Amtrak Announces $285 Million in Cuts

Washington — Facing long-standing problems with its federal policy framework and recent events that have posed new financial challenges, Amtrak today announced a $285 million package of spending cuts and capital investment deferrals and warned that it may be forced to suspend all of its money-losing routes in October.

"Everyone knows that you can't make a profit while running a network of unprofitable trains, but that is exactly what we're expected to do," said Amtrak President and CEO George D. Warrington. "On top of that, several recent events — including the recession, September 11 and the Amtrak Reform Council decision — have created new uncertainties in our business. The business actions we are taking today are intended to protect our operations and financial partners from existing political uncertainty. The time has come for Congress and the Administration to put passenger rail on a solid foundation for the future."

Amtrak said the business actions announced today are necessary to counter $120 million in less-than-anticipated revenue in 2001-2002 due to the recession, loss of $52 million in financing as a consequence of the recent action by the Amtrak Reform Council, additional security costs since September 11, and other factors beyond the company's control.

$175 million in capital improvements deferred
Amtrak will defer approximately $175 million in capital investments in FY 2002, or about 23 percent of its capital program. Deferred projects will include equipment refurbishment and overhauls, capacity and reliability improvements, as well as technology, station and facility upgrades. However, there will be no deferral of projects for required safety, environmental or reliability purposes, including fire- and life-safety improvements in New York City-area tunnels.

$110 million in operating expenses reduced
A reduction of $110 million in FY 2002 operating expenses will also be made. This will be accomplished through several measures, including a 10 percent cut in management positions and a three percent cut in labor-agreement covered positions. Overall, Amtrak's current base of 24,600 positions will be cut by 1,000, or about four percent. The company will also freeze or reduce spending in numerous categories such as hiring, travel, vehicles, discretionary training, marketing and advertising, computers, materials and supplies.

$1.2 billion in federal appropriation requested
In addition to outlining budget savings for the current fiscal year, Amtrak said it will ask Congress to appropriate $1.2 billion for basic needs to manage and operate today's system in FY 2003. The appropriation would cover $840 million in basic and mandatory capital investments, $200 million to subsidize unprofitable long-distance service, and $160 million to cover excess railroad retirement taxes. Amtrak warned, however, that this level of appropriation is insufficient to address the system's $5.8 billion capital investment backlog, improve service or reduce trip times. Moreover, an appropriation below this level will require the elimination of unprofitable long-distance service as early as October 1, 2002. For contingency purposes, legally required notification of this action will be made March 29, 2002.

Additionally, Warrington stated that an "on-time" legislative reauthorisation of Amtrak's operations is necessary this year to define the scope of the system and to align funding with it.

Current measures, successes cited
Warrington noted that the actions announced today are in addition to $258 million in savings being realized in FY 2002-2003 under measures already underway in equipment, facility and vehicle-related expense reductions, corporate restructuring and other efforts.

Warrington also stressed that Amtrak has sustained an impressive five-year record of growth, increasing rider ship by 19 percent, ticket revenue by 40 percent and overall revenue by 38 percent to a record $2.1 billion in 2001. However, Warrington cautioned that chronic under-investment in passenger rail has driven up maintenance and interest expenses, as well as capital debt service, to unacceptable levels.

Warrington again urged federal policymakers to resolve the conflicting policy mandates that expect Amtrak to operate many unprofitable routes while also meeting the test of self-sufficiency.

"Policymakers need to decide what kind of passenger rail system America needs, how much the system requires in capital and operating support and how the government will pay for the system," said Warrington