Mar 07 2002

THE FUTURE OF AMTRAK

Statement of Senator Richard Shelby

WASHINGTON, DC -- U.S. Senator Richard C. Shelby (R-AL), Ranking Member of the Transportation Appropriations Subcommittee, today commented on the future of Amtrak:

"Each year at the subcommittee's Amtrak hearing, we should have the opportunity to explore the question of what passenger rail should be in this country. I'd like to spend a few minutes discussing what passenger rail should be for this country, before we get bogged down with the Amtrak budget request."

"Passenger rail does have a role in America. It should be a cost effective alternative for travelers to automobiles or airplanes. And support for passenger rail operations should come from passengers first, then from cities and states served, and in rare instances, the Federal Government should put in the final dollars to make the service happen.

"I think passenger rail is viable in two distinct situations:

1) Service between two major metropolitan areas not more than 250-300 miles apart such as Washington/New York; New York/Boston; Houston/Dallas; St. Louis/Chicago; and Portland/Seattle; or

2) Service that evolves from the incremental growth of commuter rail operations in major metropolitan areas such as Chicago commuter service reaching Milwaukee.

"Passenger rail in America cannot support a linked national network, and I don't believe that should be the goal. Since jet aircraft made it technologically possible to travel across the country in a matter of hours and deregulation made it affordable for the average American to fly, long-distance travel on Amtrak is no more of a meaningful option than the stagecoach was after the golden spike.

"The goal ought to be a national transportation system that includes highways, airports and rail. But the notion of a stand-alone national passenger rail system for America is outdated and inefficient. Rather, passenger rail should seek to compliment travel by aircraft or in automobiles by filling the niche that exists in the two circumstances I described earlier.

"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 in the jet age. I hope the administration will step up to this challenge soon.

"The longer it takes for the Administration to lead on this issue, the more it will cost the American taxpayer. As the Administration and the Congress struggle to write legislation reauthorizing passenger rail service, I hope we can settle on a new paradigm that would extricate Amtrak from its failed business model. Senator McCain's bill may do that – so of course Amtrak is trying to derail that effort.

"In fact, Amtrak's current management is wedded to the current dysfunctional system as a means to securing the political support for another year of federal subsidies to keep Amtrak out of bankruptcy. That tired political model 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 debt spiral.

"I believe that if Amtrak adhered to Generally Accepted Accounting Practices, they would already be in bankruptcy. On a daily basis, Congress expresses the justifiable outrage at Enron and its accountants fraudulent behavior and actions.

"Amtrak management's financial practices are no better – they have been moving their losses off the books by monetizing asset like Penn Station. They are out of assets, excuses, and ideas to turn around the business.

"After five years of doing things 'differently,' Amtrak is losing more money than ever. Amtrak's foray into the freight business has not generated the projected revenues and has delayed passenger trains. It is difficult from their books to say whether freight operations add or detract from the bottom line.

"The Acela high speed service has also failed to meet projected ridership or revenue targets. And, trip times have not improved nearly to the degree advertised. The trains only reach 'high speed' for a few miles of the entire Northeast Corridor. All other Amtrak trains are running at slower speeds because Amtrak put all the money into the new trainsets and deferred track maintenance.

"Even though Amtrak annually promises that ridership will be up substantially, the passengers never show up. In 1974, Amtrak management projected that ridership would reach 37 million by 1979 – ridership only reached 21.4 million.

"Now, 28 years after that estimate, Amtrak carries roughly the same number of riders, but the new estimate is that 4.4 million more riders will ride it in fiscal year 2002 compared to last year – anyone want to take that bet?

"Simply put, Amtrak does not provide a service that is meaningful to the vast majority of Americans. The horrible attacks on September 11 clearly demonstrated that people would rather drive or stay home than ride Amtrak's long distance trains when aircraft were grounded.

"Ridership in the aftermath of the terrorists attacks may have increased over the previous quarter, but was still less when compared to the same quarter of the previous year. And when the airplanes returned to the skies, so did the passengers.

"Amtrak's management has run this railroad into the ground. They have mortgaged everything that the corporation owned to generate cash to cover their operating deficit.

"After hitting the ground, there is no reason to pretend that Amtrak is still on any sort of glidepath.

"I must admit that I'm disappointed that the administration proposes throwing $521 million of good money after bad without proposing any changes. But the story gets worse -- Amtrak says it wants more than twice that level of subsidy. For the 31st year in a row, we see that there is no upper limit to Amtrak's appetite for taxpayer dollars.

"At least there is one thing new about the fiscal year 2003 request. This year there is no pretense that Amtrak is about to turn the corner to achieve financial self-sufficiency. This year, there is no new magical proposal to bring down the cost of the subsidy – it's as though Amtrak has resigned itself to its own incompetence since they've run out of assets to monetize. For once, Amtrak's management is candid with the Congress.

"Amtrak costs the American taxpayer roughly $100,000 dollars a minute and those costs are only going up as we discover how bad Amtrak's finances really are. As the hole that Amtrak has dug for the American taxpayer continues to grow, we must 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. But, let's not give Amtrak any more shovels to dig the hole deeper – the first thing we should all agree on is that it is time to limit the damage that Amtrak is doing to the future of passenger rail and to the American taxpayer.

"No issue that comes before this subcommittee is more troubling and persistently frustrating than Amtrak. I'm more convinced than ever that passenger rail has a meaningful and real role to play in the national transportation system – but Amtrak is not part of that future.

"Unfortunately, as long as we in Congress provide subsidies to Amtrak, we enable Amtrak to perpetuate a fraud on the American people – and we rob ourselves of the opportunity to invest in meaningful passenger rail service for this country."



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