Version V, This Was the Week That Was

June 8, 2001

Another fascinating week in the Amtrak legacy has come and gone.

And, what a week it was.

1. Amtrak is now hocking the family heirlooms to meet payroll and operating expenses. We’re not clear where Amtrak senior management found a pawn shop large enough to get $300 million for selected parts of New York City’s Penn Station, but they claim a deal is in the works after the Bush Administration gave the go-ahead for the deal. Considering the state of Amtrak finances, this is akin to mortgaging the family home and taking the money to gamble in Las Vegas.
2. Amtrak claims they have a relatively low debt ratio (over $3 billion in debt versus annual revenues of $1.05 billion), but they have still not explained how they plan to pay off their debt. Since the Amtrak Reform Act of 1997 became law, they have burned through $2.2 billion of free federal money from the Taxpayer Relief Act funds, a $1 billion loan from the Canadian Export Bank, their annual federal appropriation each year of more free money averaging $500 million or more each year, and still managed to end up in debt of over $3 billion through selling and leasing back every piece of rolling stock the company has, plus similar arrangement for other assets. What is wrong with this picture? With these kind of annual expenses, how will Amtrak find the funds to service the new debt since it doesn’t do anything to bring in any new revenues to the company?
3. We finally learned some real figures from the Washington Post article this week about Amtrak’s “record ridership and revenue” year, as the company claims to still be on the glide path to self sufficiency in FY 2003. This year, Amtrak did have commendable income of $1.05 billion, a rise of 7% from the previous year. Not bad in a year when the economy was slowing. However, what Amtrak has never told anyone, and the GAO finally released, was that Amtrak’s expenses went up also at a record pace, 8%, to $1.32 billion for the year (hence the need for the $300 million mortgage on Penn Station to keep from running out of cash before the end of the fiscal year).
4. Also this week, Amtrak President George Warrington is claiming that Amtrak is making progress, by cutting the federal subsidy needs of the company to down to only $59 million a year, from over $300 million a year. OK, for all of those who are as confused about this as I am, how can this claim be made when Amtrak has consumed the equivalent of all of its free federal appropriation, all of it’s current cash revenue income, and still needs another $300 million from the private money markets so it won’t run out of cash before October 1st of this year? Keep in mind the company is bragging that the new Acela service has been exceeding it’s revenue targets to date, the Metroliners are allegedly operating at a profit, and record amounts of revenues are coming into the company from other ventures such as mail and express and negotiated partnerships with outside companies.
5. The most disturbing news of the week came from US DOT Secretary Norman Mineta, who proclaimed in a press briefing that while he fully understood Amtrak was in serious financial trouble and that he did not expect the company to meet its mandate of self sufficiency by FY 2003, he also mused that perhaps Amtrak should be confined to operations on the left and right hand coasts with maybe a few lines radiating out of Chicago.

   This ill-conceived statement indicates that under current thinking, hundreds of cities and towns in dozens of states could lose all train service permanently.

   The blame for this thinking must go back to the Amtrak Board of Directors who have been de facto setting national policy on passenger rail by concentrating heavily on the concepts of the High Speed Rail Investment Act instead of the proven winners of the long distance network.

   The board has gone along with George Warrington’s ill-conceived notions that the basic tenants of trolleys and commuter transit systems work in place of the concepts of real trains with real passenger services carrying intercity passengers.

   We have already witnessed the destructiveness of these policies through the thoughts of Secretary Mineta. If this is not turned around quickly, there will be a national meltdown in passenger rail availability that may be irreversible for years to come.

6. The basic pieces of Amtrak are faltering quickly. The revelations of the Train$ Fir$t employee movement on Friday openly demonstrates the disdain Amtrak employees have for the leadership of their company. The fact that this situation has gone this far and employees feel compelled to place themselves and their careers in such open jeopardy further demonstrates that Amtrak senior management is not focused at all on morale or employee personal growth. These are the revelations that further prove to those who have failed to grasp the situation that open Civil War is going on inside of Amtrak. Both the Amtrak passengers and American taxpayers are the victims of this war along with management and employees.

For five weeks now we have witnessed the crumbling of Amtrak. The $300 million Band-Aid of the Penn Station mortgage does nothing to solve any of these problems. Nor will the throwing of more free federal money into the situation solve any problems. The only solution is the reconstitution of Amtrak under a new management that understands the full dynamics of intercity passenger rail, the need for unionized employees, and the desire of the American public to ride a train for personal travel.

Bruce Richardson
Jacksonville, Florida