November 18, 2005

Congress says Amtrak must reduce subsidies

By John Crawley

WASHINGTON (Reuters) - Amtrak would have to take steps to
reduce its operating subsidy under an agreement nearing final
approval in Congress that would grant the passenger railroad
$1.3 billion in aid this fiscal year.

Compromise spending legislation for transportation,
treasury and housing programs approved by the House of
Representatives and awaiting action in the Senate includes
several provisions for reforming financially troubled Amtrak.

It was unclear if the changes fine-tuned by congressional
negotiators this week would satisfy the White House, which had
threatened to veto the massive spending package and not fund
Amtrak operations unless it overhauls its business.

President George W. Bush has yet to exercise his veto

The Bush administration wants to substantially reduce
federal subsidies for Amtrak operations by requiring a bigger
role for states that use the service, discontinuing
underperforming services, and contracting routes to private

The administration has also demanded greater financial
accountability from Amtrak management.

Congress has required that Amtrak reduce its operating
subsidy, which was just over $1.2 billion in the fiscal year
that ended September 30, through savings from food and beverage
service, first-class accommodations, and commuter rail fees.

Amtrak also would be barred from marketing ticket discounts
of more than 50 percent during peak hours. While Amtrak has
registered record ridership -- 25 million people last fiscal
year -- revenues have been trimmed by fare promotions.

For the first time, Amtrak's funding includes a new
discretionary account that will be controlled by the
Transportation Department for priority capital improvements.

Amtrak is a for-profit federal corporation created by
Congress that has never made money in its 31-year history. Its
annual losses exceed $1 billion. It depends on its annual
operating subsidy to survive.

A Government Accountability Office report this month was
sharply critical of some management practices and said revenues
were declining faster than costs.

Credit markets expressed renewed concern about the
railroad's future after the company's board fired Amtrak's
president, David Gunn, on November 9. Gunn was widely credited
with putting the railroad's financial priorities in order and
had begun to refurbish its aging infrastructure between Boston
and Washington, its primary asset.

But Gunn clashed repeatedly with the Bush administration,
which he says wants to bankrupt Amtrak and then dismantle it.