WASHINGTON -- Despite robust passenger growth over the past five
years, Amtrak's financial condition has deteriorated and the
national passenger railroad probably cannot get through this fiscal
year without additional federal subsidies, the Department of
Transportation inspector general said Thursday, reports the
Washington Post.
The agency's annual report on Amtrak's
financial condition said the railroad cannot possibly meet the
congressional requirement to become "operationally self-sufficient"
by Dec. 2, other than through draconian cuts in employment and
service.
"Both strategies are questionable," the report said.
"Not only would Amtrak's victory be hollow in the short term, but
the sacrifices made to achieve the immediate goal would compromise
the physical and financial integrity of any future passenger rail
company, be it Amtrak or another entity or entities."
The
report comes as the Bush administration and Congress prepare for
decisions on the future of the passenger train in America. Amtrak
must be reauthorized this year, and numerous ideas are being
discussed on a future structure for train operation, ranging from
giving Amtrak more money to breaking up the company into smaller,
private companies serving only major passenger corridors.
The
Amtrak Reform Council, formed by Congress to study Amtrak and
propose solutions, will issue a report next month that is all but
certain to recommend some private-sector solution.
Any plan
to abandon a national system and serve only high-population
corridors is sure to meet stiff opposition from congressional
leaders of both parties because their states will lose service. This
includes Senate Minority Leader Trent Lott (R-Miss.), who would
likely lose the New York-New Orleans Crescent that serves Meridian,
Miss., home to Lott political ally Mayor John Robert Smith, who is
also a member of the Amtrak board of directors.
Amtrak was
formed in 1971 to take over a deteriorating national passenger
system from private railroads. It was supposed to run a national
passenger system and make a profit after two years, but losses have
deepened.
The inspector general's report said that if
Congress chooses to continue operating a national interconnected
system, it must be prepared to pay the cost.
"It is not clear
whether Amtrak or any other entity could ever operate a linked
national system such as that in place today without operating
subsidies," the inspector general said.
Even if a smaller
system is designed to run without operating subsidies, significant
federal capital subsidies would still be required, the report said.
The exact amount would be determined by a final system plan, but, as
structured, more than $1 billion a year would be needed in federal
capital funds.
Meanwhile, Amtrak's system is deteriorating
for lack of capital spending. The inspector general said there is a
$3 billion backlog of "state of good repair" needs on the
Washington-Boston Northeast Corridor. Delays on the corridor have
increased 75 percent since 1998, the report said.
Much of
this deterioration came because Amtrak chose to spend money for
short-term projects that would help reach its operating
self-sufficiency goal. But the self-sufficiency goal then also
failed, the report said.
Amtrak's operating loss in 2001 was
$1.1 billion, $129 million greater than in 2000 and the largest loss
in Amtrak history. The formula for determining self-sufficiency is
linked to cash losses, which also rose to $585 million in
2001.
Meanwhile, Amtrak ridership and revenue have grown, led
by the Northeast Corridor, which had a 13.5 percent revenue growth
and a 4.6 percent ridership growth in 2001. For the system as a
whole, including the corridor, revenue rose 8.2 percent and
ridership 4.3 percent.
However, the growth in expenses more
than kept pace with revenue growth.
The report urged Congress
not to take a piecemeal approach to bolstering Amtrak by passing new
funding measures pending in bills introduced after the Sept. 11
hijackings.
"With little exception, we believe that these
proposals are premature in that they presuppose the scope and
profile of a passenger rail system that has not yet been decided,"
the report said.
Amtrak issued a statement agreeing that the
operational self-sufficiency mandate had required financial moves
that "left it impossible to reinvest in the existing system and
without modernized plant, equipment and technology."
"This
business model does not work," the company said. "In 2002, the
Congress, the administration and the states must seize the
opportunity to put passenger rail on a firmer foundation for the
future."