Intercity Passenger Rail

Amtrak's financial future depends on its ability to eliminate federal operating support by 2002 by increasing revenues, controlling costs, and providing customers with high-quality service. However, GAO testified that Amtrak is still in a financial crisis despite the fact that its financial performance has improved during the past two years. At the end of fiscal year 1994, Amtrak's net loss totaled about $1.1 billion; by the end of fiscal year 1996, this loss had declined to about $764 million. Yet the relative gap between total revenues and expenses has not closed significantly, and passenger revenues have generally declined in recent years. More importantly, the gap between operating deficits and federal operating subsidies has begun to grow again. Amtrak continues to be heavily dependent on federal operating subsidies to make ends meet. GAO concludes that Amtrak will likely continue to require federal financial support--both operating and capital--well into the future.

GAO noted that: (1) Amtrak's financial condition is still very precarious and heavily dependent on federal operating and capital funds; (2) GAO previously reported that Amtrak's financial condition had deteriorated steadily since 1990 and that Amtrak was unlikely to overcome its financial problems without significant increases in passenger revenues and/or subsidies from federal, state, and local governments; (3) in response to its deteriorating financial condition, Amtrak in 1995 and 1996 developed strategic business plans designed to increase revenues and reduce cost growth; (4) 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 those of FY 1994, when the continuation of Amtrak's nationwide passenger rail service was severely threatened; (5) at the end of FY 1996, the gap between the operating deficit and federal operating subsidies was $82 million; (6) capital investment continues to play a critical role in supporting Amtrak's business plans and ultimately in maintaining Amtrak's viability; (7) 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; (8) in both 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 (at speeds of up to 150 miles per hour) between Washington and Boston; (9) Amtrak will need billions of dollars in capital investment for these and other projects; (10) it will be difficult for Amtrak to achieve operating self-sufficiency by 2002 given the environment within which it operates; (11) 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 Intercity Passenger Rail Trust fund that would be established by S. 436; (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, such as route and service adjustments, necessary to reduce costs.