Amtrak recommended a $1.8 billion federal operating and capital investment grant for FY04 in order to continue…
Amtrak recommended a $1.8 billion federal operating and capital investment grant for FY04 in order to continue its efforts to bring stability to the passenger rail service, provide its customers with safe, secure and reliable service and reverse the recent deterioration of its physical plant and equipment. The proposal includes $1.04 billion for capital needs and $768 million to support operations.
In the seven years from 1997 to 2003, combined federal capital and operating support for Amtrak averaged $1.1 billion. However, this level of funding was insufficient to support Amtrak`s true capital and operating needs. Consequently, the company`s previous management increased Amtrak`s debt by more than $2.5 billion and slowed or halted important capital projects and deferred maintenance during this period to keep trains running and avoid insolvency.
This deferred capital investment resulted in the deterioration of equipment and infrastructure, and the increased borrowing resulted in debt servicing that has ballooned to more than $250 million annually.
Amtrak`s past practice of borrowing money and deferring capital investment to make payroll cannot be sustained, said Amtrak President David Gunn. We must address the deteriorated assets and, over the next several years, return our equipment and infrastructure to a state of good repair if operation is to continue.
The increase in funding needs next year versus FY03 is based on both capital and operating requirements. The capital program consists of specific projects designed to ensure that Amtrak`s systemwide trains and the Amtrak-owned Northeast Corridor are returned to a good condition. Among the proposed major capital initiatives for FY04 are the repair of 20 damaged coaches and 10 locomotives, reconstruction of five major interlockings, initial reconstruction of three important bridges, the installation of 120,000 new ties and investments in several maintenance facilities.
The increased operating deficit is driven not by expenses, which are down, but in large part by a weakness in revenue growth. The operating budget assumes no new growth in train services, unless a contracting state agrees to cover 100% of the operating loss associated with any new service. (Currently, 13 states pay Amtrak $136 million in annual operating support.)
Since this past summer, the workforce has been reduced by more than 600 employees, the phase-out of an unprofitable express business has begun and the closure of a reservation center, saving $3 million annually, has been announced. However, Amtrak has no plans to propose route cuts.
Long-term funding and reauthorization needed
This spring, Amtrak will release a detailed five-year capital plan outlining its long-term initiative to bring the railroad to a state of good repair. Combined with its projected need for operating support during these five years, the current passenger rail system will require federal funding of approximately $2 billion annually from FY04 to FY08, according to preliminary estimates. This plan will help federal policymakers lay the groundwork for the future of passenger rail through Amtrak`s reauthorization this year.
Amtrak`s federal authorization expired on September 30, 2002. Amtrak renewed its call for congressional leaders, the Administration and the company`s state partners to work together to agree upon adequate funding levels and mechanisms that will support safe, secure and reliable passenger rail service.
No passenger rail service in the world is profitable on an operating and capital basis, and Amtrak is not the exception, said Gunn. What we can do, however, is reestablish stability and run the system more efficiently. But federal leadership is necessary to address the future of passenger rail service in this country.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
