Order Code RL30659
CRS Report for Congress
Received through the CRS Web
Amtrak: Overview and Options
Updated January 25, 2001
David Randall Peterman
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Amtrak: Overview and Options
Amtrak was created in 1970, and began operation in 1971, to relieve railroad
companies of their money-losing passenger operations while maintaining passenger
rail service in the United States. Under Amtrak, passenger rail service has continued
a money-losing record that began in the 1930s. Passenger rail service in other
countries has a similar record.
A great deal of criticism is directed at Amtrak for its inability to make a profit.
The implication is that profitability is the standard condition for passenger rail
systems. Yet as consideration of Amtrak’s predecessors and foreign counterparts
shows, unprofitability is actually the norm for intercity passenger rail service. As
specified in the Amtrak Reform and Accountability Act of 1997 (P.L. 105-134),
Amtrak faces a congressional mandate to be able to cover all its operating expenses
out of its own revenues by FY2003. Amtrak says it will be able to meet this
requirement, although it has had some setbacks in its plans. But the central policy
question about Amtrak remains: given that a national system of passenger rail service
appears to be inherently unprofitable, as is the case for other public services, do we
as a Nation wish to preserve our system or to liquidate it?
Intercity passenger rail service is unique among U.S. transportation modes in that
its infrastructure (e.g., tracks) is privately owned, in contrast, for example, to public
roads and airports. Thus, capital improvements are the responsibility of private
entities. Amtrak has said it will release a capital improvements plan in January 2001.
The Department of Transportation Inspector General has estimated that Amtrak’s
capital needs, simply to maintain the status quo, are between $500 million and $1
billion each year for the foreseeable future. Any expansion or improvement in
Amtrak’s services, such as implementation of high-speed rail in other parts of the
United States outside the Northeast Corridor, would be in addition to this sum.
If intercity passenger rail is to be preserved, there are several possible options.
Among these: passenger service could be privatized, as in some other countries,
although a privatization effort in the United States would face issues not encountered
in other countries, and even the privatized operations in other countries still receive
government support. Competition could be encouraged, though Amtrak’s statutory
monopoly on passenger service was eliminated in 1997 and no competitor has yet
emerged. Non-safety regulations could be reduced, although several such regulations
were eliminated in 1997; it may take time for the impact of such changes to be seen.
Amtrak could be encouraged to shed unprofitable routes, though almost all of its
routes are unprofitable, shedding routes has little impact on fixed costs, and Amtrak
is mandated to maintain a nationwide system. Funding for passenger rail service
could be increased, to enable Amtrak or other potential providers to increase the level
of service that is available, which might boost ridership and revenues. This could be
accomplished through creating a dedicated trust fund for passenger rail, similar to
those for highway, aviation, and transit; by giving states the flexibility to use some of
their federal transportation funds for passenger rail; and by allowing Amtrak to issue
The Economic Performance of Intercity Passenger Rail Systems . . . . . . . . . . . . 3
A National System of Intercity Passenger Rail Service . . . . . . . . . . . . . . . . . . . . 4
Advantages Offered by Intercity Train Travel . . . . . . . . . . . . . . . . . . . . . . . 5
Shortcomings of Intercity Train Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Levels of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Costs of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Government Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Unique Aspects of Rail as a Transportation Mode . . . . . . . . . . . . . . . . . . 10
Amtrak’s Current Level of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Infrequent Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inability to Keep to Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slow Trains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High-Speed Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options for Providing Intercity Passenger Rail Service in the United States . . .
Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introducing Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Divide Responsibility for Infrastructure from Operations . . . . . . . . . . . . .
Shed Unprofitable Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provide Federal Funds Only for Capital Investments . . . . . . . . . . . . . . . . .
Increased Funding for Passenger Rail Service . . . . . . . . . . . . . . . . . . . . . .
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allow States to Use Federal Highway Funds for Rail . . . . . . . . . . . .
Tax-exempt Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continue the Status Quo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix: Disputes over What Constitutes Amtrak’s ‘Operating Expenses’ . . . 24
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Progressive Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
List of Tables
Table 1: Summary of Federal Transportation Finances by Mode,
FY1985-FY1995 (in billions of 1992 dollars)
Amtrak: Overview and Options
The Amtrak Reform and Accountability Act of 1997 (ARAA) (P.L. 105-134,
December 2, 1997) requires that Amtrak be able to operate without using federal
grant funds to cover operating expenses by the end of FY2002.1 Otherwise, ARAA
provides that Congress will consider an Amtrak reform plan to be drawn up by the
Amtrak Reform Council (another creation of the ARAA), or an Amtrak liquidation
plan to be drawn up by Amtrak. Both the General Accounting Office (GAO) and the
Inspector General of the Department of Transportation have noted that Amtrak does
not appear likely to achieve that 2002 goal. 2
Starting with the evidence that no large national intercity passenger rail system
has proven profitable, this report poses the question of whether such a system is in the
national interest. It examines the level of service provided by Amtrak, in contrast to
that provided by Amtrak’s predecessors and overseas colleagues. Finally, it reviews
a number of ideas that have been proposed for dealing with America’s intercity
passenger rail system. The Appendix addresses some of Amtrak’s accounting
practices that have been topics of discussion concerning Amtrak’s achievement of the
threshold of covering its operating expenses from its own revenues.
Amtrak, officially the National Passenger Railroad Corporation, is a federallychartered for-profit public corporation. Virtually all of its stock is held by the U.S.
Department of Transportation (DOT). Amtrak carries around 21 million passengers
over 23,000 miles of track each year, producing 5 billion passenger miles. This
represents 1% of U.S. intercity passenger-miles traveled on common carriers–trains,
buses, commuter trains and intercity trains (that is, excluding private automobile
travel)–and 0.3% of total U.S. intercity passenger-miles of travel each year (including
private automobiles).3 Amtrak earns around $1 billion annually in revenue from
passenger fares. Amtrak has run a deficit every year since its creation, and has
For more information on the ARAA, see Stephen J. Thompson, Amtrak Reform and
Accountability Act of 1997 and related developments, CRS Report 97-1023 E, updated
January 28, 1999.
U.S. GAO, Amtrak’s Costs and Capital Needs, GAO/RCED-00-138, p. 38;
Department of Transportation, Office of Inspector General, 2000 Assessment of
Amtrak’s Financial Performance and Requirements, September 9, 2000 (Report No.
CR–2000–121), p. iv.
”Domestic Intercity Passenger-Miles by Mode,” Eno Foundation, Transportation in America
1999, 17th edition, p. 47.
received over $33 billion4 (in constant 1999 dollars) in assistance from the federal
government to cover its deficits during that period.
Amtrak was created by the federal government in 1971 to take over intercity
passenger rail services that were previously operated by the major railroad companies
around the nation.5 Rail passenger ridership had been declining since the 1920s, due
to federal and state regulation of railroad operations and competition from private
automobile travel on highways and airplane travel, both of which, unlike the railroads
at the time, received assistance from the federal government. In the 1960s the
railroad companies were reporting combined losses of billions of dollars on their
passenger service.6 Several were facing bankruptcy due to declining profitability of
their freight operations, and most wished to be free of their money-losing passenger
operations. In order to preserve a national system of passenger rail service, while
freeing the railroad companies of their loss-making passenger service, Congress
The creation of Amtrak was an immediate response to preserve passenger rail
service in the United States The legislation creating Amtrak did not address the
underlying reasons for the long-term decline of ridership. Amtrak was a new
company, but it was made up of old parts: its equipment was transferred from the
railroads, and was old and in poor repair; its employees were also transferred from the
railroads. Amtrak represented a continuation of the status quo, except that now the
federal government, not the railroad companies, would be responsible for the financial
In 1994, Amtrak announced a goal of covering its operating costs without
federal grant support by FY2002. In tracking Amtrak’s progress toward that goal,
the General Accounting Office (GAO) has reported that during FY1995-FY1999,
Amtrak had difficulty controlling its costs and meeting its revenue goals, and that its
operating costs are likely to continue to grow.7
All dollar figures in this report are 1999 constant dollars, unless otherwise indicated (by
‘nominal’ dollars). Historical dollar figures were inflated to equal 1999 dollars using the
ratios in the ‘GDP Deflator’ column from Table 10.1–Gross Domestic Product and Deflators
Used in the Historical Tables: 1940-2005, published in the ‘Historical Tables’ section of the
FY2001 Budget of the United States Government (http://w3.access.gpo.gov/usbudget/
Amtrak was created by the Rail Passenger Service Act of 1970, P.L. 91-518; it began
operation on May 1, 1971.
George W. Hilton, Amtrak, American Enterprise Institute, Washington, DC, 1980, Table 1,
p. 3-4 (updated to constant 1999 dollars).
U.S. General Accounting Office (US GAO), Amtrak’s Costs and Capital Needs, May 2000,
GAO/RCED-00-138, p. 11.
The Economic Performance of Intercity Passenger
The focus of criticism of Amtrak is its continuing financial losses and the subsidy
this requires from the federal government. But this obscures the central question: are
Amtrak’s continuing financial losses due to its own failings, or is the expectation that
Amtrak could be profitable an impossible goal? We can compare Amtrak’s
performance with American private enterprise that operated passenger rail service
before Amtrak, and with passenger rail service in other countries.
As noted above, prior to Amtrak’s creation, the private sector rail companies
were losing billions of dollars a year operating a national intercity passenger rail
system. Amtrak exists because the private sector was not able to operate this service
at a profit.
There is a widespread belief that intercity passenger rail service is thriving in
other countries, which leads to the assumption that there is something fundamentally
wrong with Amtrak that keeps it from being equally successful. That is a
misperception. Passenger rail ridership has declined in every industrialized country
during this century. Passenger service is widely available in European countries and
Japan because the governments in those countries have supported passenger rail
service at a level far beyond that provided by government in the United States; in
those countries, passenger rail service is perceived to be in the public interest.
Moreover, conditions in those countries are, in many ways, more favorable to
passenger rail transportation than in the United States Their population densities are
higher (which makes train travel more efficient), their fuel prices, including taxes, are
higher (which makes driving more expensive relative to other travel options), and
their land area is relatively smaller (which makes travel time by train more competitive
with air travel).
Perhaps the most dramatic example of the impact of automobiles and airplanes
on train travel is found in Japan. In one sense, Japan is an example of the possibilities
of rail as a transportation mode. It is the only nation with a modern transportation
system in which intercity rail represents more than ten percent of all passenger-miles
traveled each year.
Yet in another sense, Japan is an example of the limits to the appeal of intercity
rail travel. Japan is uniquely well-suited, geographically, to rail travel: its land area
is relatively small (about the size of California) and long and narrow, and over eighty
percent of its terrain is mountainous; its population is relatively large (four times that
of California), its cities are very densely populated, and they are located virtually in
a line along the southeastern coastal plain. In addition, its government has supported
rail travel vigorously: it has invested around one hundred billion dollars over the past
40 years to build a high-speed rail network throughout the country. Additionally, the
Japanese government subsidizes non-high-speed rail services. Also, airline fares were
regulated until 1996, fuel prices are considerably higher than in the United
States–about $3.60 a gallon8–and all of Japan’s expressways are toll roads.9 Yet, in
spite of these features that would tend to promote rail travel against other modes of
travel, intercity passenger rail’s share of all passenger-miles has declined from around
32 percent in 1970 to around 18 percent in 1995 (though it still represents 34 percent
of common carrier travel).10
The same trend has appeared in every other country in which citizens have a
choice between trains, cars, and airplanes: while early in this century the majority of
travel was on trains, there has been a steady shift in passenger traffic away from trains
to cars and then to airplanes. Most dramatically, this same trend has been seen,
compressed into a single decade, in the countries of Eastern Europe since 1990. As
their economies have shifted from government control to more of a market basis,
government support for rail has declined, many people have purchased cars, and the
share of passenger traffic traveling by train has declined precipitously.
It is hard to make a case that Amtrak’s continuing financial losses or low market
share constitute a unique failure when there is no example of a major nation where
national rail passenger service is a profitable operation. Rather, policymakers are
confronted with a different set of questions: does the United States want a national
system of intercity passenger rail service? If so, at what level of service? And is
Amtrak’s current structure the best way to provide it?
A National System of Intercity Passenger Rail
The legislation creating Amtrak declared that “intercity rail passenger service is
an essential component of a national intermodal passenger transportation system.”
This was repeated in the findings of the Amtrak Reform Act of 1997.11 In polls,
Americans have indicated their desire to have intercity passenger trains supported by
the federal government: a 1997 poll by the Gallup Organization found that 69 percent
of Americans favored this (even among those who said they would not be affected by
an Amtrak shutdown, 62 percent favored continued government support for it).12
Several states across the country are appropriating funds to make improvements in
passenger rail infrastructure, even in the absence of federal matching funds. States
SRI Consulting, “Electronic Toll Collection,” 1996, http://www.itscanada.ca/html/
Statistics Bureau, Management and Coordination Agency, Government of Japan, Japan
Statistical Yearbook 1998, Table 10-4: Traffic Volume by Type of Transport (FY1970-95),
Public Law 105-134 (December 2, 1997), Section 2 (1).
invested $1.7 billion of state and local funds in high-speed rail projects during the
1990s, and forecast spending another $1.3 billion between 2000 and 2004.13
Advantages Offered by Intercity Train Travel
Trains are among the safest modes of transportation: the Japanese gradeseparated high-speed rail system carries 275 million passengers a year, has been
operating since 1964, and has never had a fatal accident; nor has France’s gradeseparated high-speed system.
Trains can run when weather causes delays for air and road travel.
Trains can serve people who don’t have access to cars or can’t drive, and people
who are afraid to fly or don’t live near airports.
Trains are very energy-efficient.14
Train stations can be catalysts for economic development.
Shortcomings of Intercity Train Travel
Trains carry such a small proportion of total passenger trips in the United States
that even significant increases in ridership would probably have only a small
impact on reducing road and airline congestion and on reducing levels of air
pollution in cities.
For conserving energy, there are other, cheaper alternatives, among them
providing more support to intercity bus travel. 15
Intercity bus travel is also a cheaper alternative for providing service to people
who don’t have access to cars or can’t drive, and those who are afraid to fly. It
is also more flexible than rail, having no fixed routes.
Trains were superseded as a passenger choice in part because of their
comparatively slow speeds; their competitive advantage in other countries has largely
come through the implementation of high speed train systems. Lacking a high-speed
network, Amtrak is like an airline with a fleet of propeller-driven planes–not very
Levels of Service
In 1920, there were 20,000 intercity passenger trains a day. By 1970, the last
year of private passenger rail service in the United States, there were 450 daily trains
operating over 49,500 miles of track. When Amtrak began operation in May of 1971,
U.S. Congress. House. Committee on Appropriations. “Federal Railroad Administration,”
Department of Transportation and Related Agencies Appropriations Bill for 2001, Part 5.
Hearing March 15, 2000, 106th Congress, 2nd Session. Washington, U.S. Government
Printing Office, 2000. Pp. 391-393.
Center for Transportation Analysis, Oak Ridge National Laboratory, Transportation
Energy Data Book, 19th ed., Tables 12-1 (Airlines) and 12-10 (Amtrak). Figures for 1997.
Stephen J. Thompson, Amtrak and Energy Conservation, CRS Report 96-22 E, January 19,
it was given a route structure of about 200 daily trains over 23,000 miles of track.
At that level of service, Amtrak produced about 3 billion passenger-miles in its first
full year of operation. In 1999, Amtrak produced 5 billion passenger-miles with about
the same length of track and number of trains: a 66 percent increase in passengermiles with virtually no increase in route miles.
A frequent criticism of Amtrak is that it represents only a tiny portion of
America’s annual travel activity, and that this proportion has scarcely grown in the
past decade. But the amount of travel Amtrak provides is not only a function of its
popularity but also of its capacity to handle travelers. Its capacity to handle travelers
is partly a function of the number of passenger cars it has; due in part to lack of
money, this capacity has scarcely changed until the past couple of years. Amtrak’s
number of passenger cars rose only 27 percent between 1972 and 1999; the number
of commercial passenger aircraft increased by 78 percent during that time.16
Amtrak is required to operate a national system of intercity service. Yet as of
1995, three of the continental 48 states had no Amtrak service (Oklahoma, South
Dakota, and Maine), and of the 100 largest metropolitan areas in the continental
United States, 23 had no Amtrak service and another 19 had less than daily service.17
Operating at a deficit, Amtrak’s ability to expand its services is largely dependent
on Congress’ willingness to support such an expansion. Congress has provide
financial support to Amtrak each year, but not at a consistent level, and overall has
provided just enough support to keep Amtrak operating at the level of service it has
offered for the past thirty years.
Costs of Service
In the final years of the 1960s, when private railroad companies were reducing
their passenger rail service, they were running around 500 passenger trains a day over
50,000 miles of track, at a loss of around $1.6 billion a year ($450 million in nominal
1970 dollars). When Amtrak began its operations in 1971, running 200 trains a day
over 23,000 miles of track, Congress provided $140 million ($40 million in nominal
1970 dollars) in support for its first year.
Since 1971, Congress has provided around $35 billion (in constant 1999 dollars)
in assistance to Amtrak, an average of around $1.2 billion a year. But as the Amtrak
Reform Council18 noted in its first annual report, the year-to-year levels have been
Number of Amtrak passenger cars: 1,569 (1972), 1,992 (1999); number of commercial
aircraft: 2,437 (1970), 4,347 (1999). Amtrak, Annual Report, various years; Air: Air
Transport Association, Annual Report, various years.
Wendell Cox and Jean Love, Amtrak’s Negligible Impact on Congestion, a report produced
for the Highway Users Federation, September 1995, available at
An organization created by the ARAA. The Council consists of 11 members, variously
very erratic, and Congress has exercised some influence over how and where Amtrak
spent this money, making it difficult, according to many specialists, for Amtrak to use
these funds effectively.19 And in the opinion of some, Congress has not provided
Amtrak enough money to achieve the goals which Congress has given it: provide
national service and operate at a profit.
For example, while the average level of funding ($1.2 billion) seems comparable
to the amount of loss the private railroad companies were experiencing prior to
Amtrak, this is misleading due to the condition of the equipment Amtrak received
from the railroads. In the latter years of privately provided passenger rail service, the
railroads cut costs by deferring purchase of new equipment and reducing maintenance
of existing equipment. As a result, the average age of the locomotives and passenger
cars the railroads transferred to Amtrak in 1971 was 22 years.
Amtrak has spent billions, when it could, to repair this equipment and to replace
it with modern equipment; in the early 1980s, the average age of its passenger cars
dropped to 13 years. But faced with low levels of capital support from Congress in
the 1980s and early 1990s, and the expense of upgrading its Northeast Corridor in the
1990s, Amtrak had to borrow funds from private lenders to purchase needed
equipment. By FY1999 the average age of Amtrak’s passenger cars had returned to
22 years, though the average age of its locomotives was only 13 years.20
In summary, from its beginning, Amtrak has been running hard just to stay in
place. Amtrak inherited an aging, undermaintained fleet of equipment from the
private railroad companies, and a significant amount of its spending in its early years
was used to make up for the expenditures that the railroad companies had postponed
making. Since then Amtrak has often borrowed money to make needed capital
investments. As a result of this borrowing, Amtrak is having to use some of the
capital investment funds provided by Congress each year to repay the debt for
previous capital investments, as well as covering operating revenue shortfalls and
other legally-mandated expenses.21 This creates an ongoing problem, as Amtrak is in
effect using current capital support to pay for past capital investments, a situation
which makes it difficult for Amtrak to deal with its current and future capital
appointed by the President and the House and Senate. It “shall evaluate Amtrak’s
performance; and make recommendations to Amtrak for achieving further cost containment
and productivity improvements, and financial reforms.” P.L. 105-134, Section 203(g).
Amtrak Reform Council, First Annual Report, January 24, 2000, iii.
Amtrak, Annual Report, various years.
‘Excess’ Railroad Retirement Fund contributions and environmental mitigation. See Stephen
J. Thompson, Amtrak and Federal Financial Assistance: Background and Selected Public
Policy Issues, CRS Report 95-1199 E, updated September 9, 1998.
Just to maintain its current level of service, Amtrak will need between $500
million and $1 billion in capital assistance annually for the foreseeable future.22 In
addition, Amtrak estimates that $12 billion in capital investment will be needed over
the next 25 years to improve the infrastructure of just the southern part of the
Northeast Corridor (from New York City to Washington DC).23
By contrast, Western European governments provided $101 billion (in nominal
dollars) in assistance to their railways from 1980-1989.24 Europe is, in land area, only
slightly larger than the United States, though its population is almost twice that of the
United States France alone has a passenger railroad network that is almost as
extensive as that of Amtrak (21,000 miles compared to 24,000 miles), and has 770
miles of dedicated high-speed track; the United States has zero miles of dedicated
high-speed track. European Union countries as a group had 1,700 miles of highspeed track in 1999, with another 1,000 miles under construction.25 France alone
expected to spend $1.5 billion on its railway network in 2000.26
As mentioned earlier, a frequent criticism made of Amtrak is that it has never
turned a profit, and therefore requires ongoing financial support from the federal
government. Amtrak proponents contend that no form of transportation in the United
States pays its own way; every transportation mode is supported by government, and
rail, proponents say, gets the least support. Moreover, federal assistance for
highways, transit and aviation are designed to leverage state and local government
spending by providing matching funds, while no such provision exists for Amtrak’s
funding. Since Amtrak is competing with highway and air travel for customers, in
their view these unequal provisions make it more difficult for Amtrak to succeed.
Others contend that at the federal level, government spending on highways and
aviation comes from taxes that have essentially been converted into user charges:
federal fuel taxes go into the Highway Trust Fund and are spent to build and maintain
highways; and airline ticket taxes go into the Airport and Airway Trust Fund to pay
for aviation improvements. Thus their funding is a function of their level of use.
U.S. Congress. House. Subcommittee of the Committee on Appropriations. Department
of Transportation and Related Agencies Appropriations 2001. 106th Congress, 2nd Session,
March 15, 2000. Estimates of both the DOT IG and GAO. p. 103.
Report from the International Railway Association, presented in U.S. Congress. House.
Subcommittee on Railroads of the Committee on Transportation and Infrastructure, Amtrak’s
Current Situation, 104th Congress, 1st Session, February 13, 1995, p. 218-222 (104-10)
(2.1) “Railways: High speed rail networks,” Transport in Figures, updated January 2000,
European Commission Energy and Transport Directorate, http://europa.eu.int/en/comm/
“Investment in France: RFF brings fresh thinking on infrastructure investment,” Railway
Gazette International, June 2000.
Amtrak proponents reply that dedicating the revenues from fuel taxes and airline
ticket taxes to highway and aviation spending is simply a policy choice that has been
made by Congress in the past; other nations choose to treat some or all of their fuel
tax revenues as general government revenues.27 They point out that most other taxes
are used for general government purposes, that large sums were spent by the federal
government on highways and aviation in the past that were paid out of general
government revenues, and that, unlike highway users and aviation companies, the fuel
taxes paid by Amtrak and the freight railroad companies do not go into a fund for
supporting rail construction or operations. Finally, they contend that what the
American people want in exchange for their taxes is better transportation service,
which does not necessarily mean only more highways or airports.
Also, as Table 1 shows, the federal government provided more assistance to
every transportation mode than it received in revenues from that mode during the
period FY1985-FY1995. The largest deficit was for air travel, where the federal
government spent $30 billion more than it received. Of the modes, the smallest deficit
was for rail, even though the federal government recorded no direct receipts from rail.
Table 1: Summary of Federal Transportation Finances by Mode,
FY1985-FY1995 (in billions of 1992 dollars)
% of Total
Source: U.S. Department of Transportation. Bureau of Transportation Statistics.
Government Transportation Financial Statistics Fiscal Years 1985-1995. Table A-2 (Part
B): Transportation Revenues by Mode and Level of Government: FY1985-95; Table A-4 (Part B):
Transportation Expenditures by Mode and Level of Government from Own Funds: FY1985-95.
Constant 1992 dollars. Numbers may not add up due to rounding.
A related criticism of Amtrak is that the amount of Amtrak’s support–$35 billion
over the past 29 years–is disproportionate to the number of people it serves. Amtrak
represents about one percent of all passenger-miles traveled on common
carriers–airplanes, buses, and trains.
Great Britain spends about 25 percent, and most other European countries about 33 percent,
of their fuel taxes on road construction. U.S. Department of Transportation, National
Transportation Strategic Planning Study, March 1990.
Table 1 also shows the proportion of federal government spending on the various
transportation modes. Highways received 52 percent of the total funding, aviation 24
percent, transit 12 percent, water 10 percent, and Amtrak 2 percent. So Amtrak’s
support, as a proportion of all government spending on transportation, is not
significantly out of proportion to its share of transportation service.
Unique Aspects of Rail as a Transportation Mode
There is an inconsistency in public funding for transportation in the United
States. While passenger rail equipment (passenger trains) is publicly funded, most of
the intercity passenger rail infrastructure (tracks) is privately owned and funded. By
contrast, for highway and air travel, the passenger equipment (autos, planes) is
privately funded, while the infrastructure (highways, airports, air traffic control) is
publicly owned and funded. Thus, building and maintaining the infrastructure for
highway and air travel has become the responsibility of federal, state and local
governments, while building and maintaining the infrastructure for intercity rail travel
is almost totally the responsibility of private industry.28
Amtrak not only carries passengers, it is also responsible for a portion of the
infrastructure needed to carry those passengers. Amtrak owns about 730 miles of
track, while it operates trains over 23,000 miles of track. The rest of that track is
owned by freight railroad companies, who are responsible for its maintenance. This
reduces Amtrak’s capital expenses from what they would be if Amtrak owned, and
had to maintain, all the track over which if operates, but this also poses operational
problems, which are discussed below under the section on Amtrak’s difficulties in
keeping to schedule. Nevertheless, even for the relatively small proportion of its
infrastructure that Amtrak owns, its costs are considerable: Amtrak estimates that it
will need to spend $12 billion over the next 25 years for maintenance and
improvements to just the southern portion of its Northeast Corridor (between
Washington DC and New York City), a distance of 226 miles.
Amtrak’s Current Level of Service
In addition to running a deficit and not serving a significant percentage of
America’s annual passenger traffic, Amtrak is routinely criticized for providing poor
service: its trains run infrequently on most routes, run slowly on most routes, and
often do not run on time. In an effort to improve its performance and its image,
Amtrak introduced a ‘satisfaction guarantee’ for its passengers in July 2000; if
passengers are not satisfied with their trip, they can get a voucher for future travel.
Infrequent service is attributable to low passenger demand and lack of funds. As
private passenger rail service declined in the 1950s and 1960s, companies dropped
The federal government appropriates $150 million each year to the states for safety-related
improvements to highway-railroad grade-crossings.
routes; Amtrak’s initial route system, designated by the U.S. Department of
Transportation, was intended to maintain a minimal level of national service, which
was all that (or even more than) Amtrak could afford. There have been some changes
to the routes since then, though the total distance has stayed close to 23,000 miles.
But lack of equipment, lack of funds, and low passenger demand has led Amtrak to
reduce the level of service on some of the routes. On some routes, trains run only
once a day, providing service to some cities only in the middle of the night; on some
routes, trains run only once every other day.
Cutting back on frequency of service over marginal routes was found in the mid1990s to cost more money than it saved (see discussion under “Shed Unprofitable
Lines” on page 20). It is argued that more frequent service on some lines might
produce more demand and more revenue. However, in many instances Amtrak does
not have enough equipment to increase operations.
Inability to Keep to Schedule
Some have observed that on most of its routes, Amtrak trains run more slowly
than did trains on the same routes 50 years ago.29 Nevertheless, even with more time
to travel from station to station, Amtrak’s on-time performance is not impressive. Its
average on-time performance is 79 percent, but this varies greatly between shortdistance routes (less than 400 miles: 80 percent) and long-distance routes (more than
400 miles: 61 percent).30 Even though Amtrak’s on-time performance has been
improving, its total hours of delay has been rising. Most of Amtrak’s trains are shortdistance, hence Amtrak’s overall average is very close to its short-distance average;
for Amtrak’s long-distance trains, not being on time often means being several hours
Amtrak attributed 55 percent of its delays in FY1999 to freight traffic. This may
be related to the willingness of the freight railroads to make way for Amtrak trains,
and to some degree to their ability to do so.
It is widely believed among the passenger railroad community that freight
railroads regarded passenger trains as nuisances even when the freight railroads were
operating their own passenger trains. Now that passenger trains are “guests” on
freight railroad tracks, they are reportedly even less welcome. Amtrak trains
frequently have to slow down or stop to accommodate slower freight trains, although
by federal law Amtrak trains are to be given priority over freight trains on track
owned by freight railroads. However, this privilege has to be enforced, and there is
an impression that different Amtrak administrations have varied in their willingness
to insist on this priority.
Joseph Vranich, Derailed: What Went Wrong and What to do About America’s Passenger
Trains, St. Martin’s Press, NY, 1997. Table 1-2, p. 13-14.
Amtrak, FY1999 Annual Report, Statistical Appendix, p. 42, ‘On-time performance.’ For
a train whose route length is greater than 500 miles, Amtrak considers arrival within 30
minutes of its scheduled time as “on-time.”
Moreover, the situation is made more difficult by the capacity limits of the
railroad tracks, although these limits were created by the freight railroad companies
themselves. Because they are private land, railroad rights of way are subject to
property tax. Typically, when there is an active track on them, they are taxed at
higher rates for this improvement, and if there are two parallel tracks, at an even
higher rate. Therefore, one cost-saving measure railroad companies have taken over
the past few decades has been to abandon track in order to reduce their property taxes
and maintenance expenses. This practice was exacerbated by railroad mergers; when
two railroads, each operating their own lines in a region, merged, the result was one
company with lots of redundant track, much of which would be abandoned.
The number of track miles (the total length of railroad track) owned in the
United States has declined from 319,000 miles (1970) to 171,000 miles (1998).31
Now that the railroad freight business is growing again, freight railroads are
complaining of constraints in their ability to handle the increased business with the
amount of track they have left. They also observe that these constraints would make
it more difficult for them to accommodate increasing numbers of passenger trains over
their track, let alone faster trains which would create even greater conflicts with the
slow freight trains.32
How can it be that U.S. trains ran faster 50 years ago than today? The reason
has much to do with both with the ownership of the tracks and their maintenance.
The Federal Railroad Administration has nine classes of track; each class has an
upper speed limit (e.g., Class 1 track has a speed limit of 10 mph for freight trains and
15 mph for passenger trains, while Class 9 track has a speed limit of 200 mph for
passenger trains).33 The track rating is a reflection of the curvature and slope of the
track and the level of maintenance it receives. Higher classes of track, which permit
higher speeds, have higher maintenance costs.
When private railroads were hauling both passengers and freight and making
money, they normally maintained their track to fairly high standards. When the
financial fortunes of railroads began to decline due to competition from trucks hauling
freight over publicly-provided highways, cutting back on the level of track
maintenance was one way to save money, and since their trains were not permitted
to run faster than 79 mph,34 higher maintenance standards were unnecessary. When
the railroads were freed of their obligation to run passenger trains by the creation of
Association of American Railroads, Railroad Facts, October 1999, p. 44.
U.S. Congress. House. Amtrak’s Current Situation. Subcommittee on Railroads of the
Committee on Transportation and Infrastructure. Hearings. 104th Congress, 1st Session.
February 7, 10 and 13, 1995. (104-10). Testimony of A.R. Carpenter, President and Chief
Executive Officer, CSX Transportation Inc. p. 361.
In 1947 the Interstate Commerce Commission imposed a 79 mph speed limit on all trains
not equipped with special traffic signaling devices in the cab of their locomotives.
Amtrak, their incentive to maintain track at classes permitting even moderately high
speeds was eliminated. Freight railroads are generally content to operate their trains
at speeds of 59 mph or less; this imposes less wear and tear on their tracks, and since
freight trains do not have to make frequent stops–as passenger trains do–their average
speed will be close to that maximum speed.
Amtrak has maintained the Northeast Corridor, the track it owns, to class 7
standards (now maintained to class 8 to permit higher speed trains; see below). But
97 percent of Amtrak’s 23,000 route miles are run over track owned by freight
railroads. Federal law permits Amtrak to operate over the tracks owned by freight
railroads at an incremental cost basis. That is, Amtrak only has to pay for any
additional costs imposed on the freight railroads for carrying Amtrak trains.
If Amtrak wants to run its trains over their track at speeds much higher than their
freight trains run, Amtrak has to pay the freight railroads for the cost of maintaining
the track to that higher class. But if Amtrak is content to operate its trains at a top
speed of 79 mph or less,35 then it doesn’t have to pay as much and its own expenses
are less–which is an important issue for the financially-strapped company.
While intercity travel by train nowhere commands the prominence it did before
the appearance of cars and airplanes, the level of ridership in the United States is
much lower than in many other countries. Britain, France and Germany all have
passenger rail systems which account for about 6-8 percent of their total annual
passenger travel miles; Japan’s system carries 18 percent. One thing that sets the
passenger rail networks of France, Germany, and Japan apart from the United States
is that they all have nationwide systems of high-speed trains.
One of the difficulties facing intercity passenger rail travel is that its advantages
have been overtaken by other modes of travel. Highways have enabled cars to be
competitive with conventional trains in speed, while airplanes are able to carry as
many passengers over long distances much faster than trains can manage. The
implementation of high-speed rail train systems is intended to make trains more
competitive with these other modes.
There is no precise speed threshold for differentiating a ‘high-speed train’ from
other trains. It is more useful to talk in terms of ‘high-speed rail networks’. Japan,
France and Germany have developed nationwide rail systems capable of speeds of
150-180 mph. These systems consist not only of very fast trains, but also of dedicated
grade-separated tracks and sophisticated signaling systems: they are the railroad
equivalent of the U.S. Interstate Highway System. The overall speed of the system
is a result not just of train speed but also of eliminating delays from slower trains and
from slowing for safety reasons at road crossings. Thus, just introducing faster trains
into the existing U.S. rail network will not achieve the same results. For example,
Amtrak’s new Acela train, which has a top speed of 150 mph or more, is only able to
Class 4 track has a speed limit of 60 mph for freight trains, 80 mph for passenger trains.
average about 82 mph over the 226 miles of its Washington DC–New York City
route, and only 55 mph over the 187 miles of its New York City-Boston route–routes
which it shares with freight trains and commuter trains.36
There is evidence that faster trains could result in increases in ridership and
profitability. Amtrak’s only profitable service has been its Metroliners between
Washington, DC and New York City; it hopes that its new Acela service will prove
even more profitable. In other countries, the introduction of high-speed networks in
heavily traveled corridors has reversed the decline in train travel in those corridors and
made some of those routes profitable. The introduction of Streamliners–trains
capable of speeds over 100 mph–in the United States in the 1930s had a similar
The benefits of high-speed rail networks go beyond simply increasing ridership.
Faster trains can increase a railroad’s productivity: a faster train can complete more
trips each day, and thereby earn more revenue per day. Significant increases in
productivity are not likely for the Northeast Corridor, however, where faster service
will offer only a marginal reduction in trip times. But in other parts of the country
faster trains could cut trip times in half or more.
On December 11, 2000 Amtrak began operating a new high-speed train, the
Acela, in its Northeast Corridor between Washington DC and Boston. Amtrak is
counting on this new service to boost ridership and revenues. Due to design and
production problems, this service was behind schedule: Amtrak had hoped to have
these trains in operation by the fall of 1999. As of January 2001, there is only one
Acela roundtrip between DC and Boston each weekday. In its first four weeks of
service, Amtrak reports that this train exceeded its revenue projections by 12
percent.38 Amtrak plans to add one trainset a month until it has 19 Acela roundtrips
each weekday between Washington DC and New York City and 10 roundtrips each
weekday between New York City and Boston.
Amtrak–and Joseph Vranich, a prominent Amtrak critic and author of
Supertrains: Solution to American’s Transportation Crisis–are optimistic about the
prospects of faster train service to increase ridership and revenues. But a French
transportation expert, assessing more than 15 years of experience with high-speed rail
service in France, argues that high-speed rail networks are competitive with other
travel modes only for a narrow niche–trips of 150 to 350 miles in length (or one to
three hours on a high speed train). For trips of less than this length, he argues that the
door-to-door flexibility of the automobile outweighs the time advantage of the trains,
unless stations are near the passenger’s origin and destination point. And for trips of
Computed from Amtrak’s Northeast Corridor Timetable. By contrast, Japan and France
have routes on dedicated track with average speeds of 160 mph. “World’s Fastest Scheduled
Train Service (as of 1997),”
Reutter, “The Lost Promise of the American Railroad,” Wilson Quarterly, Winter 1994.
“Acela Express Gets Off to Strong Start,” Amtrak press release, January 11, 2001,
more than 350 miles or so, the airplane’s greater speed trumps the train, since the cost
of travel on the two modes is comparable.39
The TGV [Train4a Grande Vitesse] has thus resulted in a great reduction
in air traffic between Paris and Lyons, Paris and Rennes, and Paris and
Nantes, all being two-hour train journeys. But this is not the case for the
Paris-Bourdeaux line, which has had a three-hour TGV link since 1990.
Air Inter, the national airline at that time, has retained 80% of its traffic
along this route, a much higher figure than expected.40
Washington, DC is 226 miles from New York City, which is 187 miles from
Boston: well within high-speed rail’s niche. But there are not many other city pairs
in the United States whose distance and travel volume are suited for the expense of
high- speed trains. Even in Japan, only one of their three high-speed train routes was
profitable as of 1987.41
Options for Providing Intercity Passenger Rail
Service in the United States
The Amtrak Reform Council is charged with providing Congress with an action
plan for a restructured and rationalized national intercity rail passenger system, if the
Council finds that Amtrak will not meet its goal of operational self-sufficiency by
FY2003. In the meantime, there are numerous proposals for how Congress should
deal with Amtrak. These include liquidating Amtrak, privatizing passenger rail
service, introducing competition, freeing Amtrak from political interference, having
Amtrak eliminate money-losing routes, providing only capital support to Amtrak,
substantially increasing Amtrak’s funding (prerequisite for any expansion of Amtrak’s
services), and continuing with the status quo.
Some42 argue that the best course for improving passenger rail service in the
United States is to privatize Amtrak, though what is meant by ‘privatizing Amtrak’
varies: eliminating government support, splitting up its operations, selling off its
assets, or reducing its regulations. Advocates of privatization argue this would
promote a more business-like approach on the part of Amtrak (or its successor). The
advantage of privatization for public services is generally considered to be the freeing
of an organization from regulations that restrict its operational efficiency. This newfound flexibility is supposed to enable the privatized organization to introduce process
Christian Gerondeau, Transport in Europe, Artech House, Inc, Boston, 1997.
Ibid, p. 123.
Since then the Japanese rail industry has been privatized, and individual line profits and
costs have not been available.
Ronald D. Utt, Congress Should Accept Industry Offers to Buy Amtrak, Heritage
Foundation Backgrounder, May 18, 1998, no. 1179; Vranich, Derailed, Chapter Nine;
innovations that achieve similar results at less cost. Where possible, the introduction
of competition among service providers is also thought to lead to improvements in
service and lower costs for public services.
Advocates of privatization cite the successful experiences of several other
countries which privatized national rail operations and saw passenger rail traffic climb
and government expenses drop.43 However, there are disputes over the interpretation
of profitability. For example, some say that France’s high-speed rail network operates
at a profit,44 yet a French transportation expert says while one of France’s three main
high speed lines may be successful enough to pay its way, the other two are not, and
that the French railway company has a “catastrophic” debt load due primarily to
development of the high-speed rail network.45 Moreover, even in those nations which
have privatized their rail systems, the national governments still provide subsidies to
the private rail companies.46
There is nothing magical about private sector operations. Private companies
routinely go out of business; even the largest and most successful companies make
bad decisions. At one time, passenger rail service in the United States was provided
by private companies in competition with each other. They were also in competition
with other forms of transportation; were restricted by government regulation of their
route structure, rates, and work rules; and were perhaps more interested in freight
than their passenger operations. These private companies lost money providing
passenger service. As a result, they reduced their investments in passenger service,
and it declined further.
When Amtrak was created, it operated with a more privatized structure than
now. Amtrak did not provide rail service directly; instead, it contracted with the
private railroads to operate passenger trains over routes set by the Department of
Transportation. Although Amtrak owned the trains (which had been given to it by the
railroads), it did not have any operating employees or own any track. Instead, the
railroad companies were still operating the trains, while Amtrak now had to cover
their losses. Thus, while there was still ostensibly competition for passengers, the
incentives of the railroad companies to hold down costs were reduced, as were their
incentives to provide good service. On-time performance worsened. In time
Congress restructured Amtrak, allowing it to buy the section of track between
Washington, DC and Boston (the Northeast Corridor) and to take over direct
operations of trains.
An Amtrak replacement would face several complications. Some of these were
not faced by the privatization of government-owned railroads in other countries. For
one, Amtrak does not own most of the track it uses. It owns the Northeast Corridor,
but for the rest of its service around the country, it uses track owned by private freight
railroad companies and pays them for its use. Thus, a replacement for Amtrak would
Vranich, Derailed, Chapter Nine.
Vranich, Derailed, p. 185.
Christian Gerondeau, Transport in Europe (Artech House, Inc, Boston, 1997), pps. 122-123
At least in the most prominent examples of privatization, Great Britain and Japan.
still have to deal with track access and maintenance issues with the freight railroads.
Moreover, the freight railroad industry takes the position that Amtrak’s franchises to
use the rail lines owned by the freight railroads are not automatically transferable; they
would insist on negotiating new terms and being satisfied as to the competence of any
other operator before permitting use of their track.
There are several major expenses Amtrak pays that would continue to exist even
if Amtrak did not. Chief among these are the costs of maintaining the Northeast
Corridor, which is used by freight railroads and by regional commuter systems as well
as by Amtrak trains. If intercity passenger rail were to be profitable anywhere in the
United States, this corridor is the likeliest location: the only Amtrak service which
makes enough money to cover its costs operates on this corridor. In the absence of
Amtrak, the costs of maintaining this corridor would simply be shifted to other
Another expense that would have to be shifted to other parties in the absence of
Amtrak is its share of contributions to the Railroad Retirement Fund. Congress
provides about $175 million to Amtrak each year to cover its share of contributions
to the industry-wide retirement plan for retirees who never worked for Amtrak;47
Amtrak pays another $63 million for its own current and retired employees.48 In the
absence of Amtrak, these costs could shift to the remaining U.S. railroad companies,
or could continue to be provided by the Congress. Finally, there is Amtrak’s debt;
while the government is not considered to be liable for this debt, this debt might affect
any future users of Amtrak’s assets, which include its trains and the Northeast
Finally, it is not clear that private providers would be willing to continue, let
alone expand, a nationwide passenger rail system. There are segments of the system
that might be profitable, such as the aforementioned Northeast corridor, which private
companies might bid on. But if Congress remains committed to a nationwide system,
the result might be to have the more profitable parts of the system operated as
businesses, with the federal government continuing to subsidize the less-profitable
segments of the system in order to maintain service on them.
There is little evidence that a national system of intercity passenger rail service
can be operated at a profit, even by private providers. It is possible that private
companies, more subject to the financial pressures of private markets, might be able
to provide passenger rail service with less financial support from the government than
Amtrak receives. But experience with privatization of government services over the
past two decades has suggested that it is competition, rather than simply privatization,
that is most likely to produce improvements in services.
For further information about Congress’ contribution to Amtrak for the Railroad Retirement
Fund, see Stephen J. Thompson, Amtrak and Federal Financial Assistance: Background and
Selected Public Policy Issues, CRS Report 95-1199 E, updated September 9, 1998.
U.S. Congress. House. Subcommittee of the Committee on Appropriations. Department
of Transportation and Related Agencies Appropriations 2001. 106th Congress, 2nd Session,
March 15, 2000. p. 319.
Some argue that the source of Amtrak’s problems is not government ownership,
but lack of competition: until very recently, Amtrak has had a monopoly on intercity
passenger rail service. They say that it is competition that promotes improved
performance, so that the key to improving Amtrak’s performance is not privatization
per se, but the introduction of competition.
As noted above, when competition did exist for passenger rail service, the
companies providing it lost money consistently, and thus sought to drop that service.
It is also the case that those same companies were losing money on their freight
operations, but now, after regulatory and structural changes in the industry, their
freight operations are profitable. So the fact that competitive passenger service was
a market failure in the past does not prove that it can never succeed.
However, Amtrak no longer has a legal monopoly over intercity rail passenger
service: the ARAA repealed a statute that allowed Amtrak to prevent others from
providing intercity rail passenger service over routes its serves. If Amtrak is still the
only major provider of intercity services, it is not due entirely to legal barriers but to
the lack of enthusiasm of the market to provide competition to Amtrak on a large
scale.49 However, it has been only three years since Amtrak’s monopoly was
eliminated; given more time, perhaps competitors will emerge.
However, it is likely that additional government action would be needed to
promote competition. Because Amtrak was created to provide passenger rail service
over a rail system that was owned by private companies, Amtrak was provided with
a number of benefits to help it operate in such an setting. For example, its passenger
trains have scheduling priority over freight trains on the track owned by the freight
railroads. Also, Amtrak receives certain financial perquisites as a government-owned
agency, such as the ability to lease vehicles from the General Service Agency, which
saves Amtrak $15 million each year.50 Finally, there is Amtrak’s annual appropriation
from the federal government, without which Amtrak would be bankrupt. Congress
would probably need to ‘level the playing field’ for a private company or companies
in some way in order to make competition feasible.
Others argue that Amtrak has competitors now. While there may be no other
major passenger rail companies in the United States, Amtrak competes with the airline
industry, the intercity bus industry, and the private automobile to provide
There are small providers of intercity rail travel, such as the American Orient Express; they
typically operate only a few routes once a week or so, and are not so much transportation
services as entertainment services, like cruise ships.
Congressional Record, 106th Congress, 2nd Session, Senate, July 20, 2000, S7337-S7342.
Still other critics argue that the problem with Amtrak is not that it is owned by
the government or that it is a monopoly, but that it is subject to a variety of restraints
that make it hard for Amtrak to innovate. These restraints are seen as two forms:
regulatory restraints and political restraints.
Some critics of Amtrak argue that Amtrak’s woes are the result of excessive
regulation, and that if Amtrak were dissolved and passenger rail service privatized
(i.e. freed of various work practice regulations), the result would be improvement in
passenger rail service and growth in demand.51 Yet it is not clear that privatized rail
service would be free of the regulations that apply to Amtrak. Since Amtrak is
regulated as part of the railroad industry, any other company providing intercity
passenger rail service would presumably be subject to the same federal safety and
labor regulations. If Amtrak’s woes are the result of excessive regulation, the
solution would seem to be to change those regulations. The ARAA did reduce the
level of regulation of Amtrak’s work practices, but it may take time to see the results
of those reforms.
Others argue that Amtrak’s efforts to achieve profitability are hindered by the
demands that Congress makes for services in constituent districts. A basic principle
of entrepreneurial practice is to shift available resources from less productive activities
to more productive activities. It is perceived by some that Amtrak cannot fully pursue
this strategy, which they see as involving the termination of unprofitable long-distance
routes, because without providing some limited level of service to many parts of the
nation, Amtrak might not get the political support it needs to operate. In a statistical
analysis of Amtrak service by one scholar, however, such political considerations
appeared to play only a modest role in Amtrak’s route decisions, while most of the
variation in service across the country could be explained by such things as population
size, population density, and distance between large population centers.52
Moreover, privatized systems are not free of political influence. In Japan, the
passenger rail companies are now private companies, but the national government
assists with the construction of new high-speed rail lines. These lines are greatly
desired by political and business officials in the country’s outlying districts, and it is
reported that the national government is constructing more lines than are
economically justifiable or than are wanted by the rail companies who will be
responsible for providing service over these routes.53
David C. Nice, Amtrak: The History and Politics of a National Railroad, Lynne Rienner
Publishers Inc, Boulder, Colorado, 1998, p. 31-42.
Yukihide Okano, “The Backdrop to Privatization in Japan,” Japan Railway and Transport
Review, Summer 1994; Far Eastern Economic Review, “Pork Barrel Express,” November
Divide Responsibility for Infrastructure from Operations
As mentioned before, rail is unique among transportation modes in the United
States in that its infrastructure is privately owned and thus the responsibility of the rail
companies. Some54 have proposed that passenger rail service could be improved if
the responsibility for maintaining the infrastructure, the tracks, was given to the
government, as is the case with highways, waterways, and air travel infrastructure.
This would free Amtrak to concentrate on operations, and relieve it of a very costly
burden. Moreover, it is thought that this might promote competition by encouraging
the entrance of new rail passenger operators.55
Conversely, this option might be opposed by the freight railroads, which own 99
percent of the track over which Amtrak operates. Also, it is not clear that the federal
government would be prepared to assume responsibility for a rail network that has
always been owned and operated by private companies (save for a brief period during
and after World War I). However, even shifting responsibility for the one percent of
its track which Amtrak does own, the Northeast Corridor, to another entity would
free Amtrak of well over $12 billion in capital costs over the next 25 years for the
maintenance of that line.
Shed Unprofitable Lines
Some argue that Amtrak should eliminate routes on which it loses money.
However, Amtrak loses money on virtually every route it operates.56 Also, since in
most of the country Amtrak is providing only limited service already, eliminating
routes would conflict with the goal of maintaining a nationwide passenger service–and
would weaken the political support for Amtrak.
Also, eliminating routes could cost Amtrak more money. 57 This is due to the
division of Amtrak’s expenses: some are fixed costs and some are variable costs.
U.S. Congress. House. Committee on Transportation and Infrastructure. A New Vision for
America’s Passenger Rail: The Report of the Working Group on Intercity Passenger Rail
to the Committee on Transportation and Infrastructure.
This is the approach recommended by European Union Directive 91/440, which seeks to
make railways independent enterprises that are commercially viable. This Directive requires,
among other things, that the railways divide their infrastructure from their operations; the
states will still be responsible for the infrastructure, but the operations will have to be run on
a commercial basis. Erik Vandenbroele, “Railway Transport Policy in Europe,” Japan
Railway and Transport Review, #2 (June 1994).
U.S. GAO, Intercity Passenger Rail: Financial Performance of Amtrak’s Routes, May
1998, GAO/RCED-98-151;Amtrak, FY2001 Route Profitability System Report, February 15,
U.S. Congress. House. Subcommittee on the Department of Transportation and Related
Agencies Appropriations, Committee on Appropriations. Department of Transportation and
Related Agencies Appropriations 2001. 106th Congress, 1st Session. March 13, 2000. P.
Fixed (‘overhead’) costs do not flow from any one route but represent the cost of
keeping the entire company running: the costs of administration, maintenance of
tracks and equipment, repair yards, workers, payments on debts, taxes. These costs
are divided among all routes. If Amtrak stops running one route, that route’s share
of the fixed costs must then be paid by the remaining routes, meaning that each
remaining route becomes more costly.
Variable costs are those created by running a particular train: e.g., the cost of
fuel and wear and tear on the equipment. Eliminating a train on a route would save
the cost of running that train, but will also eliminate the revenues received by running
Amtrak has already reduced service in many parts of the country to one train per
day, or even one train every other day. Amtrak tried cutting unprofitable routes in the
mid-1990s, and found that it lost more money by doing so.
Polls show that a majority of Americans like the idea of having a passenger train
available to them to use; however, these polls do not ask them how much they are
willing to pay to have the service available. Meanwhile, transportation statistics show
that in most parts of the country, very few of these Americans actually take advantage
of the availability of passenger train service. However, Amtrak’s long-distance trains,
the ones that cross the Great Plains and stop in small towns, have some of the highest
rates of ridership (percentage of seats filled) of all Amtrak routes.58
Provide Federal Funds Only for Capital Investments
Some, recognizing that rail is unique among transportation modes in the United
States in having to pay for its own infrastructure, have proposed providing support
for capital projects for passenger rail, while requiring Amtrak to cover its operating
costs on its own. Advocates maintain that this option would put Amtrak on a more
equal footing with other transportation modes, and enable Congress to make a fairer
comparison between Amtrak’s performance and that of other transportation modes.
In FY1973, Congress began designating some of the funds it appropriated to
Amtrak as ‘operating funds’; in FY1976, Congress began designating some of its
appropriation as ‘capital funds.’ Since FY1998, Congress has appropriated funds to
Amtrak designated as ‘capital grants,’ with the provision that these moneys could also
be used for operational expenses. The ARAA provision that after FY2002 “no funds
authorized for Amtrak shall be used for operating expenses” implies that funding
might still be provided, which by process of elimination would be for capital
Amtrak is not now able to cover its operating costs out of its own revenues, and
so has been using government funding to help cover its operating deficits. This has
U.S. Congress. House. Subcommittee on the Department of Transportation and Related
Agencies Appropriations, Committee on Appropriations. Department of Transportation and
Related Agencies Appropriations 2001. 106th Congress, 1st Session. March 13, 2000. P.
been exacerbated by Amtrak’s borrowing to make capital purchases, since repayments
of this borrowing are an operating expense. Facing the prospect of not being able to
use government funds for its operating costs after FY2002, Amtrak has reclassified
some operating costs as capital costs, with the Congress’ consent (see Appendix).
Some say that holding Amtrak to this standard would be fair only if the
government had already provided the level of support needed to establish a modern
system of rail infrastructure for Amtrak to operate over. This argument presumes that
expanded and improved passenger rail infrastructure would have resulted in increased
ridership and improved financial performance for Amtrak.
Increased Funding for Passenger Rail Service
Several funding mechanisms have been proposed for Amtrak, either as
supplements or replacements to the current practice of providing annual grants.
These include creating a dedicated source of funding similar to those of the other
transportation modes, giving Amtrak more bonding authority to raise its own funds,
and giving states the flexibility to use their federal highway funds for rail
Trust Fund. A dedicated source of funding has been Amtrak’s goal for a long
time. The highway, aviation, and transit industries each have one. The suggested
source for Amtrak is usually the motor fuel tax. The total federal tax on motor fuel
is 18.3 cents, of which 15.44 cents goes into the Highway Account of the Highway
Trust Fund and 2.86 cents goes into the Mass Transit Account (0.1 cent goes into the
Leaking Underground Storage Tank account).
The argument against this has been that the Highway Trust Fund and the
Aviation Trust Fund are funded by taxes that are, essentially, user fees. The railroads
also pay taxes on fuel, but these taxes go into the U.S. Treasury General Fund. In
November 1995, the Senate Finance Committee approved a proposal to divert ½ cent
of the 2.86 cents that goes to transit into a dedicated fund for passenger rail (Amtrak);
that legislation did not pass. In 1997 Amtrak requested that ½ cent from the 4.3 cents
that Congress added to the fuel tax in 1993 as a ‘deficit reduction’ tax be set aside in
a trust fund for capital improvements; they estimated that ½ cent would raise $750
million each year.59 The Intercity Passenger Rail Trust Fund Act of 1997 (S. 436)
would have done this; it did not pass.
Allow States to Use Federal Highway Funds for Rail. A number of
states are showing increasing interest in expanding Amtrak’s operations within their
boundaries. They argue that, in the spirit of federalism and local control, they are
better judges of their transportation needs than is Washington, and that giving them
the flexibility to use their federal highway funding for rail projects would enable them
to create more balanced transportation systems.
Hearing Before the Subcommittee on Surface Transportation and Merchant Marine of the
Committee on Commerce, Science, and Transportation, United States Senate, March 13,
1997 (S. Hrg. 105-273), p. 54.
Some opponents of this concept argue that highway needs are so great that no
moneys available for highway construction or maintenance should be used for any
other purpose. They also argue that the fuel tax is primarily paid by highway users,
therefore the revenues from the fuel tax should be primarily dedicated to highway
improvement. Others believe that allowing states to expand passenger rail service on
a piecemeal basis will reduce the responsibility of Congress to support an expanded
Currently, states are prohibited from using their federal transportation funding
for rail, although they are allowed to use it for intercity buses. A provision to allow
states the flexibility to use a portion of their federal highway funds for passenger rail
projects has been approved in the Senate in the past.60 The Surface Transportation
Act of 1999 (S. 1144, 106th Congress) would have allowed states this flexibility, as
would have H.R. 3630 (106th Congress).
Tax-exempt Bonds. The High-Speed Rail Investment Act of 2000 (S. 1900,
H.R. 3700, 106th Congress) would have enabled Amtrak to raise up to $10 billion
over the next ten years by issuing up to $1 billion in bonds each year. These bonds
would not pay interest; instead, the bondholders would be eligible to deduct a certain
amount from their taxes. The estimated cost to the government over ten years was
$3.2 billion; in exchange, Amtrak would receive a much larger amount, and in a
predictable revenue stream, which would enable it to prepare realistic long-term
In addition, these bills would have enabled Amtrak to contract with states to
provide capital improvements, with a 20 percent match by the states. They would
have required Amtrak to cooperate with the states in the development of high-speed
rail corridors, while also giving states an incentive to invest in this transportation
mode. Amtrak would have been able to leverage a large amount of money with a
lesser cost to the government.
While this legislation did not pass the 106th Congress, Senate leaders pledged to
reintroduce the legislation early in the 107th Congress. Senator John McCain,
Chairman of the Committee on Commerce, Science and Transportation, opposed the
bill but promised to hold hearings on the reintroduced bill during the 107th Congress
and allow the legislation to move forward.61
Continue the Status Quo
Since its inception, Amtrak has received an annual grant from the Congress. One
difficulty with this approach is that the annual level of funding has been unpredictable,
making it very difficult for Amtrak to plan ahead. Rail infrastructure projects are by
nature long-term projects. It takes years to construct or upgrade rail lines; without
a secure and predictable source of funding over a multi-year period, such projects are
Senate version of S. 440, the National Highway System Designation Act of 1995; also in
1991 and 1997.
“Amtrak Faces Funding Obstacles; Senator McCain Seeks Debate on Type of System U.S.
Needs,” Washington Post, January 11, 2001, A25.
difficult to carry out. Thus this arrangement has created difficulties for Amtrak’s
The creation of Amtrak was a compromise between those who felt that a
national system of passenger rail service was an important part of the nation’s
transportation system, and those who felt that passenger rail service was no longer
needed in an era of air travel and near-universal automobile ownership. Passenger rail
service was given enough government support to survive, but probably not enough
to allow it to prosper. The fluctuations in Amtrak’s funding over its life reflect the
continuing conflict between these two perspectives. At present, it appears likely that
this stalemate will continue at the federal level, with Amtrak expanding its operations
piecemeal in those states willing and able to pay for additional service with their own
Appendix: Disputes over What Constitutes
Amtrak’s ‘Operating Expenses’
Part of the question of whether Amtrak will be able to cover its operating
expenses out of its revenues by FY2003 involves what those operating expenses will
consist of. Generally Accepted Accounting Principles (GAAP) define what are
operating expenses and what are capital expenses for accounting purposes. Amtrak
prepares its annual financial statements in accordance with GAAP. But for many
years now, in reporting its annual operating expenses–or more specifically, its shortfall
in covering its annual operating expenses–to the Congress, Amtrak has excluded two
types of expenses that GAAP defines as operating expenses: depreciation, and
progressive maintenance. This exclusion has been quite explicit, and Congress has
accepted it. The Amtrak Reform Council (ARC) appears to be arguing that these
expenses should be counted as operating expenses in assessing whether Amtrak clears
the bar of covering its operating expenses by FY2003; this would have the effect of
raising that bar by about $570 million.62
Depreciation. Amtrak interprets the ARAA requirement that it operate
without federal financial assistance to cover operating losses as excluding depreciation
from operating costs for this purpose.63 One of the recommendations for change
made by the ARC is that the yardstick for measuring whether Amtrak has achieved
Amtrak Reform Council, First Annual Report, January 24, 2000, p. 9.
Depreciation is the allocation of the expense of a long-lived (i.e., capital) good over the
period of its useful life for accounting purposes; e.g., if Amtrak buys a passenger car for
$2,000,000 that has a useful life of 20 years, the car is considered an asset, and Amtrak would
record an expense for depreciation of that car of $100,000 ($200,000/20) in each of the next
twenty years. The depreciation expense is a proxy for the need to replace a deteriorating
asset; e.g., Amtrak might set aside $100,000 of revenue each year to cover the depreciation
expense, so that at the end of 20 years it would have $2,000,000 available to buy a new car.
If depreciation is not taken into account, for 19 years things look good, then in the 20th year
Amtrak has to come up with $2,000,000 to buy a new car.
operational self-sufficiency should be GAAP, which include depreciation as an
In this view, by allowing Amtrak to exclude depreciation from its operating
expenses for Congressional purposes, Congress is setting a lower standard for
Amtrak’s financial performance: it has to earn enough to cover its current expenses,
but the costs for repairing and maintaining its long-term assets (track, cars, stations,
etc) are not counted. The money to pay for those costs will have to come from
somewhere, most likely from the federal or possibly state governments.
Conversely, if depreciation were to count as an operating expense against
Amtrak’s goal of becoming financially self-sustaining in operating costs, the result
would be to put Amtrak on a slope that would become ever steeper. For depreciation
costs–the replacement costs of capital assets–will inevitably rise as an organization’s
capital investments increase. As Amtrak increases its investment in track and trains,
which is necessary to increase its revenues and attain operating self-sufficiency, its
depreciation expenses will increase right along with that increase in investment.64
Amtrak’s depreciation expense is projected to rise from around $370 million in
FY1999 to around $490 million in FY2002.
Progressive Maintenance. The ARC has observed that Amtrak classifies
maintenance expenditures for its capital goods as a capital expense rather than an
operating expense. Under GAAP, maintenance is considered an operating expense.
Amtrak spends around $80 million each year on ‘progressive maintenance’, keeping
its equipment in a good state of repair, which prolongs its useful life. For accounting
purposes it classifies that expense as an operating expense, but for purposes of
counting whether it is on track to meet Congress’ operating self-sufficiency
requirement it does not. Amtrak’s defense of this practice is that it has been counting
that expense as a capital expense since 1993, with Congress’ consent.
Apparently this practice began in 1992; in that year the cost of overhauling some
of its rolling stock exceeded 50 percent of the book value of the equipment, so
Amtrak reclassified some of its overhaul expenses as capital expenses.65
Amtrak proponents contend that this practice is common in the transportation
field. They note that the Federal Highway Administration classifies maintenance of
roads as a capital expense for receipt of federal highway funds. The FY1998
Department of Transportation Appropriation Act (P.L. 105-277) amended the
definition of capital project to include ‘preventive maintenance’ for Formula Programs
in FY1998; the Transportation Equity Act for the 21st Century (TEA-21, P.L. 105178)) amended the definition of capital project to include ‘preventive maintenance’
as a capital rather than operating expense for transit programs.
Office of the Inspector General, U.S. Department of Transportation, Report on the 1999
Reassessment of Amtrak’s Financial Needs Through Fiscal Year 2002, Report No. CE-1999116, July 21, 1999, p. 28.
US GAO, Amtrak’s Financial and Operating Conditions, GAO/RED-9571, February
1995, p. 49, footnote 5.