Intercity Passenger Rail

The elimination of federal operating support for Amtrak depends on the railroad's ability to boost revenues, control costs, and provide customers with high-quality service. GAO testified that Amtrak's financial condition is still very perilous and heavily dependent on federal capital and operating funds. Although Amtrak has developed a plan to increase revenues and reduce cost growth, passenger revenues have been declining and the gap between deficits and federal operating subsidies has begun to grow. At the end of fiscal year 1996, the gap between the operating deficit and federal operating subsidies totaled $82 million. Capital investment is critical if Amtrak's business plans are to succeed. Amtrak will need billions of dollars to bring its equipment and facilities systemwide and its tracks in the Northeast Corridor into a state of good repair and to introduce high-speed rail service between Washington and Boston. It will be difficult for Amtrak to achieve operating self-sufficiency by 2002 because of the environment in which it operates. First, Amtrak is depending on capital investment to support its business plans--specifically, an increase in capital funding support, possibly from a dedicated funding sources like the Highway Trust Fund. GAO cautions that the current budget environment may limit the amount of money actually made available to Amtrak. Second, Amtrak is relying greatly on revenue growth and cost containment to replace federal operating support. The economic and competitive environment in which Amtrak operates may limit revenue growth, however, and Amtrak will find it hard to take those steps necessary--such as route and service adjustments--to cut costs.

GAO noted that: (1) Amtrak's financial condition is still very precarious and heavily dependent on federal operating and capital funds; (2) in response to its deteriorating financial condition, in 1995 and 1996 Amtrak developed strategic business plans designed to increase revenues and reduce cost growth; (3) however, GAO has found that, in the past 2 years, passenger revenues, adjusted for inflation, have generally declined, and in fiscal year (FY) 1996, the gap between operating deficits and federal operating subsidies began to grow again to levels exceeding that of FY 1994, when the continuation of Amtrak's nationwide passenger rail service was severely threatened; (4) at the end of FY 1996, the gap between the operating deficit and federal operating subsidies was $82 million; (5) capital investment continues to play a critical role in supporting Amtrak's business plans and ultimately in maintaining Amtrak's viability; (6) such investment will not only help Amtrak retain revenues by improving the quality of its service but will be important in facilitating the revenue growth predicted in the business plans; (7) in 1995 and 1996, GAO reported that Amtrak faced significant capital investment needs to, among other things, bring its equipment and facilities systemwide and its tracks in the Northeast Corridor into a state of good repair and to introduce high-speed rail service between Washington and Boston; (8) Amtrak will need billions of dollars in capital investment for these and other projects; (9) it will be difficult for Amtrak to achieve operating self-sufficiency by 2002 given the environment within which it operates; (10) Amtrak is relying heavily on capital investment to support its business plans, which envision a significant increase in capital funding support--possibly from a dedicated funding source, such as the Highway Trust Fund; (11) while such a source may offer the potential for steady, reliable funding, the current budget environment may limit the amount of funds actually made available to Amtrak; (12) Amtrak is also relying greatly on revenue growth and cost containment to achieve its goal of eliminating federal operating support; and (13) the economic and competitive environment within which Amtrak operates may limit revenue growth, and Amtrak will continue to find it difficult to take those actions necessary, such as route and service adjustments, to reduce costs.