WASHINGTON -- Despite robust passenger growth over the past five
years, Amtrak's financial condition has deteriorated and the
national passenger railroad probably cannot get through this fiscal
year without additional federal subsidies, the Department of
Transportation inspector general said Thursday, reports the
The agency's annual report on Amtrak's financial condition said the railroad cannot possibly meet the congressional requirement to become "operationally self-sufficient" by Dec. 2, other than through draconian cuts in employment and service.
"Both strategies are questionable," the report said. "Not only would Amtrak's victory be hollow in the short term, but the sacrifices made to achieve the immediate goal would compromise the physical and financial integrity of any future passenger rail company, be it Amtrak or another entity or entities."
The report comes as the Bush administration and Congress prepare for decisions on the future of the passenger train in America. Amtrak must be reauthorized this year, and numerous ideas are being discussed on a future structure for train operation, ranging from giving Amtrak more money to breaking up the company into smaller, private companies serving only major passenger corridors.
The Amtrak Reform Council, formed by Congress to study Amtrak and propose solutions, will issue a report next month that is all but certain to recommend some private-sector solution.
Any plan to abandon a national system and serve only high-population corridors is sure to meet stiff opposition from congressional leaders of both parties because their states will lose service. This includes Senate Minority Leader Trent Lott (R-Miss.), who would likely lose the New York-New Orleans Crescent that serves Meridian, Miss., home to Lott political ally Mayor John Robert Smith, who is also a member of the Amtrak board of directors.
Amtrak was formed in 1971 to take over a deteriorating national passenger system from private railroads. It was supposed to run a national passenger system and make a profit after two years, but losses have deepened.
The inspector general's report said that if Congress chooses to continue operating a national interconnected system, it must be prepared to pay the cost.
"It is not clear whether Amtrak or any other entity could ever operate a linked national system such as that in place today without operating subsidies," the inspector general said.
Even if a smaller system is designed to run without operating subsidies, significant federal capital subsidies would still be required, the report said. The exact amount would be determined by a final system plan, but, as structured, more than $1 billion a year would be needed in federal capital funds.
Meanwhile, Amtrak's system is deteriorating for lack of capital spending. The inspector general said there is a $3 billion backlog of "state of good repair" needs on the Washington-Boston Northeast Corridor. Delays on the corridor have increased 75 percent since 1998, the report said.
Much of this deterioration came because Amtrak chose to spend money for short-term projects that would help reach its operating self-sufficiency goal. But the self-sufficiency goal then also failed, the report said.
Amtrak's operating loss in 2001 was $1.1 billion, $129 million greater than in 2000 and the largest loss in Amtrak history. The formula for determining self-sufficiency is linked to cash losses, which also rose to $585 million in 2001.
Meanwhile, Amtrak ridership and revenue have grown, led by the Northeast Corridor, which had a 13.5 percent revenue growth and a 4.6 percent ridership growth in 2001. For the system as a whole, including the corridor, revenue rose 8.2 percent and ridership 4.3 percent.
However, the growth in expenses more than kept pace with revenue growth.
The report urged Congress not to take a piecemeal approach to bolstering Amtrak by passing new funding measures pending in bills introduced after the Sept. 11 hijackings.
"With little exception, we believe that these proposals are premature in that they presuppose the scope and profile of a passenger rail system that has not yet been decided," the report said.
Amtrak issued a statement agreeing that the operational self-sufficiency mandate had required financial moves that "left it impossible to reinvest in the existing system and without modernized plant, equipment and technology."
"This business model does not work," the company said. "In 2002, the Congress, the administration and the states must seize the opportunity to put passenger rail on a firmer foundation for the future."