WASHINGTON — A wire service reports that Amtrak spent $11 million to have an outside consultant review the way the railroad does business, then shelved the report after it recommended major changes, Sen. John McCain said Wednesday.
McCain, R-Ariz., said McKinsey & Co. recommended that Amtrak operate more like a private company, focusing on profitable service in highly populated corridors and keeping money-losing long-distance routes only under contract with the states that want them.
“That report never saw the light of day, probably because the consultant recommended that Amtrak become a private company and prepare for competition,” said McCain, an Amtrak critic and a proponent of franchising train routes to other operators.
He made his comments at a hearing of the Senate Commerce subcommittee on surface transportation.
Amtrak President David Gunn, a witness at the hearing, said he had not yet seen McKinsey’s final set of conclusions.
“They may have recommended what you just said. That I don’t know,” Gunn said, promising to get the report and, if allowed under confidentiality agreements, to share it with Congress.
Gunn has made no secret of his disdain for outside consultants. When he took charge of Amtrak May 15, one of his first moves was to terminate McKinsey’s work.
He said that decision had nothing to do with McKinsey’s opinions on Amtrak’s future. “I don’t believe in consultants running around and doing my job,” he said.
Gunn’s predecessor, George Warrington, hired McKinsey last summer to advise top management on how to restructure or redesign the passenger train corporation.
Amtrak spokesman Bill Schulz said McKinsey compiled research on Amtrak and rail service generally, as well as possible cost reductions, but never issued a definitive set of proposals for Amtrak’s governing board to consider.
The Bush administration and the federally appointed Amtrak Reform Council have suggested ending Amtrak’s role as the nation’s sole operator of intercity passenger trains.
Amtrak already is a private company but enjoys special privileges that, in practice, give it a monopoly over intercity train service.
By law, Amtrak has a right to operate on tracks owned by freight railroads, with priority over freight trains, so long as it pays fees that cover its usage. Amtrak also has received more than $25 billion in capital and operating subsidies from the federal government since its creation in 1971.
With Amtrak struggling through the most severe budget crisis of its 31-year history, the Bush administration hopes to force major reforms in exchange for needed cash.
The administration agreed on June 28 to loan Amtrak $100 million to avert a shutdown that could have started the following week when Amtrak began running out of cash.
Amtrak still needs another $105 million to survive until October, when a new fiscal year begins and the government provides its annual infusion of cash. It is asking Congress for that money.
Gunn told McCain he expects Amtrak to report an operating loss of about $1 billion this year, about the same as last year.
In exchange for the $100 million loan from the Department of Transportation, Amtrak had to agree to a dozen conditions regarding its finances. One requires Amtrak to spend all its money over the next 15 months on existing assets and services, not to plan for an expansion of its service.
Gunn said Wednesday that the provision could affect work on four projects: restoration of service to Florida’s east coast; completion of a maintenance facility in Oakland, Calif.; introduction of high-speed “turboliner” service in New York; and creation of a new route between Los Angeles and Las Vegas.
Amtrak is reviewing those projects to see if it is under contract to finish them. If so, the work will continue.