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Amtrak 'near the point of no return'

01 Jul 2002

IMMEDIATELY after taking office as President & CEO of Amtrak in May, David Gunn set about tackling the railway's precarious financial position. In particular, he warned that Amtrak would have to cease running services in July unless an emergency $200m short-term loan was arranged by the end of June to avoid running out of cash. This would need to be secured against future government funding, as Amtrak has mortgaged virtually everything it owns and has amassed debts of $3·76bn. Just how serious his warning was became apparent on June 20, when Gunn appeared before the Senate Appropriations Committee on Transportation. 'The urgency of this is enormous ... we are near the point of no return', said Gunn, suggesting that Amtrak would have to start shutting down in the following week.

Gunn had already launched a sweeping reorganisation intended 'to streamline decision-making and clearly assign authority and responsibility', according to a special notice sent to all employees. Gone are the three quasi-independent operating divisions: Intercity, Northeast Corridor and Amtrak West. These are being consolidated with the mail and express unit in the Washington headquarters. 'I know most of you have been through a lot recently, but I firmly believe what we are doing will make sense and will undo some well-intended but unsuccessful organisational experiments', he explained.

On the same day that Gunn appeared before the Senate committee, Secretary of Transportation Norman Mineta announced the Bush government's views. Describing the theory that Amtrak could achieve self-sufficiency as 'fiction', he acknowledged that there was a capital backlog of $6bn. His own view was that 'inter-city passenger rail service is an important part of the nation's transportation system', but it had to 'transition to a system dictated by fundamental economics without federal operating support ... Amtrak's current route network provides too many services with limited market appeal at high operating costs to the federal government.'

Outlining several principles that would guide policy, Mineta said Amtrak should become 'a pure operating company', with 'market principles' introduced into inter-city passenger rail service. This 'would entail competition for provision of routes through a process that would assign passenger rail operating rights to a single operation in a corridor after a careful process overseen by the FRA'. A fourth guideline was that 'inter-city passenger rail policy should be based on a strong foundation of state and federal planning that clearly identifies costs, benefits and funding approaches.'

Noting that 'the Administration's vision entails a partnership with the nation's governors and other state and local leaders to support inter-city passenger rail', Mineta invited the National Governors Association to appoint a task force to work with him 'to promote a systematic deliberation' of the issues, with Northeastern Governors looking separately at 'core corridor infrastructure issues'.

Further debate and consultation was required, Mineta said. For this reason, he continued, the government opposed raising Amtrak's funding for the next fiscal year above the $521m already in the budget, 'unless such an increase is accompanied by significant reforms consistent with the principles I have outlined'.