By Ron Thaniel
July 15, 2002

Amtrak's immediate financial crisis threatened to shutdown the nation's passenger and commuter rail network stranding over 750,000 Americans who rely on this service every day. This would essentially cripple the nation's transportation infrastructure and economy. This has been averted at least until mid August. However, the nation's mayors are left with the question of whether Congress will come to the aid of America's national passenger rail system with meaningful and sustained appropriations for FY03 and beyond. To avoid a repeat of a potential shutdown in August, Congress will need to appropriate $205 million that Amtrak needs for the rest of the current fiscal year removing the need to repay any loans from next year's appropriation.

Conference of Mayors President Boston Mayor Thomas M. Menino said that mayors are relieved that an agreement has been reached to ensure continued operation of Amtrak. Without an agreement, the nation's transportation system would have been overwhelmed by the more than 60,000 daily Amtrak riders and hundreds of thousands of daily commuters on state-operated lines using Amtrak tracks," Menino said.

Menino added, "the events demonstrated how vital Amtrak is to our transportation system and our economy." "There is clearly solid and broad national support for Amtrak. Mayors from both political parties believe an effective, multi-faceted transportation system that includes a strong national passenger rail system is essential for our nation's economic success," Menino said.

Meridian Mayor John Robert Smith, Chairman of the Amtrak Board said, "The crisis raised public awareness of Amtrak and forever dispelled the question of Amtrak's relevance to the nation's infrastructure."

On June 28, Amtrak was able to finalize the details of their agreement with the Administration, which allowed Amtrak to get a $100 million direct loan. As part of the agreement, the Administration pledged their support in going forward to secure the remaining amount of the funding needed to get Amtrak through FY02.

Yesterday, July 10, before the Senate Commerce Subcommittee on Surface Transportation, Amtrak's President and CEO David Gunn complimented U.S. Department of Transportation Secretary Michael Jackson and Federal Railroad Administrator Allan Rutter on their good faith negotiations with Amtrak bringing amount the $100 million direct loan.

In recapping the situation, Gunn said, "This $100 million dollar loan is enough to keep the trains running until early August. The best solution at this time would be to receive the $205 million in the form of a supplemental appropriation, which would reduce the amount of debt that we are incurring. We will pay back the loan once our FY03 funding levels are set."

"In any event, I want to reinforce that the $100 million that we received will not be enough to get us through the rest of this fiscal year. Unless additional funds are identified, we will be forced to suspend service in early August," said Gunn.

In the past, Amtrak has resolved short-term financial crises by borrowing money from private markets. Without adequate capital funding, Amtrak has also had to finance a significant share of its capital needs through long-term financing. Currently, the company has nearly $3.8 billion in debt, which results in approximately $250 million in debt servicing per year.

If Amtrak were required to borrow all the money as opposed to an emergency supplemental, it would have to pay it back out of its FY03 appropriations, continuing this cycle of funding crises sometime next year.

Amtrak's President Commends Nation's Mayors For Their Leadership

On July 3, Gunn, in a letter to Conference of Mayors President Boston Mayor Thomas M. Menino said "I know that many mayors contacted their Congressional Representative in Washington and I want to thank you for your leadership in enabling this support."

Promising to oppose any breakup of the national system, Gunn said "I also wanted you to know that I remain firmly committed to operating a national system and that I will oppose any and all efforts to break up the system."

"I look forward to building upon Amtrak's bridge with the nation's mayors and I pledge to keep working with the U.S. Conference of Mayors as we get through the rest of this fiscal year," said Gunn.

Greater Uncertainty Lies Ahead With The FY03 Budget

While the immediate financial crisis has been resolved, the Administration rejects federal spending for Amtrak beyond the $521 million proposed in the President's FY03 budget even though Department of Transportation Inspector General Kenneth M. Mead has said that $521 million would allow Amtrak to do little more than shutdown.

According to Amtrak, a federal appropriation of $1.2 billion is the minimum necessary to maintain the current system in FY03. At levels below $1.2 billion, Amtrak passengers and millions of commuters will again face the prospect of significant service disruptions. This level of funding does not address the growing backlog of investment and maintenance needs nor does it address new investments such as corridor development.

During the Senate Commerce Subcommittee on Surface Transportation hearing on Wednesday, July 10, Gunn said "It is my hope that Congress, the Administration and Amtrak will grapple with and hopefully come to closure on some of the larger fundamental issues that we need to resolve about the level of rail passenger service and how to pay for it. Unless or until that occurs, we will always be living on the edge. Therefore, I reiterate the importance of our budget request of $1.2 billion for next year and to begin the work to resolve these larger fundamental questions."

Congressional Action

The relevant committees in the House and Senate have begun to address these long-term issues in H.R. 4545, offered by Representative Jack Quinn (NY) and S. 1991, offered by Senator Ernest F, Hollings (SC).

H.R. 4545, Amtrak Reauthorization Act of 2002, authorizes $1.975 billion in appropriations for Amtrak for FY03 for: (1) capital expenditures; (2) operating expenses; (3) payment to the Treasury in an amount equal to the tax Amtrak must pay as an employer under the Railroad Retirement Tax Act that is more than the amount needed for anticipated benefits for Amtrak retirees and for their beneficiaries; and (4) certain rail security projects.

Requires Amtrak to transmit to the Secretary of Transportation a comprehensive business plan, including targets for ridership, revenues, and capital and operating expenses, and quarterly assessments of the extent to which the business plan goals have been achieved.

S. 1991, National Defense Rail Act, authorizes appropriations of $4.6 billion a year for five years for Amtrak plus $1.4 billion in one-time security assistance. Requires studies or assessments of: (1) foreign rail transport security programs; (2) the feasibility of passenger, baggage, and cargo screening; (3) existing rail safety regulations; (4) security priorities; and (5) rail crossing delay security issues.

Directs the Secretary of Transportation to: (1) establish a national high'speed ground transportation policy; and (2) provide 100 percent financial assistance to develop and implement high'speed rail corridors according to designated priorities, including the elimination of hazards of railway-highway crossings.

Requires such projects to comply with specified labor standards, including the prevailing wage requirements of the Davis-Bacon Act.

Defines the national rail passenger transportation system. Authorizes Amtrak to operate an intercity rail service or route not included in such system, as specified. Authorizes additional appropriations for Amtrak for principal and interest, and environmental and Americans With Disabilities Act compliance. Repeals the requirement that Amtrak be self'sufficient. Authorizes appropriations for the Northeast Corridor, long and short distance trains, and State'supported routes.

Directs the Secretary to re-establish the Northeast Corridor Safety Committee. Revises requirements concerning the Amtrak board of directors. Requires an independent audit of Amtrak operations.

Revises requirements of the Railroad Revitalization and Regulatory Reform Act of 1976 concerning loans and loan guarantees.

Directs the Secretary to establish a rail passenger cooperative research program, including an advisory board.

The Bush Administration's Long-term Policy On Intercity Passenger Rail

Further creating uncertainty about the future of Amtrak and passenger rail is that the Bush Administration recently unveiled a long-term restructuring plan that involves splitting it up and having states or companies bid on taking over some of its operations. The restructuring plan includes:

Responding to the uncertainty with FY03 and the President's plan, Gunn said "I cannot imagine a country such as ours without a national passenger railroad system." He also said "No passenger system in the world operates without some form of government investment. We should not fool ourselves into thinking that Amtrak is somehow different than every other system around the world. That means that Amtrak will never (a) be profitable, and (b) will always need, just like every other mode of transportation, some form of public investment, or subsidy."

Summarizing his overarching goals for Amtrak over the next 15 months during the uncertain future, Gunn said, "I will go back to basics."

1 We will establish a very straightforward _ transparent zero based budget process, to set goals and control expenses.

2 We will streamline the corporate structure. It will be leaner and it will look like a railroad, thus eliminating overhead and establishing clear lines of authority and responsibility.

3 We intend to repair and overhaul as much equipment as we can to support our national system.

4 We will make critically needed capital investment to our infrastructure.

5 We will build a strong management team and I will not rely on outside consultants.

6 Everything we do will be to improve, strengthen or bring efficiencies to what we operate today. I will not take on any new growth or activities that do not serve this end or which increases our deficit.

Gunn noted that opportunities for cost reductions are a more realistic goal than self'sufficiency, stating, "I will look at every route and service we operate to improve efficiencies and cost recovery. I believe that is a much more achievable and realistic goal than the goal of pursuing self'sufficiency.

Immediately after the Administration released the restructuring proposal, Conference President Boston Mayor Menino sent a letter to President Bush defining the approved Amtrak resolution adopted in Madison recognizing Amtrak as the nation's passenger rail operator and opposing privatizing passenger rail. Mayors in Great Britain, where the passenger rail system was privatized until a reversal recently, have told the Conference of Mayors bluntly that the move was a disaster.

"Mayors are on the front lines of America's growing transportation crisis and we recognize the immediate importance of a national passenger rail system. As the nation has seen in the last nine months, a national passenger rail system in more urgent now than ever before," said Mayor Menino.