[Congressional Record Volume 143, Number 38 (Friday, March 21, 1997)]
[Extensions of Remarks]
[Pages E545-E547]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      PUTTING AMTRAK BACK ON TRACK

                                 ______
                                 

                           HON. FRANK R. WOLF

                              of virginia

                    in the house of representatives

                        Thursday, March 20, 1997

  Mr. WOLF. Mr. Speaker, in 1971, the National Railroad Passenger 
Corporation--Amtrak--began operations, taking over intercity passenger 
rail service from freight railroads. The freight railroads were eager 
to get out of the passenger rail service which had been unprofitable 
for many years. So eager in fact, that these freight railroads even 
donated equipment and provided financial assistance to help launch 
Amtrak. The Federal Government agreed to assist Amtrak in starting 
intercity passenger rail service and provide financial help.
  Amtrak currently provides almost 20 million intercity rail passenger 
trips per year in 45 States. While this sounds like an impressive 
number, these trips constitute less than 1 percent of all intercity 
travel in the United States. Automobiles account for the bulk of 
intercity travel, about 80 percent. Another 17 percent of travel 
between cities is on commercial or private aircraft. Even intercity 
buses provide more service--and have quadruple the ridership--than 
Amtrak.
  How much assistance has the Federal Government provided to Amtrak for 
its 1 percent market share? Since 1971 and through fiscal year 1997, 
the Federal Government has provided over $19 billion for Amtrak 
operating and capital expenses. That's $19 billion to help this 
fledgling corporation take over intercity passenger rail service from 
the freight railroads and provide less than 1 percent of all intercity 
travel. What have we gotten for our money? Far too little, I'm afraid.
  Despite this massive infusion of Federal dollars, Amtrak route miles 
have increased a mere 1,000 miles since 1971. Moreover, Amtrak has had 
an operating loss each and every year since it began in 1971, before 
paying to buy or maintain equipment. None, not a single one, of 
Amtrak's routes are profitable when equipment costs are included. And 
the outlook for the future is equally bleak.
  The fiscal year 1996 budget resolution approved by Congress assumes a 
phaseout of Amtrak operating assistance by the year 2002. However, 
Amtrak is ill-prepared to operate without Federal assistance. In fact, 
according to the General Accounting Office, Amtrak needs increased 
operating assistance--above current levels--rather than decreased 
funding. In addition, $4 billion is needed to replace worn out 
equipment. On top of the needed operating assistance, on top of the 
needed equipment assistance, Federal dollars will be needed to repair 
deteriorating track and signal equipment along the Northeast corridor.
  As I mentioned previously, none of Amtrak's routes are profitable, 
when equipment costs are included. Amtrak's Northeast corridor--the 450 
mile route between Boston and Washington, DC--which accounts for about 
half of the 20 million intercity trips, covers only about 65 percent of 
its operating and equipment costs. Other routes cover much less, on 
average, just about 50 percent of the operating and equipment costs.
  In 1994, the GAO set off alarm bells about Amtrak's future. In its 
testimony to Congress, GAO warned that Amtrak's financial condition had 
deteriorated so significantly, that its projected future costs made 
recovery difficult. Since then, GAO has continued to warn of Amtrak's 
precarious financial position. Despite these dire predictions, over the 
past 2 years, Congress and the administration have indicated that if 
Amtrak is going to survive, it cannot be dependent upon Federal 
operating subsidies beyond the turn of the century.
  How can we reconcile Amtrak's enormous Federal assistance needs with 
the congressional mandate to eliminate its operating subsidies? How do 
we respond to the growing demands for capital assistance in the face of 
budgetary constraints.
  Quite honestly, I don't know. Amtrak remains heavily dependent on 
Federal support

[[Page E546]]

for both its operating and capital needs. Amtrak developed a strategic 
business plan in 1995 designed to increase revenues, control costs, and 
eliminate its need for Federal operating subsidies by the year 2002. 
This plan has been revised several times, each time to reflect updated 
realities of its inability to raise additional revenues and/or control 
costs. According to GAO, in fiscal year 1996, Amtrak's net loss was 
$764 million, and the gap between its operating deficit and Federal 
operating support was $82 million. Clearly, Amtrak is ill-prepared to 
operate without massive help.
  There is another important point to make. Amtrak has borrowed heavily 
since 1993. From fiscal year 1993 to fiscal year 1996, Amtrak's debt 
and capital lease obligations rose from $527 million to $987 million--
nearly doubling in a 3 year period. Not only that, this debt does not 
include an additional $1 billion Amtrak expects to incur beginning in 
1999 to finance high-speed train sets and maintenance facilities for 
the Northeast corridor and the acquisition of new locomotives.
  How has Amtrak been paying off its enormous debt obligations? By 
using Federal operating support. Over the last 4 years, GAO estimates 
that Amtrak's interest expenses have tripled--from a fiscal year 1993 
level of $20.6 million to fiscal year 1996 level of $60.2 million. In 
fiscal year 1993, 6 percent of Amtrak's operating assistance was used 
to make interest payments on its debts but by fiscal year 1996, that 
percentage rose to an astounding 21 percent. Slightly less than a 
quarter of all of Amtrak's operating assistance is now going to pay for 
interest on its debt rather than covering costs associated with day-to-
day running of the railroad. As interest payments on its debt consume 
an ever increasing portion of operating assistance, Amtrak has less and 
less subsidy agreement for current operating expenses.
  What needs to be done to increase Amtrak's profitability? Amtrak will 
tell you that it has been trying very hard to survive in a competitive 
marketplace. Yet as a result of declining passenger revenues coupled 
with price competition from airlines and intercity buses, Amtrak 
passenger revenues have declined 14 percent in real terms since 1990, 
further exacerbating a bad financial situation.

  Over the past 2 years, Amtrak has been able to restructure the 
company and route system, thereby making some productivity improvements 
and reducing annual costs by approximately $400 million. However, 
restructuring has not always worked as Amtrak planned.
  For example, in August 1996, Amtrak announced that it planned to 
eliminate five routes by November 10, 1996. Many States affected by 
these route terminations approached Congress, asking that we continue 
the routes until the State legislatures had an opportunity to meet and 
discuss whether they could fund these routes from alternative sources. 
Congress agreed and provided $22.5 million to continue these routes for 
an additional 6 months.
  However, because Amtrak did not correctly calculate the cost to run 
these routes, the railroad is predicting that it will lose $13.5 
million on these routes, even after the Federal subsidy. As a result, 
Amtrak may need to cut additional routes in order to make up for these 
losses. And while Congress provided money to give the affected States 
time to develop alternate funding to continue these routes, I 
understand that none of the States has taken action to continue these 
routes. Since I became chairman of the Transportation Appropriations 
Subcommittee 2 years ago, Amtrak has cut routes four times. It appears 
that this trend may continue.
  Furthermore, for Amtrak to become a competitive railroad, it must 
complete upgrading and installation of high speed rail service along 
the Northeast corridor. After a 2-year delay on this program, Amtrak 
awarded a high speed rail contract and a new electrification contract 
in 1996. Once the corridor begins providing high speed rail service 
from Washington, DC to Boston, Amtrak estimates that it will receive an 
additional $150 million in revenue per year. However, to electrify the 
corridor and modernize its fleet, Amtrak plans to invest $5.5 billion 
by the year 2001--$3.2 billion of which is expected to come from 
Federal capital grants.
  I believe this expectation is far-fetched. In a time of declining 
Federal resources, it is simply unrealistic to assume that the Federal 
Government will be able to provide $751 million per year in capital 
grants to Amtrak, when the most recent annual appropriations have been 
under $400 million--$345 million in fiscal year 1996 and $398.45 
million in fiscal year 1997.
  What else can Amtrak do to improve its financial picture? Can it 
reduce its operating expenses by renegotiating labor agreements? Not so 
far. Amtrak recently renegotiated these agreements, but rather than 
getting some concessions from labor that would enable it to improve its 
financial position, Amtrak's labor costs are on the rise.
  Amtrak has repeatedly asked Congress to provide it with statutory 
relief from the most onerous labor provisions which could hold some of 
its labor costs in check. However, Congress has refused to provide this 
relief. What is the relief Amtrak seeks? Relief from current law which 
requires Amtrak to pay unemployment for up to 6 years to any employee 
whose route has been terminated or reduced to less than three times per 
week. Of course, other rail providers have similar requirements and 
they also have sought relief without success. Would it be fair to allow 
Amtrak to reduce the employment benefits it provides its workers while 
other transit companies can not? This is an issue Congress must 
address.
  Amtrak--and others--believe that to be free of Federal operating 
subsidies by the year 2002, it will need a dedicated source of capital 
funding. Amtrak has proposed receiving a half cent from the Federal gas 
tax, which would provide Amtrak up to $750 million per year.
  If these funds are drawn down from the current gasoline tax, not from 
the Federal portion allocated to deficit reduction, it will have a 
significant impact on whether the Federal Government can meet its 
current full funding grant agreements and other transit commitments, as 
well as its commitments for highway projects.
  Beyond this, if Amtrak receives this half cent, will Congress reduce 
the Federal subsidy provided to Amtrak, even after the railroad ceases 
collecting operating assistance? In fiscal year 1996, Congress 
appropriated $635 million for Amtrak grants and Northeast corridor 
development. This amount is less than what would be provided to the 
railroad by the gas tax. In fiscal year 1997, Congress appropriated 
$763 million, not including a one-time charge for a maintenance 
facility. This amount is roughly equal to what Amtrak would collect 
under the half cent proposal.
  What does all this mean? It appears that the half cent proposal is 
really a proposal addressing where Amtrak's money comes from rather 
than a proposal to wean Amtrak off Federal subsidies.
  So, what do we do? Our approach to Amtrak is somewhat like applying a 
band-aid when surgery is required. The band-aid may provide a temporary 
fix, but the fix--no matter how many band-aids are used--never 
addresses the underlying problem. Amtrak needs more than an annual 
financial band-aid. It is crying out for critical attention.
  Where do we go?
  Are we committed to Amtrak?
  If so, we must address Amtrak's needs in a comprehensive way in an 
effort to secure its financial footing and future viability. Amtrak is 
in a fragile state and cannot be expected to survive a piecemeal 
approach to addressing its problems and needs.
  But Congress and the American taxpayers can no longer be asked to 
throw good money after bad. Instead, if we are committed to Amtrak, we 
must be prepared to do what is necessary.
  I want Amtrak to survive. I believe America needs a national 
railroad passenger system as a vital part of a balanced transportation 
network for our nation. But we cannot continue the status quo with 
Amtrak. We must work to put Amtrak on sound financial footing and make 
it a viable mass transportation alternative for years to come.

  In the 104th Congress I introduced legislation to revitalize Amtrak 
and today, along with my colleagues, Mr. Packard and Mr. DeLay, I am 
reintroducing the ``Amtrak Route Closure and Realignment Act of 1997, a 
measure which I believe can work to help save intercity passenger rail 
service in our Nation.
  Despite its efforts, restructuring has not always worked as Amtrak 
planned. Some of Amtrak's unprofitable routes have been mandated by 
Congress and this has stymied its efforts to operate in a business-like 
manner. I believe it is imperative that we enable Amtrak to better 
operate in accordance with business principles. Let's get out of the 
way and allow Amtrak to operate like a business--a profitable one at 
that.
  My legislation would de-politicize Amtrak decision-making processes 
by removing from the political realm, painful route closure and 
realignment decisions, and placing them instead in the hands of an 
independent commission modeled after BRAC, the Base Realignment and 
Closure Commission.
  This Amtrak Commission--called TRAC or Total Realignment of Amtrak 
Commission--would conduct an independent, economic analysis of the 
entire Amtrak system and then make recommendations on route closings 
and realignments urgently needed for the survival of a passenger rail 
system in the United States. TRAC would hold public hearings around the 
country to ensure that the public and other stakeholders were given the 
opportunity to be heard and in this way make the realignment process as 
fair as possible.
  In addition to economic data, TRAC would also review nonmonetary data 
such as the contributions made by certain routes toward alleviation of 
airport congestion, pollution abatement, and energy conservation. TRAC 
would also examine alternative modes of

[[Page E547]]

transportation in rural areas, as well as look at uses communities 
could make of abandoned rail lines.
  Under my proposal, no segment of the Amtrak system would be exempt 
from review. All routes would be carefully scrutinized. TRAC would also 
examine ridership forecasts and other assumptions underlying the 
Northeast corridor, especially in light of on-going electrification 
efforts. This electrification project currently has a price tag of 
about $3.2 billion, with nearly $1.2 billion already appropriated.
  There is, however, an important factor which I mentioned earlier that 
I must reiterate which affects Amtrak's costs and efforts to achieve 
profitable operations. The Rail Labor Protection Act mandates payment 
of 6 years of full benefits to any rail worker who loses his or her job 
due to a route closure. As a result, many of the most unprofitable 
routes would actually cost even more to close than to keep going, 
albeit limping along at a loss. In fact, under the ``30-mile'' rule--
also part of current law--an Amtrak employee is entitled to demand the 
full 6 year severance package if he or she is merely relocated 30 miles 
or more. No union workers in the private sector are afforded such 
generous severance compensation, and these astronomical costs are one 
of the reasons that every trip on Amtrak costs American taxpayers $25.
  After conducting a thorough, system-wide economic review, TRAC would 
make its recommendations to Congress. These recommendations would then 
be considered by Congress under an expedited procedure--an accelerated 
time frame for consideration, with no amendments permitted, and an up-
or-down vote.
  TRAC would be comprised of 11 members. The President would appoint 
three members including the Secretary of the Department of 
Transportation, one representative of a rail labor union and one member 
of rail management. The majority leadership in the House and Senate 
would each appoint four members, in consultation with the minority 
leadership in both bodies. Members serving on this commission would 
offer expertise in rail finance, economic analysis, legal issues, and 
other relevant areas.
  Saving passenger rail service requires objective analysis and urgent 
remedies. If Amtrak is to survive, and I want to emphasize my support 
for its survival, we must get out of the way and allow it to be run in 
a manner consistent with sound business practices. We must allow 
objective, business principles to govern Amtrak operations rather than 
outside considerations or constraints. Finally, we must be able to 
justify to taxpayers, whatever decisions we make regarding Amtrak and 
this is best accomplished based on sound assessments and 
recommendations.
  I believe the TRAC legislation can help move Amtrak into the next 
century as a viable part of the Nation's transportation system and I 
urge my colleagues to support this legislation.

                          ____________________