(Reuters circulated the following article by John Crawley on May 12.)
WASHINGTON — Amtrak’s financial condition, worsened by disruption of high-speed Acela service, is being further eroded by uncertainty over federal subsidies needed to survive, the railroad’s president said on Thursday.
David Gunn told a Senate hearing bankruptcy is possible within months unless the Bush administration and Congress resolve differences soon over national rail service and deliver enough money to continue operations.
“We’re facing a cash crunch at the end of September. To me that’s imminent,” Gunn said in an interview about the potential for bankruptcy at the nation’s only multi-city passenger rail network.
Preparing for potential bankruptcy would begin sooner.
“Amtrak is quite literally coming to the end of its rope,” said Kenneth Mead, the Transportation Department inspector general, told the appropriations subcommittee on transportation.
Amtrak could lose up to $1 million per week without its premium Acela service, which has been idled for nearly a month because of brake disc cracks. The railroad estimates it will have only $32 million in cash as of Sept. 30, the end of the fiscal year. That figure is enough money to operate for weeks, officials said. Amtrak had 25 million riders last year.
Gunn said operating problems and uncertainty about subsidies are having financial consequences. Insurance is more expensive, Amtrak’s credit rating was downgraded, and several suppliers may require it to put cash in escrow to ensure payment. Gunn would not identify the suppliers, but said they were large businesses.
The railroad has requested $1.8 billion in subsidies for the 2006 fiscal year, mainly to accelerate its capital improvement program, but the appropriations subcommittee effectively ruled that out.
“I don’t know how this subcommittee will be able to provide such a significant increase,” said Sen. Christopher Bond, a Missouri Republican and the panel’s chairman.
The budget proposed by the Bush administration and spending plans approved by Congress call for fiscal restraint in an era of record budget deficits.
The administration has proposed no subsidy for Amtrak next year unless the railroad begins restructuring to reduce the need for federal help, and would not tell Congress on Thursday what it would support if those changes move forward. The Transportation Department has proposed $360 million to keep Amtrak-related commuter services running if it goes bankrupt.
Bleeding red ink, Amtrak received more than $1.2 billion in subsidies each of the past two years. But that would not be sufficient for next year with demands growing to fix tracks, bridges and tunnels, Gunn said.
Mead told the appropriations panel Amtrak would need at least $1.4 billion, plus hundreds of millions more in state contributions.