There are two additional areas of Federal financial commitment to Amtrak. Federal loan guarantees totalling almost $1 billion were extended to Amtrak during its early years for equipment purchases. These sums cannot realistically be repaid, and the Federal Government amortizes the balance at the rate of $25 million per year. The current balance is $825 million. Finally, title VII of the Rail Revitalization and Regulatory Reform Act of 1976 (Public Law 94-210) authorized $1.75 billion for the Northeast corridor improvement project. A portion of these funds was to permit Amtrak to acquire properties and track in the corridor for its operations there, as owner, rather than as lessee. This purchase of the Northeast corridor property has already been authorized under the Northeast corridor improvement project, and requires only an annual appropriation. For accounting purposes, nevertheless, it appears in the President's fiscal year 1979 budget at $24 million. It has become increasingly apparent that rail passenger service in the United States and Federal financial support for that service have approached a critical junction. The prospects are not good for Amtrak to reduce the trend of growing Federal subsidies for either its capital or operating expenses. The committee recognizes that there are public benefits to be gained from the operation of an efficient rail passenger system. However, there is a serious need for the Federal government to determine what are the legitimate benefits of that system and what are the financial costs of achieving those benefits. The committee believes that 7 years of operations of a single, primarily federally financed rail passenger transportation program, without a serious policy evaluation or analysis, is out of step with the demands being placed on our Nation's financial resources. In this connection, reference to the final report on the basic national rail passenger system, submitted by former Secretary Volpe, on January 28, 1971, is instructive. The report said that if rail passenger service was to be a viable element in a national transportation system, it was first necessary to reverse the severe decline in previous patronage experience. Amtrak asserts today that it has increased ridership by roughly 15 percent over the last several years, but the evidence strongly suggests that what increases have occurred have been due to the addition of new service or increases in frequency of service on existing routes, rather than increased patronage on existing trains. The 1971 report continued, "Only major improvements in the quality of service can generate increased demand." The General Accounting Office report, dated April 5, 1978, says, "Since 1973 GAO has repeatedly suggested, and Amtrak has agreed, that cleaner, more reliable, more comfortable equipment; more congenial personal service; and better on-time performance are necessary to attract more passengers." (A detailed summary of General Accounting Office reports regarding Amtrak is set forth in this report beginning on page 23.) The committee, therefore, in reporting this legislation, has directed. the Secretary of Transportation to undertake a study of the Amtrak route system and to recommend a new route system which will provide an optimal level of intercity railroad passenger service based upon sound marketing and demographic considerations. The committee is particularly concerned that both the costs and benefits of Amtrak service be measured in such a manner that will facilitate a rational and logical evaluation of the Amtrak route system. While costs can be accurately measured in terms of per passenger mile deficits, the committee recognizes the difficulties in quantifying societal or environmental benefits. While benefits do not lend themselves to easy numerical conversions, the time has come when there should be some effort to reasonably measure them in order to determine if the Federal Government is receiving a level of service commensurate with its financial support. It is the intention of the committee, in establishing the route reexamination procedure to encourage a broad level of public participation in order to focus attention on the rail system, its actual benefits, and the cost to the taxpayer of supporting those benefits. COMMITTEE ACTION AUTHORIZATION LEVELS The committee held hearings on Amtrak's authorization on March 10 and 13, 1978. On April 11, 1978, the committee ordered favorably reported this bill recommending authorizations for Amtrak for fiscal year 1979 in the following amounts: $510 million for payment of operating expenses; $120 million for payment of capital expenses; and $25 million for payment of guaranteed loans. The President's budget request earmarked $510 million for the operating expenses of Amtrak for fiscal year 1979 although Amtrak testified that in order for it to continue to operate the existing route system during fiscal year 1979, it would need $613 million to cover its projected operating deficit for fiscal year 1979. The committee is further recommending that the operating budgets for the Northeast corridor and the entire national system be combined under one authorization. Evidence submitted to the committee indicated that the separate authorization for the Northesat corridor does not reflect Amtrak's full corridor costs and it therefore serves no useful purpose to continue the separation. In recommending $510 million for operating losses, the committee takes the position that the time has come for substantial changes to be made in Amtrak's operations in order to reverse what the committee believes to be an intolerable escalation of operating deficits. The committee believes that Amtrak should utilize the route and service criteria set forth under section 404 of the Rail Passenger Service Act and take steps to implement cost savings measures as well as to increase revenue levels to reduce the anticipated cash shortfall for fiscal year 1979. These steps should be initiated by the Amtrak Board of Directors immediately to assure a reduced operating deficit for 1979, and not be delayed pending the final adoption and implementation of a new revised route system as mandated by this bill, which may well not occur until well into the second half of fiscal year 1979. Information available to the committee strongly suggests that the increases in ridership on Amtrak trains which have occurred during the past 7 years have been due in large measure to the addition of new train service rather than increased patronage on existing trains. In addition, on certain of its trains, ticket prices are set so low as to promote ridership that travellers are induced to use service they would otherwise not consider. The result is a vicious circle in which pressures to justify or rationalize the system lead to artificial levels of better ridership, produced only by rock bottom prices (or free passes). The unfortunate result is dissipation of the corporation's assets and resulting losses which must be borne by the U.S. taxpayer. The following table illustrates typical low levels of revenues generated by various routes: 5-YEAR FINACIAL AND OPERATING PLAN-ROUTE-BY-ROUTE PROFIT AND LOSS, FISCAL YEAR 1977 [Dollars in thousands, except loss per passenger] The committee is of the opinion that, contrary to assertions that Amtrak is greatly increasing ridership on its trains, its load factors, expressed as passenger miles per train, have gone down steadily from 126.81 in late 1974 and early 1975, to 103.81 in fiscal year 1976. The latest data show that this statistic is now below 100. Amtrak believes social benefits such as safer intercity travel, improved and more convenient services to the public, lower fuel consumption, and lower air pollution in highly populated areas justify the current level of cost of rail passenger service. The committee disagrees. It is uncontroverted that in the abstract these are desirable goals. The realization of these goals, however, depends on ridership levels not likely to be achieved, at least the way the current system operates. A train can be fuel efficient when heavily loaded and moving over relatively long distances. Amtrak is not fuel efficient because it does not carry enough passengers. The General Accounting Office has found, and the committee agrees, that passenger loads are not likely to go up unless a disruption occurs in another competing transportation mode. It has already been pointed out, that Amtrak contracts with the railroads for train service, which covers train and engine crews. Railroad union agreements generally require that engineers, brakemen, and conductors be employed by the railroad over which Amtrak runs. The following table illustrates Amtrak's functional costs in fiscal year 1977. 1 Amtrak's audited statement of operating loss, released Feb. 15, 1978, shows total expenses at $842,353,000 for fiscal year 1977. Amtrak has little control over train and engine crew costs because detailed work rules are specified by union contracts. For example, the Southern Railroad testified at the committee's hearings that it is required to operate the "Crescent" between Washington, D.C. and Atlanta, Ga. with four 5-man crews. Southern told the committee the same job could be performed safely and efficiently by two 4-man crews, reducing the number of employees for this function from 28 to 8. The committee does not believe that Amtrak's inability to fully control this situation is sufficient grounds to justify authorizations to cover these uncontrolled and excalating costs. The committee feels that while these practices are significant in the inefficiency of the total system, it should not be inferred that merely controlling these costs would halt Amtrak's red ink. Another area of deep concern to the committee relates to recent increases in the number of executives, professionals and general staff employed by Amtrak. From September 30, 1975 to September 30, 1977, executives, officials and staff assistants rose 59 percent. Professional, clerical and general staff jumped 65 percent. Employees in the support areas now have the training and experience to handle increased demand, and gross revenues have increased only 20 percent in the last 4 years. The Interstate Commerce Commission, in its report to the President and the Congress on Amtrak, dated March 15, 1978, concludes that, as a $300 million carrier, Amtrak probably does not need an administrative and clerical staff totaling one-third of Amtrak employees. Amtrak's 7-year experience shows conclusively that under current conditions, all but about 1 percent of inter-city travelers in the United States prefer other modes of transportation. We think the reasons are straightforward. Air travel is much quicker and more convenient for time-sensitive travelers, smoother and more comfortable (especially considering the comparatively short time the traveler occupies the airplane), and, on longer trips, air travel is in the same price range as Amtrak. Buses go more places than Amtrak, and bus travel is somewhat cheaper. Automobiles give travelers more control over where and when they go, are convenient to have at the destination points, and are perceived as being much cheaper than the train, particularly when more than one traveler is involved. These factors are illustrated in the following table. Under current conditions, Amtrak cannot offer most intercity travelers a service that is as good as the available alternatives. TABLE IV.-AMTRAK FARES ON POTENTIAL CORRIDOR ROUTES COMPARED WITH OTHER |