(Reuters circulated the following article on November 21.)
WASHINGTON — Amtrak is in another financial hole after posting a $1.3 billion operating loss last fiscal year and again receiving far less than it requested in federal subsidies, an influential transportation watchdog said on Sunday.
The Transportation Department’s inspector general, Kenneth Mead, said in a report to Congress that the nation’s only city-to-city passenger railroad faces a gigantic cash crunch as well as a mounting backlog of infrastructure projects, like bridge repairs, that can wait no longer.
“Continued deferral brings Amtrak closer to a major point of failure on the system but no one knows where or when such a failure will occur,” Mead warned.
He recommended Congress, which has approved $1.2 billion in fiscal 2005 subsidies for Amtrak, step in immediately to provide “clear direction” for long-term passenger rail priorities. This, Mead said, could include wholesale service cuts and other painful measures that have been avoided in recent years.
Mead’s conclusions carry weight on Capitol Hill. A similar analysis by his office in 2002 blew the whistle on Amtrak’s sagging finances after the railroad had been assuring lawmakers over several years it was making progress on weaning itself from subsidies.
Beleaguered Amtrak almost shut down later that year after three decades of service. It was rescued by additional government help and a reluctant Bush administration, which wants to dismantle the railroad and give states who want service a greater stake in rail operations.
Amtrak generates revenue from three primary sources – ticket sales, minimal contributions from states and a huge annual federal subsidy. But other conditions hinder its ability to boost revenue or cut big expenses.
Ridership continues to set records (more than 25 million in fiscal 2004), but Amtrak is hobbled by expensive and aging equipment and other components of its infrastructure that limit its ability to expand service on popular routes or start new ones. To draw and keep customers, the railroad also has to hold down fares, which further erodes its bottom line.
Amtrak is also caught in a political vortex in Washington that essentially prevents it from cutting some routes outside its flagship Northeast service. While many lawmakers with sway over transportation matters deride the cost of subsidizing passenger rail, they covet the service and jobs Amtrak and its commuter affiliates provide to their states.
Amtrak’s red ink for fiscal 2004 — a $1.3 billion operating loss and a $635 million cash loss — were comparable to last year. Its cash losses have exceed $630 million in each of the last three years.
David Gunn, Amtrak’s president the past two years, has been aggressively cutting costs and squeezing enough money out of the system and Congress for some capital improvements. A veteran railroad chief executive, Gunn has shrewdly managed Amtrak politically and has been praised for his honesty.
But Gunn’s hardball tactics of threatening shutdowns and service disruptions if subsidies are not adequate has not gotten him all the money he says he needs to turn things around. This year’s subsidy request fell $600 million short of Gunn’s target.
Mead concludes that congressional fighting over Amtrak funding, which has grown more intensive in recent years, and short-term planning that is not supported financially will only drive Amtrak into the ground.
Clifford Black, an Amtrak spokesman, said the railroad would “muddle through” with its smaller-than-requested subsidy and reorder its priorities. “We’re going to take a new look at our plans for 2005,” he said.