Jun 28 2001

STATEMENT OF SENATOR RICHARD C. SHELBY

SubCommittee on Transportation Appropriations
Status of Intercity Transportation: Airways and Railways

 U.S. Senator Richard C. Shelby (R-AL), Ranking Member of the Senator Transportation Appropriations Subcommittee, today commented on the status of intercity transportation:

"Because of the limited time we have this morning, I will submit most of my FAA questions for the record. I know that disappoints you madame administrator. I do, however, have several questions on Amtrak's short- and long-term financial health and future status that I hope we have time to get to this morning.

"First, Madame Administrator, I want to commend you for staying on at the FAA through the change of administrations. I know that, while the job certainly has its rewards, it certainly has its challenges. I look forward to working with you for the remainder of your first term as Administrator, and through the completion of your second five year sentence.

"Many places in government require substantial time in place by new leadership before real change can be implemented. You are at that point now and I would hope that you would stay on to carry out some of your initiatives, including Free Flight, Safe Flight, and capacity benchmarks. I promise that I will even resist blaming you personally for the cost and inefficiencies of the controller agreement.

"But, this morning, I want to focus primarily on Amtrak.

"I think that we've all heard the promises made each year that Amtrak is just about to turn the corner to become a self-sustaining operation.

"Let me quote from Mr. Warrington's testimony during consideration of the fiscal year 2000 bill. He stated, `I want to assure you that Amtrak is turning the corner to become a commercially oriented, customer focused and financially sound business enterprise.'

"And a year later, Mr. Warrington testified, `Today, I am happy to report that these positive trends are continuing . . . . And I believe that our results, our commercial initiatives, our network growth and our high-speed rail plans, demonstrate clearly that [our goal to not merely survive] is more than a promise.'

"We've also all heard the annual excuses that Amtrak management makes after it fails to improve its financial performance.

"I suspect that this morning we will hear why Amtrak is again in dire financial straits, and I'm confident that it will be someone else's fault. It will be Bombardier's fault for the year delay in delivering the Acela trainsets; it will be Congress' fault for not providing adequate subsidy; or perhaps it will be the American traveler's fault for not riding the trains.

"I am also confident that Amtrak's testimony here this morning will not place the blame where it belongs and where it has belonged for the past 25 years. And that is that the business model does not make sense. No amount of Federal money or inspired leadership can change that reality. In preparation for this hearing, I asked my staff to review a decade's worth of Amtrak testimony to the Subcommittee. Over that time _ every year _ ridership is up, revenues are up, and opportunities abound.

"Yet, the testimony never seems to mention the operating losses, which are growing faster than any other measure of the railroad. After all the investment, new business plans, new managements, billions in operating and capital subsidies, Amtrak is in worse shape than ever. We're being told a story in Amtrak's testimony, and it's not a good story.

"You don't invest in stories; you invest in income streams. Amtrak has plenty of stories; what they don't have is an income stream.

"I'm informed that the cash loss in fiscal year 2000 was $561 million, and I'm informed that in fiscal year 2001, Amtrak is burning cash at a rate that will amount to a loss of $930 million this fiscal year. Clearly, Amtrak is engaging in short-term borrowing to cover operational and debt service costs and that Amtrak's cash shortfall is growing to unsustainable levels.

"In the past, Amtrak has postponed the inevitable by monetizing assets to meet the annual cash shortfall. The actions of the past month to monetize the ownership interest in Penn Station represents the last resort of Amtrak to squeeze cash out of its capital assets.

"Folks, we are at the end of the line. Amtrak has no more assets to monetize, it's reached its credit limit, federal subsidies cannot keep pace with the operating losses, and Amtrak cannot constrain its operations to those routes with the potential to cover cost because of the political commitments made to garner congressional support .

"In short, nothing has changed over the past thirty years. Amtrak was a bad idea thirty years ago, and it is a bad idea today. In most parts of the country, Amtrak is not an alternative to air or automobile travel.

"The claim that passenger rail is a critical component in relieving intercity or intracity congestion is ludicrious, except for the Northeast Corridor and perhaps in two or three other highly congested transportation corridors elsewhere in the country.

"Keep in mind that Amtrak carries roughly 21 million passengers a year. By comparison, the New York MTA carries over 7 million passengers a day on its subways alone. Transit services (including commuter rail), in highly congested urban areas, can help relieve congestion, but Amtrak's services are irrelevant to the congestion faced by the majority of Americans on a daily basis and will remain irrelevant no matter what we do with Amtrak.

"Clearly, something has to be done to rationalize the business. Unfortunately, accepting the hard cold business realities of Amtrak runs headlong into maintaining the political model that Amtrak has put forward. However, the comments that President Warrington made a couple of weeks ago to the National Press club lead me to believe that even he, Amtrak's most vocal cheerleader, is coming around to accept the failures of the Amtrak business model. He said: "You cannot meet a mandate to run a national network and operate in a true, profitable, commercial sense." This is a far cry from the platitudes of his testimony over the past couple of years, but better late than never.

"For fiscal year 2002, Amtrak is requesting $521 million, and wants Congress to authorize the railroad to immediately use all of these funds as opposed to using 40 percent in fiscal year 2002 with the balance available for fiscal year 2003. My sense is that this is at best a short-term solution and that with this flexibility, Amtrak will squeak through to the Spring of 2002, when Amtrak will again be out of money.

"I am under no illusions that the votes exist in either the House or the Senate to eliminate Amtrak subsidies ... today. But as the hole that Amtrak has dug for the American taxpayer continues to grow, we will have to make choices. Those choices are not getting any easier, or any less expensive. Now is the time to change the way we view Amtrak and the role that passenger rail can and should play in this country.

"That doesn't mean that rail passenger service does not have a future in this country. What it does mean, though, is that the model for rail passenger service proposed by Amtrak is doomed to fail, as it has been over the tortured life of the corporation. The political model for Amtrak subsidies has been to promise a majority of the members of Congress that they will get something for their states or districts if they continue to support the bail out. But without a complementary change in the business model, we will never get out of the current dilemma of annually paying to keep Amtrak out of bankruptcy.

"For all these reasons, I believe it is time for the Administration to provide the leadership to restructure the business and focus on supporting a rail passenger service model that makes sense for the long term. I hope the administration will step up to this challenge soon. The longer it takes for an Administration to lead on this issue, the more it will cost and the more it is costing the American taxpayer."