By Ron Thaniel
April 28, 2003

On April 29 and 30, Amtrak President and CEO David L. Gunn will appear before the Senate Commerce, Science and Transportation Committee and the House Railroad Subcommittee, respectively, in support of his 5-year plan to bring the railroad to a state-of-good repair.

According to Amtrak, the plan is a realistic assessment of Amtrak's financial needs and a common'sense approach to restoring service reliability and prudent fiscal management.

The plan invests in capital projects to bring the company, its equipment and other physical property back to a state of good repair, improve reliability and produce a higher degree of service cost recovery. The next issue of US Mayor will recap the April 29 and 30 hearings as well as Amtrak's 5-year plan.

David Gunn testified on April 10, 2003, before the House Appropriations Subcommittee on Transportation, Treasury and Independent Agencies to outline Amtrak's $1.8 billion federal funding request for FY04 and to report on progress being made by the railroad. The $1.8 billion request is comprised of $1.04 billion for capital needs and $768 million to support operations.

Summarizing his immediate goals for Amtrak since taking over the reigns of Amtrak nearly a year ago, Gunn noted that his objectives were to maintain solvency, begin an incremental program of critical capital investment, create a lean organization with tight financial controls and build a zero-based budget.

"Overarching all of this was and is the continuing need to rebuild our credibility and so I have taken steps to end the spin and happy talk press releases. Instead, we would prefer to let our actions speak for us," said Gunn.

From 1997-2002, Amtrak received $1.1 billion annually in federal funds, which was less than what was necessary to sustain adequate capital investment and operations. Consequently, the company's leadership deferred capital investments and borrowed heavily, increasing debt from $1.3 billion to $3.9 billion during this time. Today, Amtrak cannot afford to either defer capital investments or add new debt. It must invest in a capital program that improves the reliability and quality of its service and repairs or replaces deteriorating capital assets. On the operations side, Amtrak plans no new borrowing (debt expense is $163 million for FY04) and no expansion in services unless fully funded by states for the operating loss.

Amtrak Operations and Financial Performance Improves

Six months through the current fiscal year, cash operating expenses (i.e., not including depreciation) have been $54.7 million favorable to budget, revenues were $75 million less than budget and ridership has been about 200,000 more passengers than forecast (11.4 million v. 11.2 million). Amtrak's overall cash operating budget for FY03 is $2.7 billion, of which $2.2 billion is supported by revenues and $500 million is in the form of a federal operating subsidy. The remainder of the FY03 total federal grant of $1.043 billion is for capital projects. Amtrak's federal grant now goes through the USDOT quarterly rather than directly to Amtrak.

Since becoming President of Amtrak in May 2002, David Gunn has undertaken a series of reforms to improve Amtrak's financial and operating performance. These reforms have been directed at restoring Amtrak's state of good repair, controlling its operating deficit, increasing productivity and improving maintenance to ensure safe and reliable operations. Last year, the Company was reorganized and four operating business units were abolished to streamline reporting. The number of vice presidents was reduced from 84 to 22 and a new internal budget was implemented to improve accountability.

By year-end, David Gunn unveiled plans to initiate an aggressive wreck repair program for 21 of more than 100 pieces of equipment sitting in back shops, the phase-out of Amtrak's money-losing light-freight express service and the closure of one of three reservation call centers. During the past 10 months, company head-count has been reduced by about 900. In an additional effort to bring financial stability to the railroad, Gunn has called for states to subsidize the operating loss on their existing regional train services.

While making aggressive restructuring operations and improving finances, David Gunn has maintained his commitment to the nation's mayors to maintain the national passenger rail system.

Gunn noted at the April 10 hearing "that with a consistent level of funding from FY04 to FY08, we will bring the railroad up to a state of good repair. If fully executed, our equipment will be in good condition on regular maintenance cycles, improving reliability and utilization, and the backlog of critical needs to our Amtrak infrastructure will gone."

Amtrak serves more than 500 communities in 46 states across a 22,000-mile route system.