» April 14, 2006—House Appropriations written record, fiscal 2007 passenger rail funding

Statement of

Ross B. Capon, Executive Director

National Association of Railroad Passengers

Submitted to the

Subcommittee on Transportation, Treasury, and Housing and Urban
Development, The Judiciary, District of Columbia and Independent Agencies

The Honorable Joseph Knollenberg, Chairman

Committee on Appropriations, U.S. House of Representatives

Fiscal 2007 Amtrak Funding
April 14, 2006

The National Association of Railroad Passengers strongly supports Amtrak’s FY 2007 Grant Request of $1.598 billion as well as the additional $275 million in “strategic investment initiatives” Amtrak outlined. Importantly, $100 million of the latter actually would go to the Secretary of Transportation, as administrator of a matching-funds program for states. This is the second straight year that a board 100% appointed by President Bush has supported a strong federal investment in Amtrak and passenger rail. I. Why Trains are a Good Investment Citizens want them! Harris Interactive, Inc. provides the latest significant poll indicating that Americans want more rail service, and believe that this should be mainly a responsibility of the Federal government. Harris Interactive, Inc, asked, “In the future, as more people travel, which two of the following would you like to see have an increasing share of all passenger transportation?” Americans overwhelmingly chose commuter and long range trains (44% and 35%, respectively) compared to long distance travel by car (10%) and bus (6%). When Harris asked “… which of the following would you like to see have an increasing share of all goods and commodities movements in the United States?” the response was even more striking: Fully 63% of respondents favored freight railroads, more than air freight (35%) and trucks (24%) combined. The survey then asked: “Who do you think should be mainly responsible for maintaining and improving the transportation system in the nation as a whole?” More than two-thirds (68%) of adults said the federal government. (Full poll: ) The Traveling Public Votes “Yes”: Amtrak ridership has risen in eight of the last nine years, with FY 2005 ridership 29% above that for Fiscal 1996. Long-distance trains continue to show strength. In Fiscal 2005, the long-distance trains carried an average 356 passengers per run, and the number on board at any one time (passenger-miles-per-train-mile) was 171. I will not repeat the list of “justifications” for passenger rail I recited a year ago. However, when energy price increases are “above-the-fold” news as they are now, normal public support for passenger rail becomes even stronger, as does the public policy case for providing that service. In his State of the Union Address, President Bush said, “America is addicted to oil, which is often imported from unstable parts of the world.” He was correct. Strengthening and expanding passenger rail will help reduce the vulnerability of our citizens and our economy to high energy prices. In particular, we urge that all Amtrak routes be continued—and the New Orleans-Orlando segment restored—while Amtrak improves its cost-effectiveness in various ways, many of which are discussed below. II. Amtrak Efficiency Concerns We share the concern of the subcommittee—and every responsible, interested party—that Amtrak use its revenues (both commercial and taxpayers) efficiently. Mechanical: Some of the biggest opportunities to improve Amtrak’s bottom line while maintaining and even expanding service involve updating Amtrak’s maintenance practices. The much-quoted GAO report on Amtrak management cites an important report by the Amtrak Inspector General. A key passage from the IG’s report reads: “Both of our consultants independently commented that Amtrak’s maintenance operations are being performed similar to the way the other major railroads in North America did maintenance over 20 years ago. The other Class I railroads have since moved on to more sophisticated approaches to maintenance to improve reliability and reduce costs.” Thus, Amtrak is updating and improving its practices, with an expectation that its Mechanical Department can boost output and quality while reducing costs. Dining cars: Amtrak is well underway with projects that will significantly reduce the net cost of on-board food and beverage services. On long-distance trains, Amtrak is revising dining car processes and reducing on-board staff; reductions began before Christmas and are scheduled to be complete before the end of May. Reducing food losses is a reasonable goal; eliminating them is not. Carriers worldwide consider on-board food and beverage service not as a profit center but as a necessary expense to attract and retain business. In a November 2005 speech, Jonathan Metcalf, Chief Operating Officer of Britain’s Great Northeastern Railway, said that food service on his trains “probably loses £2-£3 million (British Pounds) a year, if we didn’t do food, we’d lose passengers…it’s a key reason why they travel with us…we probably would have lost £20-£30 million in ticket revenue (without food service).” Mail: The Association repeatedly testified in support of David Gunn’s work to improve Amtrak. We believe Amtrak is much better off for his having served there. Nonetheless, we have urged Amtrak to look seriously at undoing one ill-advised step that he took—complete elimination of mail carriage even though every study of which we are aware indicated this was profitable for Amtrak. Amtrak invested in the mail business and still owns the infrastructure and a sizable number of cars with good life expectancy. I have written to Amtrak urging a careful review of opportunities to restart mail carriage where this would be incrementally profitable. Fares and Technology: Amtrak is not buying market-share with low prices. Amtrak ridership increases have come in spite of fare increases and airline fare reductions. Amtrak’s yield (average fare per passenger-mile) has increased every year since at least FY 1994 with the sole exception of FY 2003. (A passenger-mile is one passenger traveling one mile.) FY 2004 yield was 62% above that in FY 1994. Amtrak does offer good deals on-line where this makes business sense—i.e., handling “distressed inventory” (that is, seats that otherwise would go empty and where eliminating their operation is impractical or would not achieve savings). This is also important for cultivating tomorrow’s revenues; some of the people who have time to search the internet for elusive good deals are young people who may become tomorrow’s “full fare,” loyal customers. Indeed, if Amtrak was not doing this sort of thing, its fare-setting practices would be criticized by others as being just as out-of-date as its mechanical practices cited above. Creative use of the internet is not new at Amtrak. It offered full booking capability on-line starting in February, 1997, at about the same time as Continental Airlines and well before the other major airlines. Another indication of Amtrak’s on-line sophistication is the interactive route map Amtrak will offer starting next week. The DOT Inspector General criticized GAO’s report for its glass half empty approach, that is, for not giving “equal time and space [to] ‘what works’ at Amtrak, and what has been improved at Amtrak.” Fares and Public Policy: Sound public policy should encourage low fares. Lower fares mean higher ridership, and helps America and its people deal more effectively with scarce oil. Indeed, California’s financial support for its three Amtrak-run corridors helps support lower fares than are found in many other parts of the Amtrak system. This should be encouraged! III. Funding Levels The Bush Administration’s request of $900 million—30% below the current level of $1.3 billion—would not keep the trains running. Amtrak’s board requested $1.598 billion, while outlining what it could do with a further $275 million. The Administration characterizes its budget request as a “reward” for progress that Amtrak has made on reforms, but the numbers are clear.

Debt service is not optional and is estimated at $295 million. Note, however, that Amtrak has taken on no new debt since June, 2002, and that it reduced total outstanding debt by $300 million—from $3.9 billion in September, 2002, to 3.6 billion in December, 2005.
The operating grant requirement is estimated at $498 million, which Amtrak’s Board says “represents a significant stretch goal…$42 million below the approved FY 2006 budget [of $540 million] and $88 million below the DOT Inspector General’s baseline operating budget.”
Amtrak seeks $553 million for capital (not counting $177 million in non-federal funding).
Amtrak seeks $75 million for “working capital/restructuring…the minimum necessary to begin to restore the company’s level of cash reserves commensurate with the level of business risks common to a $3.0 billion company and to fund a labor settlement and work rule changes.” Mark Dayton, until recently Chief Economist with the DOT Inspector, testified last month in support of a separate Amtrak working capital appropriation of $125 million that would be reserved for emergencies.

A federal grant of $900 million would leave only $107 million for capital, which would be almost totally consumed by the $90 million of capital Amtrak seeks for “investment required to address legal and regulatory requirements, including NY tunnel life safety program, environmental remediation and pollution control, police and security, FRA-mandated rolling stock investment, and initial ADA station compliance work.”

In other words, at $900 million, investments in infrastructure and rolling stock reliability would come to a halt, along with “business initiatives and other investment…to reduce future operating requirements.” Service quality would decline precipitously, if indeed any service could be run. Amtrak presumably would incur significant financial obligations if it backed out of the Thames River bridge replacement project in Connecticut. Terminating that project, moreover, would increase chances that Boston-New York service could be forced to shut down, due to Thames or another old Amtrak river bridge becoming inoperable.

There also would be nothing for emergencies (last bullet above).

Strategic Investment Initiatives: Amtrak’s $275 million (beyond its “basic” request of $1.598 billion) includes $100 million each for profitably restructuring Amtrak’s debt and for state corridor development grants (funds which actually would be administered by the Secretary of Transportation), $50 million for targeted investments in chokepoints in America’s rail network, and $25 million for additional Americans with Disabilities Act compliance work. Our Association expects to file comments on ADA with the Department of Transportation later this month.

With particular regard to state grants, rail has continually operated at a competitive disadvantage to the other modes of transportation, which enjoy federal funding matches of 50 to 90%. Amtrak’s call for a federal-state partnership including “reliable” federal funding with an 80% match is important.

IV. Long-distance Economics

Amtrak’s long-distance and corridor services both are important; complementing each other and other U.S. transportation.

On a passenger-mile basis, corridor and long-distance trains require similar levels of operating support. [A passenger-mile is one passenger traveling one mile.]
In fiscal 2004, the farebox recovery (passenger revenues as percent of costs) for short-distance trains outside the Northeast Corridor was 44%; long-distance trains were at 39%.
The “fare box loss” per passenger-mile actually was higher (“worse”) for short-distance trains (25 cents) than for long-distance trains (15 cents).
Eliminating long distance trains eliminates all passenger rail service in 25 states.
You cannot simply “buy everyone a plane ticket cheaper than running an Amtrak train” because hundreds of cities that Amtrak serves have no access to discount airline service. In addition, many Americans cannot or chose not to fly.

Thank you for considering our views. We stand ready to help the subcommittee as we are able, including by providing such further information as you may request.

» back to main resources page

Site designed by: 2TCwebs