Intercity Passenger Rail: Outlook for Improving Amtrak's Financial Health
(Testimony, 03/24/98, GAO/T-RCED-98-134).
GAO discussed: (1) Amtrak's financial performance during fiscal year
(FY) 1997 and during the first quarter of FY 1998; (2) challenges Amtrak
will face in improving its financial health; and (3) the potential
impact that recently enacted legislation may have on Amtrak's financial
condition.
GAO noted that: (1) Amtrak's financial condition continues to
deteriorate; (2) although Amtrak has been able to reduce its net losses
(total expenses less total revenues) from about $892 million in FY 1994
to about $762 million in FY 1997, the 1997 loss would have been $63
million higher were it not for one-time increases in revenue from the
sales of real estate and access rights for telecommunications; (3) in
March 1998, Amtrak projected that its net loss for FY 1998 could be
about $845 million--about $56 million more than planned; (4) Amtrak will
continue to face challenges in improving its financial health; (5)
Amtrak hopes to improve its financial health by increasing revenues
through such actions as expanding mail and express service (delivery of
higher-value, time-sensitive goods) and instituting high-speed rail
service between New York City and Boston; (6) however, Amtrak has had to
substantially scale back its net revenue projections for express
business, and positive net income from the high-speed rail program will
not occur for another 2 years; (7) Amtrak does not currently plan to
reduce routes, even though one of its routes--the Metroliner service
between Washington, D.C., and New York City--makes money; (8) instead it
plans to fine-tune its route network and conduct a comprehensive market
analysis; (9) federal funding and recently enacted reforms will not
solve Amtrak's financial problems; (10) although the Taxpayer Relief Act
of 1997, FY 1998 capital appropriations, and the President's proposed FY
1999 budget, if enacted, will provide Amtrak with historic levels of
capital support, this support will fall short of Amtrak's identified
capital needs by about $500 million; (11) in addition, Amtrak plans to
use $1.8 billion of the $2.8 billion in requested federal capital grant
funds to pay maintenance expenses between FY 1999 and FY 2003; (12) the
use of funds for this purpose would substantially reduce the remaining
level of funds available to acquire new equipment or make the capital
improvements necessary to reduce Amtrak's cost and/or increase revenues;
(13) therefore, such use will have a negative impact over the long term;
and (14) furthermore, the Amtrak Reform and Accountability Act of 1997
significantly changed Amtrak's operations, but these reforms will
provide few, if any, immediate financial benefits.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-98-134
TITLE: Intercity Passenger Rail: Outlook for Improving Amtrak's
Financial Health
DATE: 03/24/98
SUBJECT: Financial management
Future budget projections
Strategic planning
Railroad transportation operations
Federal aid for transportation
Mass transit operations
Budget outlays
Maintenance costs
Losses
IDENTIFIER: Amtrak Northeast Corridor
Amtrak Metroliner Project
Amtrak Texas Eagle Route
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Before the Subcommittee on Transportation, Committee on
Appropriations, U.S. Senate
For Release
on Delivery
Expected at
9:30 a.m. EST
Tuesday
March 24, 1998
INTERCITY PASSENGER RAIL - OUTLOOK
FOR IMPROVING AMTRAK'S FINANCIAL
HEALTH
Statement of Phyllis F. Scheinberg,
Associate Director, Transportation Issues,
Resources, Community, and Economic
Development Division
GAO/T-RCED-98-134
GAO/RCED-98-134T
(348082)
Abbreviations
=============================================================== ABBREV
FRA -
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to testify today on Amtrak's financial
condition. Less than a year ago, we appeared before this
Subcommittee to discuss Amtrak's financial problems.\1 At that time,
we said that Amtrak was in a very precarious financial position.
Amtrak itself raised the specter of a corporate bankruptcy in 1997.\2
We are here today to report that Amtrak continues to be in a very
precarious position and will remain so for the immediate future. We
base this assessment on Amtrak's financial performance last year and
during the first quarter of this fiscal year; challenges that Amtrak
will face in improving its financial health; and the potential impact
that recently enacted legislation may have on Amtrak's financial
condition. In summary:
-- Amtrak's financial condition continues to deteriorate. Although
Amtrak has been able to reduce its net losses (total expenses
less total revenues) from about $892 million in fiscal year 1994
(in 1997 dollars) to about $762 million in fiscal year 1997, the
1997 loss would have been $63 million higher were it not for
one-time increases in revenue from the sales of real estate and
access rights for telecommunications. Prospects for fiscal year
1998 are not bright. In March 1998, Amtrak projected that its
net loss for fiscal year 1998 could be about $845 million--about
$56 million more than planned.
-- Amtrak will continue to face challenges in improving its
financial health. Amtrak hopes to improve its financial health
by increasing revenues through such actions as expanding mail
and express service (delivery of higher-value, time-sensitive
goods) and instituting high-speed rail service between New York
City and Boston. However, Amtrak has had to substantially scale
back its net revenue projections for express business, and
positive net income from the high-speed rail program will not
occur for another 2 years. Amtrak does not currently plan to
reduce routes, even though only one of its routes--the
Metroliner service between Washington, D.C., and New York
City--makes money. Instead it plans to fine-tune its route
network and conduct a comprehensive market analysis.
-- Federal funding and recently enacted reforms will not solve
Amtrak's financial problems. Although the Taxpayer Relief Act
of 1997, fiscal year 1998 capital appropriations, and the
President's proposed fiscal year 1999 budget, if enacted, will
provide Amtrak with historic levels of capital support, this
support will fall short of Amtrak's identified capital needs by
about $500 million. In addition, Amtrak plans to use $1.8
billion of the $2.8 billion in requested federal capital grant
funds to pay maintenance expenses between fiscal years 1999 and
2003. The use of funds for this purpose would substantially
reduce the remaining level of funds available to acquire new
equipment or make the capital improvements necessary to reduce
Amtrak's costs and/or increase revenues. Therefore, such use
will have a negative impact over the long term. Furthermore,
the Amtrak Reform and Accountability Act of 1997 significantly
changed Amtrak's operations; but these reforms will provide few,
if any, immediate financial benefits.
--------------------
\1 Transportation Financing: Challenges in Meeting Long-Term Funding
Needs for FAA, Amtrak, and the Nation's Highways (GAO/T-RCED-97-151,
May 7, 1997). See also, DOT's Budget: Management and Performance
Issues Facing the Department in Fiscal Year 1999
(GAO/T-RCED/AIMD-98-76, Feb. 12, 1998); and Intercity Passenger
Rail: Amtrak's Financial Crisis Threatens Continued Viability
(GAO/T-RCED-97-147, Apr. 23, 1997).
\2 See our report entitled Intercity Passenger Rail: Issues
Associated With a Possible Amtrak Liquidation (GAO/RCED-98-60, Mar.
2, 1998) for a discussion of the expected financial and other effects
if Amtrak were to undergo liquidation.
BACKGROUND
---------------------------------------------------------- Chapter 0:1
Amtrak was created by the Rail Passenger Service Act of 1970 to
operate and revitalize intercity passenger rail service. Prior to
Amtrak's creation, such service was provided by private railroads,
which had lost money, especially after World War II. The act, as
amended, gave Amtrak a number of goals, including providing modern,
efficient intercity passenger rail service; giving Americans an
alternative to automobiles and airplanes to meet their transportation
needs; and minimizing federal operating subsidies. Through fiscal
year 1998, the federal government has provided Amtrak with over $20
billion in operating and capital subsidies, excluding $2.2 billion
from the Taxpayer Relief Act.
In December 1994, at the request of the administration, Amtrak
established a goal of eliminating federal operating subsidies for
Amtrak by 2002. To meet this goal and respond to continually growing
losses and a widening gap between operating deficits and federal
operating subsidies, Amtrak developed strategic business plans.
These plans have attempted to increase revenues and control costs
through such actions as expanding mail and express service and
adjusting routes and service frequency. Amtrak also has restructured
its organization into strategic business units.
The Congress provided additional financial assistance to Amtrak in
the Taxpayer Relief Act of 1997, enacted in August 1997. This act
makes a total of about $2.2 billion available to Amtrak in 1998 and
1999 to acquire capital improvements, pay certain equipment
maintenance expenses, and pay principal and interest on certain debt,
among other things. In addition, the Amtrak Reform and
Accountability Act of 1997, enacted in December 1997, makes certain
reforms to Amtrak's operations. These reforms include, among other
things, (1) eliminating current labor protection arrangements on May
31, 1998; (2) repealing the ban on contracting out nonfood and
beverage work; and (3) placing a $200 million cap on the amount of
liability claims that can be paid as the result of an Amtrak
accident.
AMTRAK'S FINANCIAL CONDITION
CONTINUES TO DETERIORATE
---------------------------------------------------------- Chapter 0:2
Amtrak's financial condition has continued to deteriorate despite its
efforts over the past 4 years to reduce losses. While Amtrak has
reduced its net losses from about $892 million in fiscal year 1994
(in 1997 dollars)\3 to $762 million in fiscal year 1997, it has not
been able to close the gap between total revenues and expenses. (See
fig. 1.) For example, while intercity passenger-related revenues
grew by about 4 percent last year, intercity passenger-related
expenses grew by about 7 percent. Notably, the net loss for fiscal
year 1997 would have been much greater if Amtrak had not earned about
$63 million, primarily from the one-time sales of real estate and
telecommunications rights-of-way in the Northeast Corridor.
Figure 1: Revenues and
Expenses, Fiscal Years 1989-97
(See figure in printed
edition.)
Note: Amounts are in 1997 dollars.
Source: GAO's analysis of Amtrak's data.
Amtrak's net loss for fiscal year 1998 will likely be substantially
worse than in 1996 and 1997. In March 1998, Amtrak projected that
the net loss for this year will be about $845 million, or $56 million
more than budgeted. Amtrak's financial deterioration can be seen in
other measures as well. For example, Amtrak's working capital--the
difference between current assets and current liabilities--generally
declined between fiscal years 1995 and 1997, from a deficit of $149
million to a deficit of $300 million. As figure 2 shows, at the end
of fiscal year 1997, Amtrak's working capital was the lowest it had
been over the last 9 years. Declining working capital jeopardizes a
company's ability to pay its bills as they come due. The decline in
working capital reflects an increase in accounts payable, short-term
debt, and capital lease obligations, among other items.
Figure 2: Amtrak's Working
Capital Surplus/Deficit, Fiscal
Years 1989-97
(See figure in printed
edition.)
Note: Amounts are in nominal dollars.
Source: GAO's analysis of Amtrak's data.
Amtrak's poor financial condition has also affected its cash flow and
its need to borrow money to make ends meet. In fiscal year 1997,
Amtrak had to borrow $75 million to meet its operating expenses. The
prospects in fiscal year 1998 are worse. Amtrak originally planned a
cash-flow deficit of $100 million in fiscal year 1998; however, in
January 1998, Amtrak increased this estimate to $200 million.\4 This
projected increase is primarily due to (1) reductions in expected
revenues from Amtrak's pilot express program ($47 million); (2) a
liability for the wage increases provided by Amtrak's recent
agreement with the Brotherhood of Maintenance of Way Employees ($35
million);\5 and, (3) an increase in accounts payable that resulted
from deferring fiscal year 1997 payables to fiscal year 1998 ($16
million). Amtrak began borrowing in February 1998 to make ends meet.
--------------------
\3 Unless otherwise noted, information on financial condition and
performance was provided by Amtrak and was not independently
verified. The net loss for fiscal year 1994 excludes a one-time
charge of $261 million (in 1997 dollars) for accounting changes,
restructuring costs, and other items.
\4 As of mid-March 1998, Amtrak had $150 million of its $170 million
in short-term lines of credit available to help meet cash-flow
deficits.
\5 This $35 million reflects Amtrak's estimate of the cost in fiscal
year 1998 of extending the Brotherhood of Maintenance of Way
Employees labor settlement to Amtrak's 12 other labor unions. Amtrak
is in the process of negotiating with the other unions.
IMPROVING AMTRAK'S FINANCIAL
HEALTH PRESENTS CHALLENGES
---------------------------------------------------------- Chapter 0:3
Amtrak will continue to face challenges to its financial health.
Despite efforts to improve revenues and cut costs, the railroad
continues to lose more money than it planned. This situation may get
worse. Amtrak's recent agreement with the Brotherhood of Maintenance
of Way Employees is expected to increase Amtrak's fiscal year 1998
labor costs by between $3 million to $5 million. According to
Amtrak, extending this type of settlement to all of its labor unions
could cost between $60 million and $70 million more each year than is
currently planned, from fiscal years 1999 through 2002.\6 Amtrak's
plans to reduce its financial losses by "growing" its way to
financial health--that is, increasing revenues, rather than cutting
train routes--may also encounter difficulty. These plans depend, at
least in part, on expanding mail and express services. However,
Amtrak's efforts to increase its express business have been
frustrated and it has had to reduce anticipated revenues in its
express pilot program by $47 million.\7 As a result, in January 1998
Amtrak increased its projected overall loss\8 for fiscal year 1998
from $52 million to $99 million. Another Amtrak
initiative--establishing high-speed rail service between New York
City and Boston--also will not provide immediate financial benefits.
In establishing high-speed rail transportation between these two
cities, Amtrak expects to decrease travel time from 4-1/2 hours to 3
hours and significantly increase revenue and ridership. Amtrak's
goals are for the high-speed rail program to begin providing positive
net income in fiscal year 2000.
Amtrak will also continue to find it difficult to take actions to
reduce costs, such as making route and service adjustments. During
fiscal year 1995, Amtrak was successful in reducing and eliminating
some routes and saving an estimated $54 million. In fiscal year
1997, Amtrak was less successful in taking such actions. Amtrak does
not currently plan to reduce any more routes. Instead, it plans to
fine-tune its route network. For example, in February 1998, Amtrak
added a fourth train per week between Chicago and San Antonio on the
Texas Eagle route, in part to accommodate expanded mail and express
business. Amtrak is also planning to begin daily passenger rail
service between Los Angeles and Las Vegas by January 1999.
In explaining the rationale for attempting to increase revenues
through fine-tuning Amtrak's routes rather than through cutting back
on service, Amtrak and Federal Railroad Administration (FRA)
officials pointed to Amtrak's mission of maintaining a national route
system. They noted that such a system will consist of routes with a
range of profitability, including poorer-performing routes that
provide needed linkages to better-performing routes. Furthermore,
poorer-performing routes may provide public benefits, such as serving
small cities and rural areas. These officials stressed that cutting
the routes with the worst performance could damage the national
network and cause the loss of revenue on connecting routes. Amtrak
has just begun a market analysis that could result in several
alternatives for a national intercity passenger rail network.
The decision to make route adjustments is a difficult one, even
though Amtrak's data show that only one of the railroad's 40 routes
(Metroliners between Washington, D.C., and New York City) covers all
its operating costs.\9 For the remaining 39 routes, Amtrak loses an
average of $53 for each passenger. Amtrak data show that it loses
over $100 per passenger on 14 of these routes, and only 5 routes
covered their train costs in fiscal year 1997. However, Amtrak
encounters opposition when it proposes to discontinue routes because
of the desire by a range of interests to see passenger train service
continued in potentially affected communities. In addition, Amtrak
maintains that every route that covers its variable costs (costs of
running trains) makes a contribution toward its substantial fixed
costs. Finally, simply pruning Amtrak's worst-performing routes
could exacerbate Amtrak's financial condition because eliminating one
route is likely to affect ridership on connecting routes that are
perhaps performing better.
--------------------
\6 This is net of any one-time payments or productivity increases or
efficiency gains negotiated with the unions.
\7 In addition, the Surface Transportation Board has been asked to
rule on whether a freight railroad must make its tracks and
facilities available to Amtrak for express service. An adverse
ruling could further reduce revenue opportunities. Amtrak has
reduced its anticipated net revenues from express service from about
$75 million annually to about $27 million annually after fiscal year
1998.
\8 Overall loss is the same as net loss, except the federal operating
support received and noncash items (such as depreciation) are
excluded. Amtrak refers to overall loss as its "budget result."
\9 The costs include the costs of running trains (e.g., fuel and
train crew); route costs (e.g., costs to maintain stations); and
allocated system costs (overhead).
FEDERAL FUNDING AND REFORM
LEGISLATION MAY NOT MEET
AMTRAK'S FINANCIAL NEEDS
---------------------------------------------------------- Chapter 0:4
As a result of the Taxpayer Relief Act and funds requested through
the appropriations process, record amounts of federal funds could be
available to fund Amtrak's capital improvement needs. However,
Amtrak projects that it will still be short of the funds it believes
are necessary to meet these needs. In addition, Amtrak plans to use
a substantial portion of these funds to meet maintenance needs--needs
that have traditionally been considered operating expenses. Finally,
recently enacted reform legislation will likely have little financial
impact in the short term.
AVAILABLE FUNDS MAY FALL
SHORT OF AMTRAK'S CAPITAL
INVESTMENT NEEDS AND MAY BE
USED TO PAY MAINTENANCE
EXPENSES
-------------------------------------------------------- Chapter 0:4.1
Capital investments will continue to play a critical role in
supporting Amtrak's business plans and ultimately in maintaining
Amtrak's viability. Such investment will not only help Amtrak retain
revenues by improving the quality of service but will also be
important in facilitating the revenue growth predicted in the
business plans. Although Amtrak stands to receive historic levels of
federal capital funds in the next few years, it is not likely that
sufficient funds will be available to meet Amtrak's identified
capital investment needs. Amtrak's September 1997 strategic business
plan identified about $5.5 billion in capital investment needs from
fiscal years 1998 through 2003.\10 This amount includes such items as
completing the high-speed rail program between New York and Boston
(about $1.7 billion), making infrastructure-related investments
(about $900 million), and overhauling existing equipment (about $500
million). However, federal funding from the Taxpayer Relief Act, the
fiscal year 1998 capital appropriation,\11 and the President's
proposed fiscal year 1999 budget--along with about $800 million that
Amtrak anticipates receiving from state, local, and private
financing--would provide about $5.0 billion, or about $500 million
short of the $5.5 billion that it states that it needs for capital
funding.
Amtrak plans to use a substantial amount of these federal funds for
maintenance expenses, such as preventative maintenance, rather than
for high-yield capital investments. The use of these available
federal funds for maintenance expenses could have long-term financial
impacts on Amtrak. In particular, such use would reduce the amount
of money available to Amtrak to acquire new equipment and/or acquire
those capital improvements necessary to reduce costs and/or increase
revenues.
In this regard, the President's proposed fiscal year 1999 budget
would allow Amtrak to use capital grant funds for maintenance
purposes, such as overhauling rail rolling stock and providing
preventative maintenance. The administration believes such
flexibility would allow Amtrak to manage its capital grant
appropriation more efficiently and make clearer trade-offs between
maintenance and capital investment costs. Amtrak's March 1998
revised strategic business plan indicates that it plans to use $511
million (82 percent) of the $621 million in capital grant funds
proposed in the President's fiscal year 1999 budget for maintenance
expenses. In total, Amtrak plans to use $1.8 billion (65 percent) of
$2.8 billion in capital grants under the President's budget proposal
to pay maintenance expenses from fiscal years 1999 through 2003.
In addition, Amtrak plans to temporarily use some of the Taxpayer
Relief Act funds for the allowed maintenance of the existing
equipment used in intercity passenger rail service. To help stay
within its credit limits,\12 Amtrak plans to temporarily use $100
million in Taxpayer Relief Act funds for a portion of allowed
maintenance expenses in fiscal year 1998, according to Amtrak's March
1998 revised strategic business plan. Amtrak's use of a portion of
its federal capital grant for maintenance expenses, as is currently
allowed for transit, is expected to enable it to repay this $100
million. Amtrak also plans to temporarily use $317 million and $200
million in Taxpayer Relief Act funds in 1999 and 2000, respectively,
for a portion of allowed maintenance expenses. In this way, Amtrak
expects to reduce its cash flow deficits to $100 million in each of
those years. Amtrak officials told us that the Taxpayer Relief Act
funds, including these repayments, will ultimately be used for
investments that have a high rate-of-return and that are highly
leveraged.
According to Amtrak, temporarily using a portion of Taxpayer Relief
Act funds for allowed equipment maintenance will help the corporation
avoid additional borrowing from its credit lines over the original
planned amount. Amtrak believes using Taxpayer Relief Act funds for
this purpose will help keep it below its maximum short-term credit
limit. Amtrak officials told us that using a portion of the
federally appropriated capital grant funds for maintenance will
provide stability for Amtrak over the next several years, thus
averting a possible bankruptcy. This stability will provide Amtrak
with some breathing room to (1) determine how to address the capital
shortfall and (2) complete a market analysis that would result in
several alternatives for a national intercity passenger rail network.
--------------------
\10 As of mid-March 1998, the capital portion of this business plan
had not been approved by Amtrak's board of directors.
\11 The fiscal year 1998 capital appropriation excludes $199 million,
which was not to be made available for obligation if Amtrak's reform
legislation was enacted before such capital appropriation was
distributed. The Amtrak Reform and Accountability Act was enacted in
December 1997. The $199 million would have been distributed in July
1998.
\12 As discussed earlier, Amtrak is currently projecting a cash-flow
deficit of about $200 million by the end of fiscal year 1998, or
about $100 million more than planned.
SHORT-TERM FINANCIAL EFFECTS
OF AMTRAK REFORM LEGISLATION
MAY BE LIMITED
-------------------------------------------------------- Chapter 0:4.2
The Amtrak Reform and Accountability Act was also designed to address
Amtrak's poor financial condition by making certain reforms to
Amtrak's operations to help Amtrak better control and manage its
costs. For example, the act
-- eliminates, as of May 31, 1998, existing labor protection
arrangements for employees who lose their jobs as the result of
a discontinuation of service (currently eligible employees may
be entitled to up to 6 years of compensation) and requires
Amtrak and its unions to negotiate new arrangements;
-- repeals the statutory ban on contracting out work (except food
and beverage service, which can already be contracted out) and
makes contracting out subject to negotiations by November 1999;
and
-- places a $200 million cap on the amount of liability claims
(including punitive damages) that can be paid as the result of
an Amtrak accident.
The reforms contained in this act may have little, if any, immediate
effect on Amtrak's financial performance for several reasons. First,
Amtrak officials pointed out that no route closures are currently
planned. Therefore, no new labor protection costs are expected to be
incurred. Amtrak officials also noted that the existing labor
protection arrangements for employees affected by route closures have
primarily resulted in payments of wage differentials because many
eligible employees were transferred to lower-paying jobs. According
to Amtrak, in the past 5 years, only 5 employees have received
severance pay and 11 employees are currently in arbitration over this
issue. Second, the ban on contracting out work need not be
negotiated until November 1, 1999.\13
Amtrak officials believe that while the repeal of the ban may provide
long-term flexibility, including flexibility in union negotiations
and in controlling costs, the repeal is not likely to have much
effect before November 1999. Finally, Amtrak believes the $200
million limit on liability claims may have limited financial effect
because this cap is significantly higher than amounts Amtrak has
historically paid on liability claims. Amtrak and FRA officials
believe the benefits of these reforms are unclear at this time.
These reforms may not result in measurable financial savings as much
as in additional flexibility in negotiating with labor unions and in
addressing the freight railroads' concerns over such issues as
liability payments.
The act also made other changes that have the potential for a
significant impact on Amtrak's future. First, the act replaced the
current board of directors with a "Reform Board."\14 Second, it
established an independent commission--the Amtrak Reform Council--to
evaluate Amtrak's financial performance and make recommendations for
cost containment, productivity improvements, and financial reforms.
If at any time after December 1999 the Council finds that Amtrak is
not meeting its financial goals or that Amtrak will require operating
funds after December 2002, then the Council is to submit to the
Congress, within 90 days, an action plan for a restructured national
intercity passenger rail system. In addition, under such
circumstances, Amtrak is required to develop and submit an action
plan for the complete liquidation of the railroad.
--------------------
\13 Amtrak and one or more of its trade unions may mutually agree to
collectively bargain this issue sooner.
\14 The Reform Board is to assume its responsibilities by March 31,
1998, or as soon as four members have been appointed and qualified.
As of mid-March 1998, the Reform Board had not been established.
Unrelated to the act, Amtrak's president and chief executive officer
resigned in December 1997. A successor had not been named as of
mid-March 1998.
-------------------------------------------------------- Chapter 0:4.3
Mr. Chairman, in 1995, we concluded that the Congress needed to
decide on the nation's expectations for intercity passenger rail
service and the scope of Amtrak's mission in providing that service.
These decisions require defining a national route network,
determining the extent to which the federal government would
contribute funds, and deciding on the way any remaining deficits
would be covered. In 1997, we concluded that, as currently
constituted, Amtrak will need substantial federal operating and
capital support well into the future. Whether Amtrak will be able to
improve its financial position in the near term is doubtful. If not,
the Congress will be asked to continue to provide substantial sums of
money each year to support Amtrak. If the Congress is not willing to
provide such levels of funds, then Amtrak's future could be radically
different, or Amtrak may not exist at all. We believe that this is
the right time for Amtrak's new Reform Board to work with the
Congress to consider and act on the issues that will chart Amtrak's
future.
Mr. Chairman, this concludes my testimony.\15 I would be happy to
respond to any questions that you or Members of the Subcommittee may
have.
--------------------
\15 The information contained in this testimony is based on our
review of Amtrak's financial reports and plans; recently-enacted
legislation; and discussions with Amtrak and FRA officials. We met
with Amtrak officials, including Amtrak's Vice President for
Government and Public Affairs, to obtain comments on a draft of our
statement. Amtrak said that our presentation of the issues was fair;
and they asked that we provide additional information on Amtrak's
planned use of capital grant funds and Taxpayer Relief Act funds. We
have included this information in our statement. We performed our
work in March 1998 in accordance with generally accepted government
auditing standards.
*** End of document. ***