oversight

Intercity Passenger Rail: Amtrak's Progress in Improving Its Financial Condition Has Been Mixed

Published by the Government Accountability Office on 1999-07-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Chairman, Committee on
                  Commerce, Science, and Transportation,
                  U.S. Senate


July 1999
                  INTERCITY
                  PASSENGER RAIL
                  Amtrak’s Progress in
                  Improving Its Financial
                  Condition Has Been
                  Mixed




GAO/RCED-99-181
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   Resources, Community, and
                   Economic Development Division

                   B-282088

                   July 9, 1999

                   The Honorable John McCain
                   Chairman, Committee on Commerce,
                     Science, and Transportation
                   United States Senate

                   Dear Mr. Chairman:

                   Since its inception in 1971, the National Railroad Passenger Corporation
                   (Amtrak) has accumulated massive financial losses, with recent losses
                   averaging over $800 million per year. To help Amtrak sustain operations
                   and make needed capital investments, the federal government has
                   provided it with nearly $23 billion in financial assistance since 1971. In
                   1994, in response to a request from the administration, Amtrak established
                   a goal of eliminating its need for federal operating subsidies by fiscal year
                   2002 (termed being “operationally self-sufficient”). To accomplish this
                   goal, Amtrak developed a series of strategic business plans designed to
                   increase revenues and control costs.

                   In 1998, we reported that Amtrak was in a precarious financial condition.1
                   This report responds to your request to provide an updated assessment of
                   Amtrak’s current financial performance as well as its prospects for
                   improved future financial performance. In particular, this report discusses
                   (1) Amtrak’s overall financial performance in fiscal year 1998; (2) the
                   prospects for Amtrak to meet its financial goals for operating
                   self-sufficiency outlined in its most recent strategic business plan; and
                   (3) the extent to which current and anticipated federal funding and
                   recently enacted legislative reforms aimed at helping Amtrak better
                   control its costs are likely to help improve its financial condition.


                   Amtrak’s overall losses increased in fiscal year 1998 after several years of
Results in Brief   improvement. In fiscal year 1998, Amtrak’s net loss (total expenses less
                   total operating revenues) was $930 million, the largest loss in the last 10




                   1
                     Intercity Passenger Rail: Prospects for Amtrak’s Financial Viability (GAO/RCED-98-211R, June 5,
                   1998); Intercity Passenger Rail: Financial Performance of Amtrak’s Routes (GAO/RCED-98-151,
                   May 14, 1998); Intercity Passenger Rail: Outlook for Improving Amtrak’s Financial Health
                   (GAO/T-RCED-98-134, Mar. 24, 1998); and Intercity Passenger Rail: Issues Associated With a Possible
                   Amtrak Liquidation (GAO/RCED-98-60, Mar. 2, 1998).



                   Page 1                                          GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




years.2 By comparison, Amtrak’s net loss in fiscal year 1997 was
$762 million.

Amtrak has made some progress in reducing its reliance on federal
operating support. However, between now and 2002, it needs to achieve
about 5 times as much in financial improvements (or what it terms “net
impact”) as it has been able to achieve over the past 4 years to reach
operational self-sufficiency. Amtrak’s current strategic business plan,
approved by its Board of Directors in October 1998, estimates that ongoing
and planned initiatives will result in a cumulative net impact of $1.6 billion
from fiscal year 1999 through fiscal year 2002, primarily through increases
in revenues as a result of taking business plan actions. However,
uncertainty surrounds Amtrak’s ability to achieve this net impact and to
reach operational self-sufficiency by fiscal year 2002. For example, the
plan contains over $160 million in “placeholders” for productivity
increases and other reforms to be defined at a later date. Furthermore,
Amtrak’s expectations to increase revenues through other initiatives, such
as implementing new high-speed service between Boston and Washington,
D.C., and increasing its express service (the delivery of higher-value,
time-sensitive goods) are based on critical assumptions—about such things
as passenger ridership and the ability to obtain access to specialized
equipment—that have yet to be tested in the marketplace.

Current and anticipated annual federal funding and recently enacted
reforms aimed at helping Amtrak better control its costs will likely have
little short-term impact on improving its overall financial condition. First,
Amtrak plans to use nearly $1 billion of the $1.6 billion it expects to
receive in federal capital appropriations over the next 3 fiscal years for
maintenance rather than capital improvements. While maintenance is
important for preserving assets and Amtrak’s fiscal year 1999 capital
appropriation could be used for equipment maintenance, Amtrak’s plans
to continue to use capital appropriations in this way means it will forgo or
delay capital investment projects that could increase future revenues and
reduce future costs. However, Amtrak’s Board of Directors has approved
plans for $1.3 billion of capital improvements from the $2.2 billion made

2
 This net loss is adjusted to exclude federal financial assistance counted as revenues. The Amtrak
Reform and Accountability Act of 1997 eliminated the requirement that Amtrak issue preferred stock
to the Department of Transportation in the value of the federal appropriations received. As a result,
beginning with its fiscal year-end 1998 audited financial statements, Amtrak recorded a significant
amount of federal financial assistance as revenues instead of preferred shareholder equity. In addition,
Amtrak received federal financial assistance in fiscal years 1998 and 1999 through the Taxpayer Relief
Act and recorded a portion of these funds as revenues. In this report, we present net loss amounts,
excluding the amount of federal financial assistance that Amtrak’s audited financial statements include
as revenues in 1998. This adjustment allow us to better compare Amtrak’s net loss position with those
of previous years.



Page 2                                           GAO/RCED-99-181 Amtrak’s Financial Condition
             B-282088




             available to it through the Taxpayer Relief Act of 1997. In addition, as we
             reported in 1998, while the Amtrak Reform and Accountability Act of 1997
             provided Amtrak greater flexibility in its business operations, the reforms
             provide few financial benefits in the short term. We found this condition
             continues to exist largely because Amtrak and its unions have not
             completed negotiations over labor protection arrangements and reforms
             for contracting out work.


             The Rail Passenger Service Act of 1970 created Amtrak as the nation’s
Background   intercity passenger railroad. Prior to Amtrak’s creation, intercity passenger
             service was provided by a number of individual railroads, which had lost
             money, especially after World War II. The act, as amended, gave Amtrak a
             number of goals, including providing modern, efficient intercity passenger
             rail service; giving Americans an alternative to automobiles and airplanes
             to meet their transportation needs; and minimizing federal operating
             subsidies. As of June 1999, Amtrak provided intercity passenger service
             along 42 routes that include most states.

             Like all major national intercity rail services in the world, Amtrak receives
             substantial government support. From 1971 through June 1999, the federal
             government provided Amtrak with nearly $23 billion in financial
             assistance. However, in December 1994, at the direction of the
             administration, Amtrak established the goal of eliminating its need for
             federal operating subsidies, that is, achieving operational self-sufficiency,
             by fiscal year 2002. In addition, the Amtrak Reform and Accountability Act
             of 1997 authorized appropriations for Amtrak’s operating and capital
             expenses through fiscal year 2002 but prohibited Amtrak from using
             federal funds for operating expenses, except for an amount equal to
             excess Railroad Retirement Tax Act payments after 2002.3 In fiscal year
             2002, Amtrak expects to spend only $185 million (its estimated payments
             to the railroad retirement system in excess of the retirement benefits for
             Amtrak employees) of federal funding for expenses other than capital
             projects.

             To meet the goal of operating self-sufficiency and respond to continually
             growing losses and a widening gap between operating deficits and federal
             operating subsidies, Amtrak developed a series of strategic business plans.
             By following these plans, Amtrak has attempted to increase revenues and
             control costs through such actions as expanding mail and express service,

             3
              Amtrak participates in the railroad retirement system, under which each participating railroad pays a
             portion of the costs for all retirements and benefits in the industry.



             Page 3                                           GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




adjusting routes and service frequency, and reorganizing into strategic
business units. Its Board of Directors approved Amtrak’s most recent
strategic business plan in October 1998.

Historically, Amtrak received separate federal appropriations for
operating expenses and capital improvements. For fiscal year 1999,
Amtrak received a single capital appropriation of $609 million instead of
separate appropriations for operating and capital assistance. However, the
conference report accompanying the appropriation provided that Amtrak
could use appropriated funds for the maintenance of equipment (an
operating expense) in addition to traditional capital investments.

The Congress also provided Amtrak with financial assistance through the
Taxpayer Relief Act of 1997. This act made a total of about $2.2 billion
available to Amtrak in fiscal years 1998 and 1999 to acquire capital
improvements and pay for the maintenance of existing equipment, among
other things.

The Amtrak Reform and Accountability Act of 1997 made certain reforms
to Amtrak’s operations. Among other things, the act (1) eliminated existing
statutory and contractual labor protection arrangements as of May 31,
1998, and required negotiations over new arrangements; (2) repealed the
statutory ban on contracting out work when it would result in employee
layoffs and made contracting out part of the collective bargaining process
(except for food and beverage service, for which contracting out was
already allowed); and (3) placed a $200 million cap on the aggregate
amount that Amtrak and others must pay rail passengers for all claims
(including claims for punitive damages) arising from a single accident or
incident.4

The act also established an independent council—the Amtrak Reform
Council—to evaluate Amtrak’s performance and make recommendations
for cost containment, productivity improvements, and financial reforms. If
at any time more than 2 years after the enactment of the act and the
implementation of a financial plan for operating within authorized funding
levels, the Council finds that Amtrak is not meeting its financial goals or
that Amtrak will require federal operating funds after December 2002, then
the Council is to submit to the Congress, within 90 days, an action plan for
a restructured national intercity passenger rail system. In addition, if the



4
 These include claims made against Amtrak, any high-speed railroad authority or operator, any
commuter authority or operator, any rail carrier, or any state.



Page 4                                          GAO/RCED-99-181 Amtrak’s Financial Condition
                      B-282088




                      above events occur, Amtrak is required to develop and submit an action
                      plan for its liquidation.

                      The act also eliminated the requirement that Amtrak issue preferred stock
                      to the Department of Transportation in the value of federal appropriations
                      received. As a result, beginning with its fiscal year-end 1998 audited
                      financial statements, Amtrak, following guidance from its external
                      auditors, recorded a significant amount of federal financial assistance as
                      revenues instead of preferred shareholder equity. In addition, a significant
                      amount of the federal funds made available by the Taxpayer Relief Act was
                      also recorded as revenues. One effect of this situation is that Amtrak’s
                      fiscal year 1998 financial statements are not comparable to previous
                      financial reports unless certain adjustments are made. In this report, we
                      present net loss and working capital amounts that exclude the amount of
                      federal assistance that Amtrak’s audited financial statements include as
                      revenues or current assets in 1998. These adjustments allow us to better
                      compare Amtrak’s net loss and working capital positions over time.


                      Amtrak had made some progress in reducing its net losses in recent
Amtrak’s Overall      years—from about $833 million in fiscal year 19945 to $762 million in fiscal
Losses Increased in   year 1997. However, Amtrak’s net loss (adjusted to exclude $577 million of
Fiscal Year 1998      federal funds that its audited financial statements count as revenues)6
                      increased to $930 million in fiscal year 1998. (See fig. 1.) This amount is
                      the largest net loss in the last 10 years. One of the reasons for the increase
                      is that the 1998 figure includes retroactive payments attributable to labor
                      negotiations concluded by the end of 1998.7 But, even when the roughly
                      $106 million of such labor payments are not included in the net loss, the
                      net loss is still $824 million, $62 million more than in fiscal year 1997.




                      5
                       The net loss for fiscal year 1994 excludes a one-time charge of $244 million for restructuring costs and
                      other items.
                      6
                       See the “Background” section for why we made adjustments to the net loss and working capital
                      amounts we present for fiscal year 1998.
                      7
                       Although these retroactive payments are attributable to the period 1995 through 1998, Amtrak’s fiscal
                      year 1998 financial statements reflect the liability for the retroactive portion of all labor agreements
                      made in fiscal year 1998 and expected to be made in fiscal year 1999. Amtrak will make these
                      retroactive payments in fiscal years 1999 and 2000.



                      Page 5                                            GAO/RCED-99-181 Amtrak’s Financial Condition
                                        B-282088




Figure 1: Amtrak’s Net Losses, Fiscal
Years 1994 Through 1999
                                        -1000      Dollars in millions




                                         -700




                                         -400




                                         -100



                                                    1994          1995             1996         1997        1998          1999
                                                                                                                        estimated

                                                                                      Fiscal year



                                        Note: The amount shown for fiscal year 1998 has been adjusted to exclude federal financial
                                        assistance from revenues.

                                        Source: GAO’s analysis of Amtrak’s data.




                                        Amtrak officials stated that the increase in net loss is also due to an
                                        increase in capital investment that resulted in increased depreciation
                                        expenses. Specifically, depreciation expenses, a noncash item, increased
                                        by $52 million in 1998—from $242 million in fiscal year 1997 to
                                        $294 million in fiscal year 1998. Amtrak expects that depreciation
                                        expenses will grow by another $66 million in fiscal year 1999 and by
                                        additional amounts in subsequent years as it makes additional capital
                                        investments. While an increase in depreciation—which reflects the amount
                                        of capital equipment that is consumed and must be replaced in future
                                        years—increases net loss, Amtrak points out that investments resulting in



                                        Page 6                                            GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




increased depreciation expenses are expected to have positive effects in
the future, such as increasing revenues, reducing costs, and eliminating
the need for federal operating support.

In October 1998, Amtrak estimated that the net loss for fiscal year 1999
will be $930 million. However, through April 1999, Amtrak’s net loss for
the current fiscal year is $11.4 million less than expected.

Another measure of Amtrak’s overall financial condition is its working
capital (current assets less current liabilities). Working capital measures a
corporation’s ability to pay its bills when due. Amtrak’s working capital
deficit (adjusted to exclude $647 million in short-term investments and
related interest resulting from unspent Taxpayer Relief Act funds) at the
end of fiscal year 1998 was about $400 million. This amount is $100 million
worse than the $300 million working capital deficit Amtrak recorded at the
end of fiscal year 1997 and is the worst such deficit in at least the last 10
years. Figure 2 shows the degree to which working capital balances have
fallen over the past 4 years.




Page 7                              GAO/RCED-99-181 Amtrak’s Financial Condition
                                      B-282088




Figure 2: Amtrak’s Working Capital,
Fiscal Years 1994 Through 1998
                                      -500       Dollars in millions




                                      -400




                                      -300




                                      -200




                                      -100




                                         0
                                                   1994            1995          1996          1997         1998

                                                                                 Fiscal year

                                                      Working Capital


                                      Source: GAO’s analysis of Amtrak’s data.




                                      Amtrak continues to need to borrow money to pay its current-year
                                      operating expenses, including those for payroll, fuel, ticket stock, and
                                      food. At the end of fiscal year 1997, Amtrak had outstanding borrowing of
                                      $75 million to meet its operating expenses. At the end of fiscal year 1998,
                                      the amount of outstanding borrowing needed to meet operating expenses
                                      had fallen to $50 million. This $50 million in year-end borrowing was half
                                      of what Amtrak had estimated at the beginning of the fiscal year. However,
                                      at the end of fiscal year 1999, Amtrak estimates, it will need to have
                                      $100 million in borrowing to meet its operating expenses. Additionally,
                                      Amtrak plans to have short-term borrowing of $100 million outstanding at
                                      the end of fiscal year 2000.




                                      Page 8                                       GAO/RCED-99-181 Amtrak’s Financial Condition
                           B-282088




                           To help its cash flow, Amtrak is seeking legislation specifically authorizing
                           it to use its fiscal year 2000 capital appropriation to pay for a wider variety
                           of maintenance expenses than in fiscal year 1999. This would be similar to
                           the flexibility allowed recipients of federal transit financial assistance. For
                           fiscal year 2000, Amtrak is requesting the authority to use its capital
                           appropriation for maintenance-of-way expenses (e.g., costs for
                           maintaining tracks) in addition to maintenance-of-equipment expenses, as
                           permitted in fiscal year 1999. Without this authority, Amtrak has stated
                           that it will not be able to use existing cash to cover $50 million of its
                           operating expenses in fiscal year 2000. As of June 1999, Amtrak had not
                           developed a way to meet its financial obligations if the Congress does not
                           allow this flexibility.


                           Amtrak’s October 1998 strategic business plan does not anticipate that the
Amtrak’s Prospects         corporation will use any federal subsidies for operating expenses (other
for Achieving              than for excess railroad retirement expenses) in fiscal year 2002—1 year
Operating                  earlier than requested by the administration and specified in the Amtrak
                           Reform and Accountability Act of 1997. However, considerable
Self-Sufficency Are        uncertainty exists about whether Amtrak will be able to achieve its targets
Clouded by                 for revenues and expenses for several key business plan actions, and
                           Amtrak historically has not met its financial goals for increasing revenues
Uncertainties in Its       and reducing expenses.
Business Plan and by
Past Performance
Amtrak Cites a Narrowing   Amtrak’s efforts are pointed toward achieving operating self-sufficiency by
Budget Gap                 fiscal year 2002. To do this, Amtrak’s strategic business plan focuses on
                           reducing what it calls its “budget gap,”8 which Amtrak defines as the
                           corporation’s net loss less capital-related expenses, including depreciation
                           of its physical plant (such as locomotives, cars, and stations), other
                           noncash expenses, and expenses from its program to progressively
                           overhaul railcars (i.e., to conduct a limited overhaul of cars each year
                           rather than a single comprehensive overhaul every several years). In
                           essence, the budget gap represents expenses not funded by its revenues or
                           its capital program.

                           According to Amtrak, its budget gap fell by $18 million in fiscal year
                           1998—from $512 million in fiscal year 1997 to $494 million in fiscal year
                           1998 after an adjustment for the cost of retroactive labor payments is
                           made. (See fig. 3.) Even though Amtrak’s audited financial statements

                           8
                            Amtrak also calls this its “budget result.”



                           Page 9                                         GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




allocated the full $106 million amount of the retroactive payments for
recently negotiated labor agreements to fiscal year 1998 expenses, Amtrak
officials, in calculating the budget gap, allocated the amounts over the
years for which those payments actually accrued ($35 million in fiscal year
1996 and in fiscal year 1997 and $36 million in fiscal year 1998). Amtrak
officials told us that they believe that such an allocation is a more
appropriate methodology for presenting its financial situation. The result
of this allocation improves Amtrak’s fiscal year 1998 budget gap by
$70 million. Amtrak’s October 1998 strategic business plan estimates that
the budget gap will be reduced by another $10 million in fiscal year 1999.




Page 10                            GAO/RCED-99-181 Amtrak’s Financial Condition
                                    B-282088




Figure 3: Amtrak’s Budget Gap and
Progressive Overhaul Expenses,
Fiscal Years 1994 Through 1999      -600       Dollars in millions




                                    -500




                                    -400




                                    -300




                                    -200




                                    -100




                                       0
                                                1994            1995             1996             1997             1998            1999
                                                                                                                                 estimated

                                                                                      Fiscal year

                                                   Progressive Overhauls
                                                   Budget Gap


                                    Note: Amtrak’s progressive overhaul program started in fiscal year 1995 (and affected its
                                    expenses starting in fiscal year 1996). For fiscal year 1998, amounts for progressive overhauls
                                    include $4 million to prepare for the Year 2000 date change.

                                    Source: GAO’s analysis of Amtrak’s data.




                                    However, even with these improvements in Amtrak’s budget gap, Amtrak
                                    must still reduce its losses substantially if it is to become operationally




                                    Page 11                                         GAO/RCED-99-181 Amtrak’s Financial Condition
                           B-282088




                           self-sufficient by the end of fiscal year 2002. In the next 4 fiscal years,
                           Amtrak must reduce its budget gap by $309 million, from $494 million to
                           an amount equivalent to excess railroad retirement payments9 (estimated
                           at $185 million in fiscal year 2002). This needed improvement by 2002 is
                           about 5 times the $60 million improvement Amtrak was able to achieve in
                           the previous 4 fiscal years, 1995 through 1998.

                           Another issue in Amtrak’s calculation of the budget gap is the treatment of
                           progressive overhaul expenses. Amtrak does not include these expenses in
                           its calculation of the budget gap even though they are considered to be
                           operating expenses under generally accepted accounting principles. As
                           described, the Amtrak Reform and Accountability Act of 1997 prohibits
                           Amtrak from using federal funds for operating expenses, except for an
                           amount equal to excess Railroad Retirement Tax Act payments after 2002.
                           According to Amtrak officials, while generally accepted accounting
                           principles require the recording of such spending as operating expenses,
                           Amtrak funds progressive overhauls through its capital program and
                           therefore believes that the costs for them should be counted as capital
                           costs.10 If progressive overhauls are included in the calculation of the
                           budget gap, the gap increases by $12 million in fiscal year 1998—from
                           $549 million in fiscal year 1997 to $561 million in fiscal year 1998—and in
                           fiscal year 1999 will be $560 million.


Amtrak’s Strategic         Under its October 1998 strategic business plan, Amtrak plans to reach
Business Plan Emphasizes   financial health by emphasizing business growth, that is, primarily by
Revenue Growth to          increasing revenues. Amtrak expects significant revenue increases from
                           implementing new high-speed rail service between Boston and
Achieve Operational        Washington, D.C., and expanding its express service (delivery of
Self-Sufficiency           higher-value, time-sensitive goods). Amtrak also plans to increase its
                           revenues and control costs by developing a market-based intercity route
                           network that aligns its passenger service more closely with customer
                           demand (adding trains to certain routes or starting new service where
                           appropriate, for instance). Amtrak does not plan to eliminate any routes or
                           services in fiscal year 1999 but has not made any long-term decisions
                           about routes. (In 1997, 39 of Amtrak’s 40 routes were unprofitable when



                           9
                            See the “Background” section.
                           10
                            According to Amtrak, if it is unable to fund its progressive overhaul program from federal funds after
                           2002, it may be forced to move to a heavy overhaul program. Amtrak officials believe that the
                           progressive approach keeps its equipment in a higher average state of good repair and is less
                           expensive.



                           Page 12                                          GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




train, route, and system costs are included.)11 In addition, by developing
and implementing service standards (such as improving service to
passengers), Amtrak expects to increase ridership (and revenues) through
higher-quality and more consistent service. Finally, Amtrak plans to
contain costs primarily by reducing the costs of electric power in the
Northeast Corridor and enhancing productivity in a number of ways
throughout its system.

Amtrak estimates that its business plan initiatives will result in net
financial improvements of $1.6 billion for fiscal years 1999-2002. (See table
1.) In particular, it expects to begin obtaining most revenue increases and
cost savings beginning in fiscal year 2000. For example, over the period
covered by the plan, Amtrak expects that its initiative for express service
will generate a cumulative net impact of about $60 million. Of this
$60 million, Amtrak expects to obtain about $56 million between fiscal
years 2000 and 2002. Amtrak also estimates that its new high-speed rail
service, which will begin in fiscal year 2000, will have a $408 million net
impact during the period. Over one-third ($631 million) of the total net
impact of $1.6 billion is expected to occur in fiscal year 2002, the last year
of the plan.




11
   Intercity Passenger Rail: Financial Performance of Amtrak’s Routes (GAO/RCED-98-151, May 14,
1998.)



Page 13                                        GAO/RCED-99-181 Amtrak’s Financial Condition
                                           B-282088




Table 1: Estimated Financial Results of Amtrak’s Initiatives From Fiscal Year 1999 Through Fiscal Year 2002
Dollars in millions
                                               Change in        Change in
Initiative                                      revenues        expenses        Net impact Basis for estimate
Align network to meet customer demand                  $60             ($45)           $105 Officials’ professional judgment
Implement service standards to improve                                                        Officials’ professional judgment
quality                                                 85              (20)            105
Undertake actions to be defined later                   56             (154)            210 Placeholders to balance annual budgets
                                                                            a
Begin high-speed service                               822              414             408 Ridership forecast
Expand express service                                 248              188a              60 Analyses of market potential
Purchase electricity at wholesale rates                  (5)            (34)              29 Contract with a utility company
Subtotal                                             $1,266           $349             $917
Implement hundreds of other initiativesb               840              148             692 Strategic business units’ forecasts
Total                                                $2,106           $497           $1,609
                                           a
                                            The expenses for high-speed rail service and express service exclude $179 million and
                                           $8 million for depreciation, respectively.
                                           b
                                            These hundreds of individual initiatives have been developed by Amtrak’s three strategic
                                           business units—the Intercity, Northeast Corridor, and West business units, as well as
                                           Corporate/Service centers. We did not review the bases for these estimates.

                                           Source: GAO’s analysis of Amtrak’s October 1998 strategic business plan.



                                           Table 1 also shows that the expected financial impact from six key
                                           initiatives will account for nearly 60 percent of the expected net
                                           impact—$917 million. The remaining benefits come from hundreds of
                                           individual actions outlined in Amtrak’s business plan. Overall, Amtrak
                                           projects that if it achieves the financial benefits associated with these
                                           initiatives, including 100 percent of the $631 million in financial
                                           improvements it projects for fiscal year 2002, it will gradually reduce its
                                           reliance on federal operating assistance, and achieve operating
                                           self-sufficiency in 2002.


To Achieve Estimated Net                   All plans are subject to uncertainty and Amtrak’s estimates for six key
Impacts for Six Key                        initiatives reflect this uncertainty. First, Amtrak plans to align its service to
Initiatives, Amtrak Must                   better meet customer demand, referred to as implementing a market-based
                                           network. Amtrak expects to generate $105 million in net impact over the
Address Uncertainties in                   period by such actions as serving currently unserved markets that have
Its Strategic Business Plan                good demand potential. According to Amtrak officials, for the most part
                                           this estimate was based on senior officials’ judgment of changes in
                                           revenues and expenses resulting from analysis of the potential for




                                           Page 14                                        GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




partnerships with states and local governments in certain transportation
corridors. However, Amtrak did not supply us with any information on
how it derived the $105 million amount.

Second, Amtrak expects to generate another $105 million in net impact by
implementing a variety of service standards designed to ensure a
consistent, high-quality product. These service standards will be focused
on encouraging employees to provide consistent, high-quality service;
improving customer-to-staff ratios; addressing customers’ complaints and
resolving them as quickly as possible; and instituting a service guarantee
program (such as providing a transportation credit) if service does not
meet established standards. Overall, Amtrak expects that these efforts will
increase revenues by generating additional ridership and reduce operating
costs by lowering employees’ absenteeism. However, the service standards
had not been defined at the time the $105 million estimate was made.
Instead, Amtrak officials told us that the $105 million estimate was based
on extensive analysis completed by senior management, including
benchmarking against corporations that had implemented similar types of
programs, such as the United States Postal Service, Ritz Carlton, Sears,
and Continental Airlines. Amtrak then estimated that it could have a net
impact of $59 million per year from (1) a reduction in occasions in which
customers will not ride Amtrak again as the result of poor, inconsistent
service ($10 million per year); (2) fare increases justified by higher-quality,
more consistent service ($20 million per year); (3) increases in employees’
productivity ($23 million per year); and (4) reductions in absenteeism
($6 million per year). An Amtrak official told us that Amtrak chose to be
conservative in estimating a $105 million in savings over the life of the
4-year plan, rather than utilizing the full $59 million per year in its estimate
of savings.

Third, Amtrak’s plan contains a broad category of undefined actions
referred to as “undefined initiatives” and “planned management actions
to be developed.” These categories represent $210 million in net impact
for which Amtrak had not identified specific initiatives or developed any
plan of action at the time the plan was approved. The amounts were
placeholders to balance the yearly budgets. According to Amtrak officials,
these initiatives represent the gap that Amtrak must fill even if it
successfully implements all of its other business plan actions. Amtrak
intends to achieve this net impact primarily through cost savings that it
will identify on an ongoing basis. By June 1999, Amtrak officials had
identified actions representing a net impact of about $49 million, reducing
the dollar amount of actions yet to be defined to about $161 million.



Page 15                               GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




Fourth, Amtrak’s plan estimates $408 million in net impact from
implementing high-speed rail service in the Northeast Corridor. This
estimate was based on an extensive ridership forecast. However, in
November 1998 the Department of Transportation’s Office of Inspector
General questioned $192 million of the gross revenue projections for fiscal
years 1999 through 2002. In particular, the Inspector General’s review
indicated that Amtrak was too optimistic regarding the system’s ability to
generate ridership in the early years of the forecast.12 While Amtrak
disagreed with the Inspector General’s assessment of the expected gains in
ridership in the early years, this type of disagreement highlights the
inherent uncertainty in estimating revenues from high-speed rail service.

Fifth, Amtrak estimates that its express service will result in a net impact
of $60 million, which Amtrak officials stated was based on their
assessment of the market potential for this service. Amtrak has made
some initial steps in this area. For example, it has entered into a
partnership with the United Parcel Service and four other carriers to
provide time-sensitive express service generating an estimated $2.9 million
in annual revenues (less than 1 percent of Amtrak’s estimate of revenues
from express service over the period covered by the business plan).
However, Amtrak is new to this area and does not yet have a track record
on which to base its projections. In addition, Amtrak does not yet have
long-term contracts to support much of the projected financial benefit.
Furthermore, much of the expected benefit depends on Amtrak’s
expanding its fleet of express equipment through acquisition, leasing, or
other arrangements, most of which still need the approval of Amtrak’s
Board of Directors. Thus, while it is possible that Amtrak may achieve its
net revenue goal, many important actions remain to be taken.

Finally, Amtrak plans to have net savings of $29 million from buying
electric power in the Northeast Corridor at wholesale rates. Currently,
Amtrak buys electricity at retail rates for its own use and for resale to
commuter railroads owned by state and local governments. Its estimated
cost savings were based on negotiations with a utility under which Amtrak
would purchase power at a wholesale price. However, the Federal Energy
Regulatory Commission denied a request to treat Amtrak as a government
entity that would be exempt from the Federal Power Act’s restrictions on
wholesale power purchases. Consequently, Amtrak now plans to seek
enactment of legislation that would designate the railroad as a power
wholesaler. Amtrak’s estimate of savings is contingent upon obtaining this

12
  Amtrak officials pointed out that the Inspector General’s report included greater estimated revenues
than Amtrak did after 2003, resulting in a convergence of the estimates by 2006.



Page 16                                          GAO/RCED-99-181 Amtrak’s Financial Condition
                                    B-282088




                                    legislation by September 30, 2000. In the meantime, Amtrak officials stated
                                    that Amtrak will help cut its electricity costs by using a competitive bid
                                    process allowed under deregulation, including “retail choice” programs in
                                    Pennsylvania, New York, Massachusetts, Rhode Island, and Connecticut
                                    for electric power purchases. However, this approach will not achieve
                                    Amtrak’s estimated $29 million in savings.


Amtrak Has Not Achieved             Amtrak has been unable to achieve its planned budget gap in any of the
Its Plans for the Budget            last 4 years. Specifically, from fiscal year 1995 through fiscal year 1998,
Gap, Although                       Amtrak’s budget gap was, in total, $285 million more than planned, as
                                    shown in table 2.13 This result occurred primarily because Amtrak’s
Performance Is Improving            expenses were significantly higher than planned. During the 4-year period,
                                    Amtrak’s revenues were $34 million less than planned, and expenses were
                                    $251 million more than planned. As a result, Amtrak’s actual budget gap
                                    was higher than it expected. However, the table also shows that the
                                    difference between the planned budget gap and the actual budget gap has
                                    been decreasing since fiscal year 1996. Moreover, through April of the
                                    current fiscal year, the budget gap is about $10 million less than what
                                    Amtrak had estimated for the first 7 months of fiscal year 1999.14

Table 2: Degree to Which Amtrak’s
Budget Gap Exceeded Its Goals for   Dollars in millions
Fiscal Years 1995 Through 1998                                   Difference between planned and actual
                                                                      performance—Better/(Worse)
                                                                 1995              1996             1997             1998a             Total
                                    Revenues                     $152              ($48)              $48            ($186)             ($34)
                                    Expenses                      (163)              (77)            (155)              144             (251)
                                    Budget gap                    ($11)           ($125)           ($107)              ($42)           ($285)
                                    Note: Expenses of about $106 million in fiscal year 1998 retroactive labor payments were not
                                    included in this analysis because they were not in Amtrak’s strategic business plans.
                                    a
                                     Compares differences based on Amtrak’s September 1997 strategic business plan rather than
                                    the revised March 1998 plan. See the “Agency Comments and Our Evaluation” section for a
                                    pertinent discussion.

                                    Source: GAO’s analysis of Amtrak’s data.




                                    13
                                      This table focuses on the difference between actual and planned performance. See fig. 3 for total
                                    losses reflected by the budget gap.
                                    14
                                     Amtrak’s budget result was a loss of about $35 million for the first 7 months of fiscal year 1999, as
                                    opposed to the estimated $45 million loss.



                                    Page 17                                           GAO/RCED-99-181 Amtrak’s Financial Condition
                           B-282088




                           The table shows that Amtrak’s revenues exceeded planned amounts for 2
                           of the 4 years. Fiscal year 1998 revenues were significantly lower than
                           planned (by $186 million), primarily because of lower than expected
                           express service business. In contrast, expenses were greater than planned
                           in fiscal years 1995 through 1997 but much lower than planned (by
                           $144 million) in fiscal year 1998. The better than planned results were
                           primarily due to lower than expected train operation costs, such as lower
                           than expected fuel costs. If Amtrak experiences difficulties in controlling
                           expenses over the next 4 years, it will have to generate significantly more
                           revenues than planned in order to achieve operating self-sufficiency.


                           Current and planned annual federal funding and reforms contained in the
Federal Funding and        Amtrak Reform and Accountability Act of 1997 are likely to have little
Reform Legislation         short-term impact on improving Amtrak’s overall financial condition. In
Will Likely Have Little    the short term, continued annual federal funding will help Amtrak cover a
                           significant portion of its operating expenses for maintenance and help
Short-Term Impact on       meet its cash flow needs. However, in the long term, using these funds for
Improving Amtrak’s         maintenance expenses will limit the use of funding for capital investments
                           that would help Amtrak reduce its costs and increase its revenues in the
Overall Financial          future. Finally, although the act allowed Amtrak greater flexibility in its
Condition                  business operations, these reforms are not likely to provide immediate
                           financial benefits.


Use of Federal Funds for   According to its October 1998 strategic business plan, Amtrak ultimately
Maintenance Expenses       plans to use $559 million (about 92 percent) of its $609 million fiscal year
Limits Needed Capital      1999 capital appropriation to pay for the maintenance of equipment—a use
                           specifically referred to in the conference report accompanying the
Investments                appropriation. Most of the remaining $50 million will be used to pay
                           principal on its capital debt. Amtrak plans to continue using a large
                           portion of the appropriations that it expects to receive from fiscal year
                           2000 through fiscal year 2002 for maintenance expenses (including
                           progressive overhauls)—in total, about $1 billion. This $1 billion represents
                           nearly two-thirds of the $1.6 billion Amtrak expects to receive through
                           annual federal capital appropriations.15

                           The short-term benefits of using substantial portions of its capital
                           appropriations for maintenance carry long-term consequences. Capital
                           investments play a critical role in supporting Amtrak’s business plan and

                           15
                             According to Amtrak’s October 1998 strategic business plan, the Office of Management and Budget’s
                           5-year funding plan incorporated anticipated capital support of $571 million for fiscal year 2000 and
                           $521 million each year for fiscal 2001 and 2002, for a total of about $1.6 billion for the 3 fiscal years.



                           Page 18                                            GAO/RCED-99-181 Amtrak’s Financial Condition
                             B-282088




                             ultimately in building and maintaining Amtrak’s viability.16 However, as we
                             reported last year, Amtrak had a $500 million shortfall between its
                             estimated capital needs and available funding.17 Using federal funds for
                             maintenance will limit the funds available for needed capital investments
                             that would help Amtrak reduce its costs and increase its revenues in the
                             future. By using its federal appropriations to cover maintenance expenses,
                             Amtrak may widen this gap between its stated capital needs and expected
                             available funds.

                             However, in fiscal year 1999, Amtrak has plans to use $758 million of the
                             $2.2 billion it received through the Taxpayer Relief Act of 1997 for capital
                             improvements in addition to the $558 million its Board of Directors
                             approved for capital investments in fiscal year 1998. Amtrak does not yet
                             have a capital plan detailing its capital investments for the remainder of
                             these funds. Amtrak has pledged to ultimately use all of the $2.2 billion for
                             high-return capital initiatives and for certain mandatory and tactical
                             projects. In the short term, Amtrak plans to temporarily use a significant
                             portion of these funds for certain authorized expenses for equipment
                             maintenance because (under an agreement with the administration) the
                             railroad will not draw down all of its fiscal year 1999 federal capital
                             appropriation in the year in which the funds are appropriated.18 Amtrak
                             expects that as its revenues increase as a result of its strategic business
                             plan initiatives, it will repay the borrowed Taxpayer Relief Act funds.

                             Finally, after 2002, questions about whether Amtrak is truly operationally
                             self-sufficient would arise if Amtrak’s capital appropriations are made
                             available and used for maintenance expenses, which are operating
                             expenses. On the other hand, if Amtrak is not permitted to continue to use
                             appropriated funds for maintenance, then it would have to look for
                             additional ways to increase revenues and reduce expenses.


Short-Term Financial         The Amtrak Reform and Accountability Act of 1997 was intended to help
Effects of Amtrak Reform     improve Amtrak’s financial condition by making reforms to Amtrak’s
Legislation May Be Limited   operations to help the railroad better control and manage its costs. Among
                             the act’s reforms aimed at improving Amtrak’s financial condition were
                             provisions that

                             16
                               See GAO/T-RCED-98-134.
                             17
                               See GAO/T-RCED-98-134. As of early June 1999, Amtrak’s Board of Directors had not approved a
                             revised capital plan showing capital needs and the funds expected to be available to meet those needs.
                             18
                              Amtrak’s October 1998 strategic business plan assumes that it may draw down only 40 percent of
                             each year’s general capital appropriation on the first day of the fiscal year and the remaining
                             60 percent on the first day of the following fiscal year.


                             Page 19                                          GAO/RCED-99-181 Amtrak’s Financial Condition
    B-282088




•   eliminated, as of May 31, 1998, existing statutory and contractual labor
    protection arrangements that provided up to 6 years of compensation for
    employees who lost their jobs because of the discontinuance of service on
    a route or such other covered actions and required negotiation over new
    arrangements;
•   repealed the statutory ban on contracting out work that would result in
    employee layoffs (except for food and beverage service, which could
    already be contracted out), incorporated the ban into existing collective
    bargaining agreements, and made contracting out subject to negotiation by
    November 1999; and
•   placed a $200 million cap on the aggregate amount that Amtrak and others
    must pay rail passengers for all claims (including claims for punitive
    damages) arising from a single accident or incident.

    As we reported in 1998, the reforms contained in the act may have little, if
    any, immediate effect on Amtrak’s financial performance for several
    reasons. First, regarding labor protection arrangements, after 10
    negotiating sessions, Amtrak and its unions agreed to submit the matter to
    binding arbitration. As of early June 1999, the panel of arbitrators had not
    reached a decision.

    Second, Amtrak officials do not expect to address contracting out work
    unrelated to food and beverage service before November 1, 1999. The
    officials believe the repeal of the ban may provide long-term flexibility,
    including flexibility in union negotiations and in controlling costs, but at
    this time cannot predict what changes may result from these negotiations
    and what the effect on costs may be.

    Finally, Amtrak believes the limit of $200 million per accident for rail
    passenger liability claims may have a limited financial effect because this
    cap is significantly higher than amounts Amtrak has historically paid on
    such claims. This reform may not result in measurable financial savings as
    much as in additional flexibility in negotiating with labor unions and in
    addressing the freight railroads’ concerns over such issues as liability
    payments.19

    The act also made other changes that have the potential for a significant
    impact on Amtrak’s future. For example, it established an independent
    council—the Amtrak Reform Council—to evaluate Amtrak’s performance
    and make recommendations for cost containment, productivity

    19
     The financial effects—if any—of the March 15, 1999, crash of Amtrak’s City of New Orleans train
    operating on Illinois Central Railroad Company tracks in Bourbonnais, Illinois, are not yet known.



    Page 20                                          GAO/RCED-99-181 Amtrak’s Financial Condition
                     B-282088




                     improvements, and financial reforms. If, at any time more than 2 years
                     after the enactment of the act and implementation of a financial plan for
                     operating within authorized funding levels, the Council finds that Amtrak
                     is not meeting its financial goals or that it will require operating funds after
                     December 2002, then the Council is to submit to the Congress, within 90
                     days, an action plan for a restructured national intercity passenger rail
                     system. In addition, if the above events occur, Amtrak is required to
                     develop and submit an action plan for its liquidation.


                     Amtrak has focused its strategic business plan on the near-term goal of
Conclusions          becoming operationally self-sufficient by 2002—a goal established by the
                     administration and the Congress. Amtrak’s plan is ambitious; and, to its
                     credit, it is currently somewhat ahead of the plan’s financial goals. Yet the
                     overwhelming bulk of the expected financial benefits of the plan are still
                     to come—with most to be achieved in the final year of the plan. Our
                     concerns are two-fold. First, several aspects of the plan are subject to
                     considerable uncertainty, including, but not limited to, identifying over
                     $160 million in productivity and other improvements during the remaining
                     3 years of the plan. Second, Amtrak has a history of not meeting its
                     financial goals, and the current 4-year plan anticipates achieving about 5
                     times as much in financial improvements as Amtrak was able to achieve
                     through its business plans over the previous 4 years. We recognize that all
                     plans by their very nature are subject to uncertainty. However, given the
                     uncertainties in the current plan, Amtrak’s history of missing financial
                     goals, and the magnitude of the savings still to be achieved, it is difficult to
                     be confident that Amtrak will become operationally self-sufficient within
                     the next 3 years. The stakes are high: The Congress gave Amtrak until the
                     end of fiscal year 2002 to reach operational self-sufficiency and required
                     that plans for restructuring and liquidating Amtrak be prepared if the
                     railroad does not meet this goal.


                     We provided Amtrak and the Federal Railroad Administration within the
Agency Comments      Department of Transportation copies of a draft of this report for their
and Our Evaluation   review and comment. We met with Amtrak officials, including the
                     Vice-President for Government and Public Affairs and the Controller. In
                     general, Amtrak believed that the draft report contained inappropriate
                     analyses and mischaracterized how Amtrak derived selected expected
                     financial benefits in its strategic business plan.




                     Page 21                               GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




Amtrak believes that the preferred measure of progress toward achieving
operating self-sufficiency is not net loss but rather its “budget gap,” an
Amtrak financial measure that excludes expenses funded from its capital
program. Amtrak apparently misunderstood the purpose of our work. As
stated in the draft report, the objective of this portion of our work was to
assess Amtrak’s financial performance in 1998. The work was not limited
to assessing progress in meeting its goal of operational self-sufficiency.
Consequently, a discussion of financial performance that is limited to
Amtrak’s budget gap would be inappropriate and incomplete. We have
clarified the objective and the discussion of this topic in the report.

Amtrak also disagreed with our inclusion of expenses for progressive
overhauls in our discussion of Amtrak’s progress in achieving operational
self-sufficiency. Amtrak stated that while generally accepted accounting
principles require Amtrak to record such spending as operating expenses,
it funds progressive overhauls through its capital program and therefore
believes that they should be counted as capital costs. As a result, in
Amtrak’s view, the costs of progressive overhauls would be excluded from
the calculation of Amtrak’s progress toward achieving operational
self-sufficiency by 2002. As discussed in our report, generally accepted
accounting principles consider progressive overhaul expenses to be
operating expenses. As a result, we have not revised how these costs are
categorized. We have added to this report Amtrak’s rationale for excluding
progressive overhaul expenses from its budget gap and show the impact of
both including and excluding it.

Amtrak stated that we did not recognize that the higher net loss in fiscal
year 1998 was partially the result of higher depreciation expenses resulting
from investments and that these investments will have positive impacts for
ridership and revenues in the future. We agree and have included
information regarding the impact that Amtrak’s capital investments have
had on its operating expenses and net loss. We have also added a
discussion of the important role that these investments will have on
Amtrak’s ability to increase revenues in the future.

Amtrak officials stated that our analysis of actual versus planned financial
results for fiscal year 1998 was inappropriate because we used Amtrak’s
original strategic business plan issued in September 1997 rather than its
revised plan issued in March 1998. They stated that the revised March plan
is a better benchmark to judge its fiscal year performance because it
reflects business changes resulting from the enactment of the Amtrak
Reform and Accountability Act and the Taxpayer Relief Act in 1997, as



Page 22                              GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




well as other factors, such as significant management changes. We
disagree. We believe that the most appropriate benchmark for evaluating
yearly performance is the plan approved at the beginning of the fiscal year.
Revising a plan 6 months into a fiscal year significantly reduces the
uncertainty inherent in preparing an initial estimate of performance. In
addition, the March 1998 plan was an exception—Amtrak typically
produces a plan in September or October of each year. Finally, while we
agree that the enactment of the two laws and Amtrak’s change in
leadership were significant events for Amtrak, the primary financial
revisions contained in the March 1998 plan were reductions in revenues
associated with Amtrak’s mail and express service initiatives. These
reductions were primarily due to revised assumptions about the market
for express service, rather than a direct result of the above mentioned
events.

Amtrak also objected to our characterization of how it derived estimates
for the expected financial benefits associated with the initiatives to
(1) implement service standards and (2) align its route network to meet
customer demand. Amtrak stated that the estimates were based on
extensive analyses completed by senior management officials and
included benchmarking with other service providers. We believe that the
characterization in our draft report was wholly consistent with the
information that we obtained from top financial officials and others within
Amtrak. In commenting on our draft report, Amtrak officials supplied us
with a rationale for how they derived the estimate for financial benefits
associated with implementing service standards. We have added this
material to our report. The officials did not supply any additional
information on how they derived the estimate for the expected financial
benefits associated with aligning Amtrak’s route network to meet
customer demand. Based on the additional information received, we
revised our report to characterize how Amtrak developed its expected
financial benefits as using “professional judgment” rather than making
“best guesses.”

Finally, Amtrak officials offered a number of technical and clarifying
comments that we incorporated throughout the report, where appropriate.

In commenting on our draft report, the Department of Transportation
stated that when the goal of achieving operational self-sufficiency was
established, the administration understood that meeting the goal would
not be easy. (See app. I.) It believes that Amtrak’s strategic business plan
provides a credible path for achieving operational self-sufficiency. The



Page 23                              GAO/RCED-99-181 Amtrak’s Financial Condition
              B-282088




              Department also stated that it believes Amtrak is moving in the right
              direction and is currently ahead of its financial targets identified in the
              corporation’s strategic business plan. It stated that our report should
              recognize Amtrak’s increased investment in traditional capital projects. As
              discussed above, we have added this information to our report. The
              Department also commented that the Taxpayer Relief Act of 1997
              authorizes Amtrak to use Taxpayer Relief Act funds for some maintenance
              activities. Although the draft report provided to the Department included
              this fact, we have added to our report a further reference to this allowed
              use of Taxpayer Relief Act funds.


              To determine the status of Amtrak’s financial condition, we reviewed its
Scope and     fiscal year 1998 annual report, October 1998 strategic business plan, and
Methodology   fiscal year 2000 legislative report and federal grant request. We also
              interviewed Amtrak’s Chief Financial Officer and other financial systems
              officials. To obtain a historical perspective on Amtrak’s financial
              condition, we also reviewed Amtrak’s annual reports for fiscal years 1994
              through 1997. To provide information on Amtrak’s current strategic plan
              for obtaining operating self-sufficiency, we reviewed its current and
              previous strategic business plans and the Department of Transportation’s
              Office of Inspector General’s Summary Report on the Independent
              Assessment of Amtrak’s Financial Needs Through Fiscal Year 2002. We
              also discussed the current strategic business plan with a variety of Amtrak
              officials, including officials in its Intercity and Northeast Corridor strategic
              business units and Amtrak’s Chief Financial Officer. We did not
              independently verify the accuracy of Amtrak’s financial data in its current
              strategic business plan.

              Finally, to provide information on the extent to which federal funding and
              recently enacted legislative reforms will help Amtrak resolve its financial
              problems, we first reviewed the Amtrak Reform and Accountability Act of
              1997, the Taxpayer Relief Act of 1997, and Amtrak’s fiscal year 1999
              appropriation. We then discussed the likely impact of these acts with
              Amtrak officials. We also reviewed Amtrak’s proposed capital plan and
              interviewed Amtrak officials about its contents.

              We conducted our review from January 1999 through June 1999 in
              accordance with generally accepted government auditing standards.




              Page 24                               GAO/RCED-99-181 Amtrak’s Financial Condition
B-282088




As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after the
date of this letter. At that time, we will send copies of this report to
interested congressional committees; George D. Warrington, the President
and Chief Executive Officer of Amtrak; the Honorable Rodney E. Slater,
the Secretary of Transportation; the Honorable Jolene M. Molotoris, the
Administrator of the Federal Railroad Administration; the Honorable
Jacob J. Lew, the Director of the Office of Management and Budget; and
Gil Carmichael, the Chairman of the Amtrak Reform Council. We will also
make copies available to others on request.

If you or your staff have any questions about this report, please call me at
(202) 512-3650. Key contributors to this report were Ruthann Balciunas,
Catherine Colwell, David Lichtenfeld, and James Ratzenberger.

Sincerely yours,




Phyllis F. Scheinberg
Associate Director,
  Transportation Issues




Page 25                               GAO/RCED-99-181 Amtrak’s Financial Condition
Appendix I

Comments From the Department of
Transportation




             Page 26      GAO/RCED-99-181 Amtrak’s Financial Condition
           Appendix I
           Comments From the Department of
           Transportation




(348146)   Page 27                           GAO/RCED-99-181 Amtrak’s Financial Condition
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested