Mr. Chairman, Ranking Member Hollings, and distinguished members of the Committee, thank you for the opportunity to testify at today’s hearing on the Administration’s proposal for Amtrak reauthorization.

I have read the Administration’s proposal. Let me give you my general observations about their plan and approach.  I want you to know that the testimony I am presenting today reflects comments I shared with the Board of Directors and employees shortly after the plan was unveiled.

I realize that the Administration’s proposal is one of several bills and in many respects the reauthorization discussion is in its early stages.  While I have strong concerns about the Administration’s plan, I appreciate their intentions through their bill to play an active role in the debate.  As you know, Allan Rutter is not only the Secretary’s representative to the Board, but he also provides regulatory oversight on a number of fronts as it relates to our operations, not the least of which is the responsibility for managing our federal grant.  He has been a good member of the Board and has been fair to us in his other roles. Therefore, I wish I could offer more positive views on the Administration’s proposal.

In short, I believe that the timelines set are unrealistic and the overall approach is unworkable.  As you know, the timelines in the bill start with passage of the legislation and extend for six years.

The Amtrak board is given six months to prepare a transfer plan.  As I understand it, this requires creating three independent companies:

  • Residual Amtrak
  • Passenger services operating company
  • Infrastructure company

At the end of the first year, the transition must be complete and the companies incorporated, which would require articles of incorporation, by-laws, changes in board structure, and additional management changes.

Also at the end of the first year, you would have to have contracts for service to have been negotiated between the entities.  I believe this would be a very complex, and needlessly distracting, undertaking.

Simultaneously, with the above mentioned activities, and by the end of year one, a proposal for an interstate compact for service and maintenance of the Northeast Corridor would have to be presented to the eight Northeast states and the District of Columbia.  This arrangement would in essence be controlled by the Department of Transportation through a new Northeast Corridor Compact Commission.  My reading of the proposal left me in some doubt as to what will occur if the Compact is not formed.  One could infer that absent the compact the Administration would have to propose and submit to Congress new legislation to provide for the continuation of NEC service-intercity, commuter, and freight.

What is clear is that at the beginning of year two, there would be three aforementioned companies: Residual Amtrak; Passenger Services Operating Company; and Infrastructure Company.

The legislation provides for the federal government to fund capital grants to overcome deferred maintenance in years three to six, but only if the Northeast Corridor Compact is formed.

It is not clear who would advocate for the ongoing funds necessary to run service and the costs for the creation of these new entities.  It is also not clear how this funding would be obtained, but presumably it would be through the appropriations process but without any specific levels of funding authorization for appropriations. All of this occurs with a $50,000 voluntary severance available to existing Amtrak employees.

As I indicated to the Board in my summary of the bill, one can appreciate the enormity of the task that would be at hand.  The Amtrak Board will be attempting to run a railroad, which is in serious physical difficulty.  There is apparently no attempt to address deferred maintenance until year three.  All the while, Amtrak will be losing skilled hourly workers and a significant portion of management to the severance arrangements or resignations.  The Board will be responsible for the operation, safety, and reliability of a company whose assets are deteriorating and whose organization is in turmoil.  Key existing vacancies and newly created positions will have to be filled in the surviving companies while the Board will have to continue to address existing financial control issues by a finance department that could be in chaos.  Furthermore, every decision the Board makes would be subject to approval by the new Asset Transition Committee of the Department of Transportation to “ensure” that the pubic interest is being served.

There are many other provisions in the proposed legislation concerning: long distance routes; liquidating real estate; debt; exclusive rights; common stock and preferred stock, etc.  In particular, this bill will radically alter the relationships between Amtrak and commuter authorities who will have to pay substantially more for access to the corridor.  Additionally, it proposes stringent new financial standards for long distance trains that will result in the extinction of all long distance trains within three years of enactment if not sooner.  Eventually, any route that survived the test would go on the auction block for privatization.

As I said, I realize that the reauthorization of Amtrak is no easy task and there are many different ideas for reforming Amtrak.  I also know that none of this will happen overnight. So, I am proceeding to carry out the capital and operating budgets, which were approved by the Board.  I recognize that large organizations tend to be resistant to change.  It is easy to be critical and sometimes it is human nature to resist change.  I am not being critical for the sake of being contrary.  But I do not believe that the Administration’s plan is workable.

The closest parallel would be the privatization of British Rail, which began in 1993, and the separation of their operations and infrastructure maintenance.  In that case, it took years to accomplish and it consumed billions of dollars in government funding.  For 25 years the NEC states and Amtrak have worked to improve capacity, reliability and utility for rail passengers.  One of the key reasons for its success is that Amtrak largely controls the infrastructure and operations on the NEC.

I will say that I do agree with the Administration’s proposal that states ought to pay operating support for services that they request and that there be federal matching funds for states for capital investments.

Before I conclude, I want to say a word or two on some of fiscal year 2003’s highlights and give you some preliminary year-end figures.  For the first time since 1995, we did not have to seek emergency funding or borrow money to cover our costs and get through the year.  Despite the war, blackout, hurricane and weak economy, Amtrak finished the year with an all-time high ridership record.  We expect to record nearly 24 million trips, breaking the record of 23.5 million in 2001.  Similar to the rest of the travel industry, our ticket revenues will fall short of last year and budget.  We expect that our revenues will be about 6% below last year and 10% below plan. We have made substantial progress overhauling damaged and wrecked cars returning 27 cars to service (when I came to Amtrak we had about 110 wrecked and damaged cars, so we have chipped away about 20% of the total), and we have successfully replaced 40 miles of wood ties with concrete ties and replaced old rail with new rail where needed.  We have   undercut an additional 22 miles of rail. We also have exited the express business and eliminated two routes.

As we look ahead, what is clear to me is that the railroad is in desperate need of investment for both plant and equipment.  In the absence of any reauthorization legislation, I am moving forward with a capital plan and reforming Amtrak’s internal structure.  No matter what happens, work on both fronts must occur.  The work we have begun this year is work that would have been done no matter which plan is adopted and has set the foundation for fiscal year 2004, the first year of our five-year capital plan that, with adequate funding, will bring the railroad to a state-of-good-repair.

Again, thank you for the opportunity to testify and I look forward to responding to your questions.

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