, as Congress is creating a new 
operating company in the next few months and funding it we will 
get a budget picture every year of what the national train 
system costs to run and what individual trains cost to run.
    The infrastructure issue: all these 11 high speed corridors 
are developing around the country and the states want to play 
and the freight people are willing to play. Norfolk Southern, 
Mr. David Goode down there has offered if he can get $900 
million worth of money, he would double-track his line down 
through Virginia for high speed intermodal freight trains and 
passenger trains.
    So you have the infrastructure, the real estate thing out 
there must be a separate business and submit a separate budget.
    Mr. Rogers. How many grade crossings are there in Virginia?
    Mr. Carmichael. Probably one for every mile of track. And 
the cities are beginning to work on this--my little city, for 
example, traded some grade crossings for the old train station 
and we rebuilt it.

                         VIRGINIA TRACK SPEEDS

    Mr. Rogers. Mr. Rutter says that you can only go how fast 
on that kind of a track?
    Mr. Carmichael. Seventy-nine.
    Mr. Rutter. Yes, up to 79 and then between 79 and 110, it 
depends on the kinds of grade crossing signals.
    Mr. Rogers. Well, let us assume you can go 110 miles an 
hour. How many people are you going to get on that train and 
spend--what, ten hours to go what you can fly in an hour, hour 
and a half?
    Mr. Carmichael. The average train trip is not ten hours, it 
is very much like the commuter trips between cities, 
particularly between here and the northeast and over in the 
midwest. This is an unused mode of transportation out there 
that is primarily carrying freight right now and it has a huge 
capacity to do better than that.

                  PER PASSENGER COSTS ON AMTRAK ROUTES

    Mr. Rogers. Now, Mr. Warrington, I am trying to simplify 
this, correct me if I am wrong. Corridor trainstravel typically 
less than 300 miles, as opposed to long distance trains that travel 
overnight. Corridor trains have a per passenger operating loss of $9.98 
and your long distance trains, the overnight trains, are responsible 
for by far the largest share of your losses. In 2001, I am told the per 
passenger loss on those trains, those long distance trains, was 
$138.71. Is that correct?
    Mr. Warrington. Off the top of my head, I do not know, but 
it sounds right.
    Mr. Rogers. And so if you dropped all of the overnight 
trains, the long distance trains, you would still be in the 
red, right?
    Mr. Warrington. Well, let me answer it in two ways. First 
of all, if we eliminated long distance trains, there are 
clearly short-term costs around devolving that system that are 
costly around transition and the like. I think it is not the 
right economic thing to do, clearly, over the short haul.
    Now, on the issue of corridor services, the Northeast 
Corridor and the other corridor trains, a substantial portion 
of which are state-supported. The corridor is clearly a 
positive contributor. The state-supported trains are very close 
to being a positive contributor and, in fact, in the next round 
of discussions over the next 12 months with those states we 
will be negotiating upward some of those contributions in order 
to cover all of the direct costs. As a matter of fact, those 
contributions have increased, have virtually doubled over the 
past four or five years.
    The other point that I would like to make, Mr. Chairman, 
around this question of long distance trains, corridor services 
and the like, is the importance of defining a long-term policy 
here. As I said, the long distance train network is uneconomic 
and will always be uneconomic and will require subsidies. The 
corridor trains we run out there are close to being positive 
contributors and with more work, focus and some moderately 
additional speed can be positive contributors. We know the 
Northeast Corridor is a positive contributor.
    I think the real challenge here is to evolve this system. 
Many say that the system that is out there today is a 1971 
designed system and to a certain extent it is. And I think the 
real issue here is the extent to which we want to define what 
the ultimate system is over the next 20 years, a federal 
responsibility I would argue and evolve that system into a 
system which looks much more like a series of higher speed 
corridors, with whatever connections we believe are appropriate 
between those corridors.
    I will tell you that in all of the work that we have done 
what is very clear is that the economics of trips, trip times 
between two and three hours, are very powerful and if you 
couple that with frequency and a comfortable trip, you have a 
winner that can be a positive contributor and that experience 
has existed all around the world.
    If you look at the Northeast Corridor, despite the under 
investment in the Northeast Corridor, which has been well 
documented, since the Acela service has been introduced, we at 
Amtrak are now capturing between New York and Washington 53 
percent of the end point market share.
    That means that every rail or air trip Washington and New 
York, not including any of the intermediate points, Amtrak now 
captures 53 percent of those trips with U.S. Air and Delta 
splitting the remaining 47 percent.

                   AIR/RAIL MARKETSHARE SPLITS ON NEC

    Mr. Rogers. And have you analyzed why you are so successful 
on that route compared to airlines?
    Mr. Warrington. It is because downtown to downtown is very 
attractive and, in the end, it is time. I will tell you all of 
our research tells us it is a positive experience. Our 
employees do a terrific job and the design of the service 
package is very attractive.
    And my point, Mr. Chairman, is the bigger set of policy 
questions here start with what is the national system that we 
want to see over the next 15 or 20 years? Right now, we happen 
to be discussing today's system for the next six, 12 and 18 
months. There is a real bigger question here, though, which is 
what do we want that system to evolve to?

                  AMTRAK'S VISION OF A NATIONAL SYSTEM

    Mr. Rogers. Well, what do you want it to evolve to? What is 
your solution to solving the Amtrak problem?
    Mr. Warrington. The federal government taking 
responsibility for defining what is in the national interest 
around the development----
    Mr. Rogers. Mr. Rutter is going to solve that problem.
    Mr. Warrington. Defining what is in the national interest. 
And that is in effect designing the system like in 1955 the 
interstate highway system was designated and designed.
    You know, over the past number of years we have 11 
corridors federally designated but no money to go with them. 
When the interstate highway program was designated in the 
1950s, there was money that went with the designation of the 
interstate highway program.
    And my point is that the system needs to be defined as a 
matter of national transportation policy. It can only be done 
as a federal responsibility so it links well with both the 
planning and the policy and the investments that go to 
adjoining modes and intermodalism needs to be more than a 
cliche. The system needs to work better together. And there are 
lots of efficiencies that could be better secured now around 
the rail system and rail service than could be secured around 
alternative investments in other modes.
    My point is that we need to define what that system is, but 
not over the next one, two or three years, but over the next 20 
or 25 or 30 years and evolve today's system to that kind of a 
route map across this country, with a very clear set of market 
expectations.
    Mr. Rogers. What draws the map? Who decides what routes we 
are going to do?
    Mr. Warrington. I think that is something that has to be 
done, the leadership around it has to be in the federal 
government, with Congress, with us, and all other interested 
parties.
    How was the interstate highway system designed and 
developed? It was a product of a political process and I think 
the same political process and focus needs to be--for the first 
time in 30 years, really, needs to be applied here. I cannot 
unilaterally do that and, you know, it would be irresponsible 
for me and Amtrak living outside the power structure, outside 
the transportation policy structure in this country, to be 
making those kinds of judgments about what this nation should 
have as a competitive intercity rail system. It is an 
inappropriate role for Amtrak and even though we have carried 
that burden for 30 years.
    Mr. Rogers. See, I think the routes have already been 
decided. I mean, you look at your ridership on the 
variousroutes that you have, I do not know how many riders there are.
    For example, on the Sunset Limited, the one that costs $377 
for us to pay to haul one passenger, you are only hauling 5 
percent of the end point traffic between those two cities, 95 
percent are not using it. They have voted to do something else. 
They are either flying or they are driving or whatever.
    And we can go down the list. You are getting 45 percent of 
the Chicago-Washington traffic, end point traffic is on Amtrak. 
That is not too bad. But from Boston to Newport News, only 2 
percent of the end point travelers are going Amtrak. And so on.
    Are we not seeing here where people prefer to travel by 
train? Is this not the route map that we should be looking at? 
You already have trains traveling those routes and people are 
saying no thanks.
    Mr. Carmichael. One of the problems with it, it does not 
have any frequency. That is one of the difficult things. On 
Portland to Seattle to Vancouver, when they increased the 
frequency, the ridership went up dramatically in those city 
pairs.
    Mr. Rogers. It is awfully easy to do surveys. I mean, 
airports do surveys all the time. Towns do surveys all the 
time. Ridership for making application for a commuter line on 
air service. Have we done any passenger surveys about where 
people would like and need to have routes, even if you increase 
the frequency, perhaps even the time? Have we done any of that?
    Mr. Warrington. Yes. We have done extensive economic 
modeling, as well as research around what the potential is of 
different services and what is very clear, Mr. Chairman, is 
that the future has to be around and has to directly relate to 
the development of higher speed, dedicated corridors connecting 
critical city pairs in this country. And I think the issue here 
is the transition issue.
    How do you transition from today's system to that kind of a 
system? Over what period of time? And what are we prepared to 
pay for as a government to keep today's system in place in 
order to enable that system to evolve to the right kind of 
system over time that could be more attractive from a market 
share point of view?
    How do we create more Northeast Corridor scenarios here in 
other locations around this country?
    And I think it is really a transition issue, a transition 
of today's network into a system that looks and feels much like 
that, that is then well connected with linked assumptions about 
what is an appropriate air market and what is an appropriate 
rail market.
    Mr. Rogers. Maybe we ought to go back and look at Congress' 
bill on base closings because the biggest problem we all face 
in all of this is shutting down a line. We all know that, it is 
unspoken. It is like closing a military base. When you say we 
do not need this base any more, and we have dozens of those 
that DOD is trying to shut down now, when we say we need to 
close a base, all of the local civic efforts erupt and require 
the congressmen and the senators to oppose it and consequently 
we do not do that. We have the same problem here when we 
attempt to shut down a route that is hopelessly unfunded, 
unsupported. We get opposition from all of those folks that 
civic pride requires they defend. Have we hit a nail here on 
the head?
    Mr. Carmichael. Yes. In fact, what he just described was 
the train operating company and what you just described is an 
oversight small government agency that can do what you are 
talking about. So the whole argument today seems to keep coming 
back to creating an operating company and having some sort of 
oversight that will make them be responsible and produce a 
national passenger system that connects the right cities.
    Mr. Rogers. But when that small government agency that we 
fund that you are talking about decides to close down the 
Florida-L.A. route, they are going to descend upon us just like 
they do now, will they not?
    Mr. Carmichael. No, sir. No, sir. When the operating 
company decides to close a route, it is the small government 
agency's job to sit and defend it and approve it.
    Mr. Rogers. Yes, but who pays the salary of the government 
agency?
    Mr. Carmichael. That is a tough situation.
    Mr. Rogers. Hello?
    Mr. Warrington. Mr. Chairman, if I might?
    You know, I cannot get away from the fact that there is a 
United States Department of Transportation in this town that is 
charged with setting national transportation policy. This is a 
national transportation policy question. In the end, unless 
there is a set of policy decisions that are linked to where the 
investment goes in this transportation arena, around highways, 
aviation, ports and all the other modes to create a separate, 
new government type agency that is also outside the power 
structure, the policy structure and the United States 
Department of Transportation, all we will have done is simply 
shift the political baggage and the political process from 
Amtrak to another entity that is outside of the government 
process.
    I think in the end the United States Government and the 
Department of Transportation is the only entity in this 
government that can effectively, professionally, directly and 
meaningfully deal with these difficult policy questions and can 
be in the power structure around resource allocation in this 
town.
    Mr. Carmichael. I do not disagree with him. Just put it in 
DOT, the small government agency, but it cannot be under the 
FRA. As the FRA administrator, I realized when I was on the 
board of Amtrak that I was in conflict of interest. I am a 
safety officer for the government, I should not be on the 
Amtrak board, looking back on that. First, I pushed real hard 
that the FRA take the responsibility for this oversight, but 
then I realized the FRA is a safety agency and there is a 
conflict. This oversight committee needs to be in an advocate 
position and it needs to be in an independent oversight 
position.
    So you can put it in the Surface Transportation Board or 
something, you can put it in DOT, I do not disagree with him. I 
wish DOT was more of a policy developer, but it is very hard 
for the government to get into picking winners and they do not 
like to do that, so policy out of DOT is going to be hard to 
get.

                            SERVICE PAYMENTS

    Mr. Rutter. But it is not just picking winners, it is 
paying for it. We could ratchet down to just a few routes 
around the country and we are still facing how to pay for those 
types of services and that is the thing that is the frustrating 
part, but it is also the thing that keeps us from coming up 
with this is how we want to get to where we want to go.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                       USER FEES FOR RAIL TRAVEL

    Mr. Rogers. But there are a lot of models out there. When 
you get in your car to travel across the interstate system, you 
are paying huge gasoline taxes, which goes to build and 
maintain that highway. When you fly on an airplane, you are 
paying a pretty good sized aviation tax, in part to help pay 
the costs of airports and now security and so on. The users are 
paying the fee, it is a user fee. Should there not be a user 
fee for riding on a railroad?
    Mr. Rutter. That is maybe a big part of the ultimate 
solution, both in terms of----
    Mr. Rogers. What do you charge----
    Mr. Rutter. Whether you do it by taxes or whether you do it 
by fares, but that is not going to get you all the way there.
    Mr. Rogers. I understand that. But you owe us a report.
    Mr. Rutter. Yes, I do.
    Mr. Rogers. And it just so happens that the same 
Subcommittee that is funding Amtrak funds your agency. As luck 
would have it. And they are both due about the same time.
    Mr. Rutter. Yes, sir.
    Mr. Rogers. So we expect DOT to have a plan before us 
before we mark up this appropriations bill.
    Mr. Rutter. I can do the math.
    Mr. Rogers. Pardon me?
    Mr. Rutter. I can do the math. I know what you are talking 
about.
    Mr. Rogers. You are getting close. We want a plan. We want 
the administration's plan. We have to have the experts through 
the DOT, the nation's transportation policy maker, to make 
policy. That is what they are paid for. We are paid to 
appropriate and oversee. You are paid to propose plans on 
national transportation policy. We are waiting with the money, 
we want your plan.
    Mr. Rutter. Yes, sir.
    Mr. Rogers. Anybody have anything else?
    Marty, do you want to----
    Mr. Sabo. No.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Mead. I have one question. Administrator Rutter is 
going to get to you the administration's plan in a couple of 
months, within a couple of months, by the time you mark up and 
he desperately wants to do that, he said. I also heard you say 
that you wanted Amtrak's numbers for this $1.2 billion scrubbed 
and Mr. Warrington has committed to getting us those numbers so 
we can get on with the process of scrubbing that. It is going 
to be particularly important if the plan that comes forward 
contemplates cost sharing between the states and the federal 
government. Meanwhile, you have to mark up this legislation and 
report out a bill before you know what the authorization is 
going to look like. Your forecasts right now, this request, is 
not based on a concept of an 80/20 or 70/30 match.
    Mr. Rogers. Well, let me just say this. We are not going to 
do as we have done before. That day is over. Amtrak is going to 
change. We are not going to pour money in that hole any more 
and if you want a national rail system, you had better get 
busy. And I suggest you talk to these folks who have put a lot 
of time into this restructuring and, of course, to Mr. 
Warrington, who has vast experience and, of course, Ken Mead is 
going to keep an eye on you, too. And I expect we are going to 
be back here at this same table pretty soon and we are going to 
see how far you have come. Because I have an idea there will 
not be a re-authorization bill this year.
    And so this may be, as I have said at the outset, the only 
train leaving the station. And if it is going to be the only 
train leaving the station, I am going to scrub the load before 
it goes. So this is not your last appearance, your last chance 
to testify here.
    Mr. Rutter. I certainly hope it is not my last.
    Mr. Rogers. And so we are going to send you back to the 
shops now and we want some work done.
    Mr. Rutter. Yes, sir.
    Mr. Rogers. And we will have you back up here and see how 
far you have come. I do not have a date in mind at this point 
in time, but it cannot come any later than late April. So I am 
going to say by the last week of April you all better be 
prepared because we are going to give you a chance to save the 
world.
    Anything else before we close down here?
    Mr. Carmichael. We would just thank you, Mr. Chairman, for 
letting us--the ten members of this council--present their 
citizens' report. They did some good work.
    Mr. Rogers. Well, they did and I want to thank you and the 
members of the reform council for the work that you put into 
this and the dedication and devotion. I know it is a chore and 
we appreciate it very much in the public interest and we hope 
that you have precipitated some sort of action here.
    Thank you very much.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Carmichael, G.E..................................................     1
Mead, Kenneth....................................................     1
Morgan, L.J......................................................  1049
Rutter, Allan....................................................     1
Warrington, George...............................................     1


                               I N D E X

                              ----------                                
        

                    Federal Railroad Administration

                                                                   Page
2003 Amtrak Funding Report.......................................   105
2003 Amtrak Grant Request........................................   123
Access Cost and Incentive Payments...............................   144
Accident Rates...................................................   685
Accident Trends..................................................   731
Actions Needed to Complete Penn Station Project..................   596
Accidents:
    Injuries, Employee...........................................   722
    Grade Crossing/Fatalities and Trespasser Fatalities..........   644
    Train........................................................   725
    Train........................................................   730
Additional Positions.............................................   551
Administration Proposal on Amtrak/Rail Service...................   123
Advanced Locomotive Propulsion Systems:
    Program......................................................   609
    Program Completion...........................................   610
    Program Integration..........................................   609
    Program Integration Testing and Demonstration................   611
    Program Total Cost...........................................   610
Air/Rail Market Share Splits on NEC..............................   146
Alaska Railroad Obligations......................................   655
Alaska Railroad's Train Control Project..........................   656
Amtrak:
    2003 Funding Report..........................................   105
    2003 Grant Request...........................................   123
    Access Costs for Non-Owned Lines.............................   143
    Administration Proposal on...................................   123
    Causes of Cost Growth........................................    89
    Detail of Capital Request for FY '03.........................   113
    Eligibility for RRIF Program Funds...........................   679
    Fiscal Year 2003 Request for.................................   125
    FRA and Reform Council Activities............................   680
    Labor Costs Versus Industry Average..........................   104
    Measuring Load Factor........................................   104
    Per Passenger Costs on Routes................................   145
    Performance, Budget, and Passenger Rail Service Issues.......    45
    Revenues to Fund Capital Requirements........................   154
    Statement of George Warrington, President and CEO of.........     4
    Sufficiency of 2003 Grant Request............................   109
    Vision of a National System..................................   146
Amtrak Reform Council:
    FRA Activities...............................................   681
    FRA's Role on................................................   680
    FY 2002 Funding..............................................   681
    Opening Remarks..............................................    76
    Reform Council Report........................................   680
    Testimony of Gilbert E. Carmichael, Chairman.................    83
Annualization of FY 2003 FTEs....................................   554
Authorized FTES and Onboard Personnel............................   555
Baltimore Rail Infrastructure Study..............................   574
Budget Measures to Address Increased Derailments.................   676
Causes of Amtrak Cost Growth.....................................    89
Challenges to Expediting Fire and Life Safety Repairs............   599
Charlotte-Raleigh Sealed Corridor................................   619
Civil Penalty:
    Collections in Recent Years..................................   734
    Trends.......................................................   734
Closed Grade Crossings...........................................   645
Community Costs to Silence Locomotive Horns......................   736
Completion of the Charlotte-Greensboro Sealed Corridor...........   619
Construction Schedule for Penn Station Redevelopment Project.....   597
Corridor Planning Activities.....................................   621
Cost Sharing.....................................................   588
Crash Test Results...............................................   570
Crash Testing Passenger Cars, Commuter Cars and Locomotives......   569
Credit Risk Premium Contributions by Non-Railroad Entities.......   679
Current Cost Estimate of Pennsylvania Station Project............   594
Current Regulatory Backlog.......................................   742
Derailments......................................................   673
Detail of Amtrak's Capital Request for FY '03....................   113
Employee:
    Accidents/Injuries...........................................   722
    Casualty Rates...............................................   720
    Casualty Rates...............................................   721
Enforcement Case Backlog.........................................   786
Enforcement Cases:
    By Class of Railroad.........................................   785
    In Last Three Years..........................................   785
Essential Air Service as Possible Rail Service Model.............    99
Evaluation of the Integrated Railway Remote Information System...   574
Final Regulations and Any New Regulatory Projects Pursued Since 
  Last Year......................................................   741
Fiscal Year 2003 Request.........................................   108
Fiscal Year 2003 Request for Amtrak..............................   125
FRA:
    And Reform Council Activities................................   681
    Expertise in Locomotive Research and Development.............   578
    Opening Remarks..............................................    18
    Reimbursables................................................   559
    Statement of Honorable Allen Rutter, Administrator...........    20
    Support for Operation Respond................................   791
FRA's:
    Key Safety Rulemakings.......................................   738
    Role on the Amtrak Reform Council............................   680
    Work to Expedite Tunnel Safety Repairs.......................   598
FRA-Wide IT Initiative...........................................   569
Freight Rail Study Along I-81 and I-95 Corridors.................   575
Funding for:
    Crash Tests..................................................   571
    Grade Crossing Mitigations and Low Cost Innovative 
      Technologies...............................................   617
    High-Speed Non-Electric Passenger Locomotive Demonstration 
      Program....................................................   607
    The Sealed Corridor..........................................   620
FY 1996-2002 Safety Workforce....................................   688
FY 1997-2001 Safety Trends.......................................   690
FY 2001:
    Safety Inspections...........................................   690
    TEA-21 Funding for Grade Crossings...........................   626
    -2002 Grade Crossing Funding/Projects........................   635
FY 2002:
    Amtrak Reform Council Funding................................   681
    High-Speed Rail Corridor Funding.............................   621
    New Positions................................................   550
    Security Initiatives.........................................   575
    TEA-21 Funding for Grade Crossings...........................   628
    -2003 Initiatives to Reduce Grade Crossing/Trespasser 
      Fatalities.................................................   631
FY 2003:
    Consulting Services Funds....................................   787
    Grade Crossing Funding.......................................   642
    Obligated Balances for the West Virginia Rail Project........   655
    Request for Information Technology...........................   565
    Security Initiatives.........................................   576
    User Fees....................................................   587
Grade Crossing:
    Accidents....................................................   653
    Accidents/Fatalities and Trespasser Fatalities...............   644
    Activities...................................................   564
    Collisions...................................................   650
    Closed.......................................................   645
    Fatalities by State..........................................   648
    FY 2001 TEA-21 Funding for...................................   626
    Hazard Mitigation Demonstration Project......................   613
    Other TEA-21 Projects........................................   629
    Top 16 States with Most Accidents............................   643
    Trespasser Accidents/Fatalities..............................   652
GSA Rent.........................................................   560
Hazardous Material Accidents.....................................   693
High-Speed:
    Marketing of the Non-Electric Passenger Locomotive...........   608
    Non-Electric Passenger Locomotive Demonstration Program Cost 
      Sharing....................................................   607
    Non-Electric Passenger Locomotive Demonstration Program......   606
    Non-Electric Passenger Locomotive Revenue Service............   608
    Passenger Service............................................   102
    Rail in America..............................................   672
    Rail Service.................................................   671
    Train Control Systems........................................   599
Impact on RTL on Amtrak Deferral.................................   613
Increase in Derailments..........................................   672
Increased State Participation in Operation Lifesaver Activities..   563
Information Technology:
    Program Cost.................................................   566
    Program Delays...............................................   568
Inspection Data..................................................   687
Inspector General Opening Remarks................................    42
Inspectors Authorized/On Board...................................   687
Interest Costs as Part of the Capital Budget.....................   141
Interest in RRIF Program.........................................   679
Is Amtrak Solely to Blame for Its Financial Troubles.............    88
Is Cutting Routes an Option to Cut Costs.........................    90
Is Operating Self-Sufficiency Still Possible.....................    89
Locomotive Horn Final Rule Timetable.............................   737
Locomotive Research and Development..............................   577
Locomotive Research and Development in the Rail Industry.........   578
Low Cost Innovative Technologies.................................   614
MAGLEV:
    Nevada-California Project....................................   623
    Pittsburgh and Baltimore Projects............................   622
    Request for FY 2003 Funding for..............................   624
    Status of Low-Speed Program..................................   624
Marketing of the High-Speed Non-Electric Passenger Locomotive....   608
Marshall University and the University of Nebraska...............   572
Marshall University and the University of Nebraska Project 
  Funding........................................................   573
Measuring Amtrak's Load Factor...................................   104
Method for Allocation of Costs to Long Distance Trains...........   141
Milwaukee-to-Madison Train Control Project.......................   604
NAJPTC:
    Program Cost Sharing.........................................   601
    Program vs R&D Train Control.................................   602
Nevada-California MAGLEV Project.................................   623
New York State ROHR Turboliner Upgrade Delivery..................   612
Non-Electric Passenger Locomotive:
    Demonstration Program........................................   606
    Demonstration Program Cost Sharing...........................   607
    Funding for Demonstration Program............................   607
    Locomotive Revenue Service...................................   608
    Marketing of.................................................   608
    Status of Program............................................   606
North American Joint Positive Train Control Program..............   600
Northeast Corridor Improvement Program...........................   592
NTSB Voice Recorder Recommendation...............................   910
Number of Committees Imposing Whistle Bans.......................   735
Operation Lifesaver..............................................   561
Operation Respond:
    Cost Benefits and Current Status.............................   788
    FRA Support for..............................................   791
    Funding Request for FY 2003..................................   790
Other TEA-21 Grade Crossing Projects.............................   629
Pennsylvania Station:
    Actions Needed to Complete Project...........................   596
    Construction Schedule for....................................   597
    Current Cost Estimate of Project.............................   594
    Redevelopment Project Scope of Work..........................   598
    Redevelopment Project Unobligated Balance....................   597
    Status of Funding............................................   595
    TIFIA Loan Extension.........................................   594
    TIFIA Loan Extension.........................................   595
Per Passenger Costs on Amtrak Routes.............................   145
Pittsburgh and Baltimore MAGLEV Projects.........................   622
Political Appointees.............................................   555
Positive Train Control on High-Speed Rail Corridors..............   605
Problems Arising from September 11...............................   577
Process for Allocating Interest Costs............................   142
Project Unobligated Balances.....................................   681
PTC:
    Evaluations..................................................   580
    In R&D and NGHSR.............................................   579
Rail Fatalities..................................................   728
Railroad Rehabilitation and Improvement Financing (RRIF) Program.   677
Request for FY 2003 Funding for MAGLEV...........................   624
Research and Development Projects................................   581
Revenues to Fund Amtrak's Capital Requirements...................   154
Rhode Island Rail................................................   593
Rhode Island Rail Unpaid Obligations.............................   594
Routes...........................................................   133
RRIF:
    Amtrak Eligibility for Program Funds.........................   679
    Fund Award Preference........................................   687
    Interest in Program..........................................   679
    Program Loans................................................   677
    Program Staff Work...........................................   678
Rulemakings Completed in the Last Year...........................   740
Safety & Operations No-Year Funds................................   560
Safety Statistics................................................   694
Sealed Corridor:
    Charlotte-Raleigh............................................   619
    Completion of the Charlotte-Greensboro.......................   619
    Funding......................................................   618
    Funding for..................................................   620
    Transfer of Technologies.....................................   620
Security Positions...............................................   551
Service Payments.................................................   149
Spend out of Unobligated Balances................................   683
State:
    Participation................................................   685
    Participation................................................   689
Statement of George Warrington, President and CEO of Amtrak......     4
Statement of Honorable Allen Rutter, Federal Railroad 
  Administrator..................................................    20
Status of:
    High-Speed Non-Electric Passenger Locomotive Demonstration 
      Program....................................................   606
    High-Speed Rail Development..................................   657
    Locomotive Horn Rulemaking...................................   735
    Low-Speed MAGLEV Program.....................................   624
    NTSB Recommendations.........................................   791
    Pennsylvania Station Funding.................................   595
    The Integrated Railway Remote Information System.............   573
    The New York State ROHR Turboliner Upgrade Program...........   612
    The Rhode Island Rail Development Project....................   592
    West Virginia Rail Development Project.......................   653
Sufficiency of 2003 Grant Request................................   109
T-16 Vehicle.....................................................   556
T-6 and T-16 Cost of Operation...................................   558
TASC Costs.......................................................   561
TASC Costs.......................................................   732
Testimony of Gilbert E. Carmichael, Chairman, Amtrak Reform 
  Council........................................................    83
The Appropriate Role for Rail Policy Development.................   130
Top 16 States with Most Grade Crossing Accidents.................   643
Train Accidents..................................................   725
Train Accidents..................................................   730
Train Control Communications Testing.............................   603
Transfer of Sealed Corridor Technologies.........................   620
Transportation Technology Center Support.........................   578
Trespassing--Leading Cause of Railroad Fatalities................   635
Unobligated Balance for the West Virginia Rail Project...........   654
Use of Capital Funds for Operating Expenses......................   151
Use of T-16 Vehicle..............................................   558
User Fee Equity..................................................   587
User Fees........................................................   591
User Fees for Rail Service.......................................   156
Virginia Track Speeds............................................   145
West Virginia Rail Project:
    FY 2003 Obligated Balances for...............................   655
    Status of....................................................   653
    Unobligated Balance for......................................   654
Warrington, George Biography.....................................    17
Which States Can Fund High-Speed Rail............................   671

              Research and Special Programs Administration

Accident Data Form Revisions, Pipeline Safety....................   954
Accidents Investigations, Pipeline Safety........................   941
Appropriations and Obligations, Emergency Transportation.........  1042
Budget and Administrative Issues:
    Political Appointees.........................................   977
    Reprogramming..............................................982, 983
    Staffing.....................................................   972
    Training Expenses............................................   982
    Travel Per FTE...............................................   982
    Unobligated Balances.........................................   984
Causes of Incidents, Pipeline Safety.............................   928
Civil Penalties and Fines, Pipeline Safety.......................   961
Common Ground, Pipeline Safety...................................   937
Coordination with DOE's Transportation Emergency Preparedness 
  Grant Program, Hazardous Materials Safety......................   996
Crisis Management Center, Emergency Transportation...............  1041
Current On-Board Staff, RSP......................................   973
Current On-Board Staff by Position, Hazardous Materials Safety...   976
Damage Prevention Community Technical Assistant/Public Education 
  Program, Pipeline Safety.......................................   937
Damage Prevention Grants (FY 2001), Pipeline Safety..............   932
Data Quality Improvement, Hazardous Materials Safety.............  1023
Emergency Preparedness Administration Cost Reimbursable, 
  Hazardous Materials Safety.................................1000, 1001
Emergency Preparedness Funds Receipts, Hazardous Materials Safety   996
Emergency Preparedness Grants, Hazardous Materials Safety........   998
Emergency Transportation:
    Appropriations and Obligations...............................  1042
    Crisis Management Center.....................................  1041
Employees by Organizational Unit, RSP............................   976
Grant Programs vs. Technical Assistance Program, Pipeline Safety.   935
Hazardous Liquid Incidents, Deaths, Injuries and Property Damage, 
  Pipeline Safety................................................   942
Hazardous Materials Safety:
    Coordination with DOE's Transportation Emergency Preparedness 
      Grant Program..............................................   996
    Current On-Board Staff by Position...........................   976
    Data Quality Improvement.....................................  1023
    Emergency Preparedness Administration Cost Reimbursable..1000, 1001
    Emergency Preparedness Funds Receipts........................   996
    Emergency Preparedness Grants................................   998
    Incidents, Death, Injuries and Property Damage...............  1019
    Inspections/Incidents........................................  1021
    New Position Request (FY 2003)...............................   980
    NTSB New Recommendations.....................................  1013
    NTSB Open Recommendations....................................  1002
    Penalties and Tickets........................................  1022
    Personnel Increases..........................................   975
    Registration Fee Collections.................................   995
    Rulemakings..............................................1014, 1015
    Security.....................................................   989
    Staffing Authorized..........................................   972
    Training of State and Local Personnel........................  1023
    User Fee.................................................1001, 1002
    Vacancies....................................................   973
    Validation of Data on Incident Information...................  1024
Human Centered Research, Research and Development Planning and 
  Management.....................................................   994
Incidents, Death, Injuries and Property Damage, Hazardous 
  Materials Safety...............................................  1019
Incident Summaries and Statistics, Pipeline Safety...............   956
In-Line Inspection Technologies, Pipeline Safety.................   927
Inspections/Incidents, Hazardous Materials Safety................  1021
Inspections History, Pipeline Safety.............................   950
Inspectors/Inspections, Pipeline Safety........................940, 941
Integrity Initiative Pilot Program, Pipeline Safety..............   923
Integrity Management, Pipeline Safety............................   925
Interstate Oversight Grant Program, Pipeline Safety..............   934
Interstate Oversight Grant Program vs. Damage Prevention Grant 
  Program, Pipeline Safety.......................................   934
Natural Gas Incidents, Deaths, Injuries and Property Damage, 
  Pipeline Safety..............................................945, 947
Natural Gas Grant Allocation (FY 2001), Pipeline Safety..........   938
NTSB New Recommendations, Hazardous Materials Safety.............  1013
NTSB Open Recommendations, Pipeline Safety.......................   965
NTSB Open Recommendations, Hazardous Materials Safety............  1002
Oil Pollution Action, Pipeline Safety............................   958
One-Call Program, Pipeline Safety................................   930
Opening Remarks..................................................   911
Outstanding Rulemakings, Pipeline Safety.........................   967
Penalties and Tickets, Hazardous Materials Safety................  1022
Personnel Increase (FY 2002), Hazardous Materials Safety.........   975
Personnel Increase (FY 2002), Pipeline Safety....................   916
Pipeline Safety:
    Accident Data Form Revision..................................   954
    Accident Investigations......................................   941
    Causes of Incidents..........................................   928
    Civil Penalties and Fines....................................   961
    Common Ground................................................   937
    Damage Prevention Community Technical Assistant/Public 
      Education Program..........................................   937
    Damage Prevention Grants (FY 2001)...........................   932
    Personnel Increases (FY 2002)................................   916
    Grant Programs vs. Technical Assistance Program..............   935
    Hazardous Liquid Incidents, Deaths, Injuries and Property 
      Damage.....................................................   942
    Incident Summaries and Statistics............................   956
    In-Line Inspection Technologies..............................   927
    Inspections History..........................................   950
    Inspectors/Inspections.....................................940, 941
    Integrity Initiative Pilot Program...........................   923
    Integrity Management.........................................   925
    Interstate Oversight Grant Program...........................   934
    Interstate Oversight Grant Program vs. Damage Prevention 
      Grant Program..............................................   934
    Natural Gas Incidents, Deaths, Injuries and Property Damage..   945,
 947
    Natural Gas Grant Allocation (FY 2001).......................   938
    NTSB Open Recommendations....................................   965
    Oil Pollution Action.........................................   958
    One-Call Program.............................................   930
    Outstanding Rulemakings......................................   967
    Personnel Increase...........................................   916
    Relationship Between One-Call Programs and Pipeline Incidents   931
    Risk Management Initiative...................................   920
    Security.....................................................   971
    Staffing Authorized..........................................   916
    States Without Effective One-Call Programs...................   930
    System Integrity Pilot Program...............................   923
    Third Party Damage...........................................   949
    Unappropriated Balance in Reserve Fund.......................   929
    User Fees....................................................   957
    Vulnerability Study..........................................   970
    Workload Measures............................................   951
Political Appointees, RSP........................................   977
Positions Request (FY 2003), Hazardous Materials Safety..........   980
Positions Request (FY 2003), RSP.................................   980
Positions Request (FY 2003), Transportation Safety Institute.....   981
Registration Fee Collections, Hazardous Materials Safety.........   995
Relationship Between One-Call Programs and Pipeline Incidents, 
  Pipeline Safety................................................   931
Reprogramming, RSP.............................................982, 983
Research and Development Planning and Management:
    Human Centered Research......................................   994
    Research and Development Planning and Management Activities..   992
    Transportation Infrastructure Assurance (TIA) R&D............   984
Risk Management Initiative, Pipeline Safety......................   920
Rulemakings, Hazardous Materials Safety......................1014, 1015
RSPA Opening Statement:
    Budget Request...............................................   911
    Emergency Transportation.....................................   914
    Hazardous Materials Safety...................................   914
    Pipeline Safety..............................................   913
    Research and Technology......................................   915
Security, Hazardous Materials Safety.............................   989
Security, Pipeline Safety........................................   971
Staffing Authorized, Pipeline Safety.............................   916
Staffing Authorized, RSP.........................................   972
Staffing Authorized, Hazardous Materials Safety..................   972
States Without Effective One-Call Programs, Pipeline Safety......   930
System Integrity Initiative Pilot Programs, Pipeline Safety......   923
Third Party Damage, Pipeline Safety..............................   949
Training Expenses, RSP...........................................   982
Training of State and Local Personnel, Hazardous Materials Safety  1023
Transportation Infrastructure Assurance, Research and Development 
  Planning and Mgmt..............................................   984
Transportation Safety Institute..................................  1043
    New Position Request.........................................   981
Travel per FTE, RSP..............................................   982
Unappropriated Balance in Reserve Fund, Pipeline Safety..........   929
Unobligated Balances, RSP........................................   984
Users Fees, Pipeline Safety......................................   957
Users Fees, Hazardous Materials Safety.......................1001, 1002
Vacancies, Hazardous Materials Safety............................   973
Vacancies, RSP...................................................   974
Validation of Data on Incident Information, Hazardous Materials 
  Safety.........................................................  1024
Volpe Center.....................................................  1025
Vulnerability Study, Pipeline Safety.............................   970
Workload Measures, Pipeline Safety...............................   951

                      Surface Transportation Board

Abandonments.....................................................  1089
Accomplishments..................................................  1051
Background.......................................................  1049
Board Members and Terms..........................................  1080
Board Reauthorization............................................  1087
Budget Request: Comparison of Budget Requests....................  1060
Buffalo Rate Study...............................................  1086
Bus Mergers......................................................  1094
Caseload.........................................................  1095
Case Under Consideration.........................................  1088
Coal Rate Contracts, Expiring....................................  1093
Comparison of Board's and President's Budget Requests............  1060
Construction Cases:
    Rail Line....................................................  1093
    Staffing.....................................................  1094
Cost Accounting System...........................................  1070
Earnings: Class I Railroads......................................  1100
Fee Waivers:
    Activity.....................................................  1072
    Requests.....................................................  1072
Filed Rail Rate Complaints.......................................  1091
Funding:
    FY 2002 User Fee Collections.............................1061, 1064
    Travel.......................................................  1107
Industry Issues..................................................  1085
Intercity Bus Mergers............................................  1094
Managerial and Supervisory Positions.............................  1077
Mergers: Class I.................................................  1082
National Security................................................  1084
President's Budget Request.......................................  1060
Railroad:
    Abandonments.................................................  1089
    Buffalo Rate Study...........................................  1086
    Cases Under Consideration....................................  1088
    Class I Mergers..............................................  1082
    Earnings, Class I............................................  1100
    Industry Issues..............................................  1085
    National Security............................................  1084
    Rail Line Construction.......................................  1093
    Return on Investment.........................................  1099
    Revenue Adequate.............................................  1098
    Staffing to Handle Construction Proposals....................  1094
    State of Industry............................................  1084
Railroad-Shipper Transportation Advisory Council:
    Members......................................................  1104
    Policy Recommendations.......................................  1105
Rates:
    Buffalo Rate Study...........................................  1086
    Expiring Coal Rate Contracts.................................  1093
    Filed Rate Complaints........................................  1091
    Rates and Services...........................................  1086
    Regulation Cases.............................................  1097
Reauthorization of Board.........................................  1087
Replacement Employees for Retirees...............................  1077
Return on Investment Rates.......................................  1099
Retirement Eligibility...........................................  1074
Revenue Adequate Railroads.......................................  1098
Rulemakings:
    Current......................................................  1102
    User Fee NPR.................................................  1071
Salaries and Expenses............................................  1057
Staffing:
    Additional Staffing..........................................  1076
    Current Level................................................  1072
    By Function..................................................  1080
    Handle Rail Line Construction Proposals......................  1094
    Managerial and Supervisory Positions.........................  1077
    Replacement Employees for Retirees...........................  1077
    Retirement Eligibility.......................................  1074
State of Railroad Industry.......................................  1084
Statement of Chairman Morgan:
    Accomplishments..............................................  1051
    Background...................................................  1049
    Budget Request...............................................  1049
    Fiscal Years 2002 and 2003...................................  1055
    Goals........................................................  1050
    Salaries and Expenses........................................  1057
    Summary......................................................  1056
    Workload.....................................................  1059
Top User Fee Generators..........................................  1062
Travel...........................................................  1107
User Fees:
    2002 Collections.........................................1061, 1064
    Comparison of Recent User Fee Schedule Updates...............  1065
    Cost Accounting System.......................................  1070
    Fee Waivers Activity.........................................  1072
    Fee Waivers Requests.........................................  1072
    Notice of Proposed Rulemaking................................  1071
    Top User Fee Generators......................................  1062
    Updating Schedule............................................  1071
Working Within DOT...............................................  1105
Workload:
    Caseload.....................................................  1095
    Cases Under Consideration....................................  1088
    FY 2002 and FY 2003..........................................  1055
    Summary......................................................  1059

                                
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