a

GAO

United States Government Accountability Office

Report to the Chairman, Committee on 

Transportation and Infrastructure, House 

of Representatives

November 2006 INTERCITY 

PASSENGER RAIL

National Policy and 

Strategies Needed to 

Maximize Public 

Benefits from Federal 

Expenditures

GAO-07-15
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 2006

INTERCITY PASSENGER RAIL 

National Policy and Strategies Needed to 

Maximize Public Benefits from Federal 

Expenditures 

Highlights of GAO-07-15, a report to 

Chairman, Committee on Transportation 

and Infrastructure, House of 

Representatives 

Intercity passenger rail service is at

a critical juncture in the United

States. Amtrak, the current service

provider, requires $1 billion a year

in federal subsidies to stay

financially viable but cannot keep

pace with its deteriorating 

infrastructure. At the same time,

the federal government faces 

growing fiscal challenges. To assist 

the Congress, GAO reviewed (1) 

the existing U.S. system and its 

potential benefits, (2) how foreign

countries have handled passenger

rail reform and how well the United

States is positioned to consider 

reform, (3) challenges inherent in 

attempting reform efforts, and (4) 

potential options for the federal 

role in intercity passenger rail. 

GAO analyzed data on intercity

passenger rail performance and

studied reform efforts in Canada, 

France, Germany, Japan, and the 

United Kingdom. 

What GAO Recommends

GAO recommends that Congress 

consider restructuring the nation’s 

intercity passenger rail system. 

Any change should include 

establishing clear goals for the 

system, defining the roles of key 

stakeholders, and developing 

funding mechanisms that include 

cost sharing between the federal

government and other

beneficiaries. Amtrak agreed 

intercity passenger rail is at a

critical juncture and said that

reform includes establishing

national policy goals, stakeholder 

roles, and committed funding. 

The existing intercity passenger rail system is in poor financial condition and 

the current structure does not effectively target federal funds to where they 

provide the greatest public benefits, such as transportation congestion relief. 

Routes of 750 miles or more, while providing service for some rural areas

and connections between regions, show limited public benefits for dollars 

expended. These routes account for 15 percent of riders but 80 percent of 

financial losses. “Corridor” routes (generally less than 500 miles in length) 

have higher ridership, perform better financially, and appear to offer greater 

potential for public benefits. 

The countries GAO studied varied in their reform approach, but their 

experience shows the United States needs to consider three key elements in 

attempting any reform: (1) define national policy goals, (2) define the roles 

of government and other participants, and (3) establish stable funding. 

Countries found these elements important in setting the role of passenger 

rail in the national transportation system and increasing the benefit from 

investing in passenger rail. Currently, however, the United States is not well 

positioned to address these key elements. The goals or expected outcomes 

of intercity passenger rail policies are ambiguous, participants’ roles are 

unclear, and there is widespread disagreement about the level of funding to 

devote to this effort. Amtrak is taking actions within its authority to reduce 

costs and increase efficiency, but Amtrak is not in a position to address all

key elements. To undertake reform, federal leadership is needed. 

Addressing key elements of reform poses many challenges, because those 

who have a stake in the process have divergent goals or points of view.

Amtrak workers, freight railroads that own much of the rail system over 

which passenger trains operate, and federal and state governments would be 

among those affected. The diversity of viewpoints poses challenges for 

determining both the overall goal for passenger rail in the United States and 

the federal role in achieving this goal. Funding-related challenges include 

identifying how to pay for achieving these goals and how to overcome 

disadvantages intercity passenger rail faces relative to leveraging of federal 

funds. Although federal-state cost sharing is common in highway and transit 

programs, states face difficulty leveraging their expenditures on rail service.

There are four main options for the federal role in intercity passenger rail

service: (1) keep the existing structure and funding, (2) make incremental 

changes to improve financial or operational performance, (3) discontinue 

federal involvement, or (4) fundamentally restructure the system. Each 

option has advantages and disadvantages, and each faces its own challenges. 

Each requires some level of federal funding, a clear articulation of expected 

goals, and, except for the status quo option, substantial time to implement. 

Of these options, the fourth—fundamental restructuring—would allow for 

effectively integrating rail into the national transportation system and 

substantially improving overall performance and accountability. 

www.gao.gov/cgi-bin/getrpt?GAO-07-15.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact JayEtta Z. 

Hecker at (202) 512-2834 or 

heckerj@gao.gov. 
Page i GAO-07-15 Intercity Passenger Rail

Contents

Letter 1

Results in Brief 4

Background 8

Existing U.S. Intercity Passenger Rail System Is in Poor Financial 

Condition and Appears to Provide Limited Benefits for Federal 

Expenditures 14

Foreign Experiences Illustrate Various Approaches to Restructuring 

and Key Reform Elements 43

The United States is Not Well Positioned for Reform 56

Addressing Reform Elements for Intercity Passenger Rail Will 

Require Overcoming Stakeholder and Funding Challenges 69

Options for the Future of Intercity Passenger Rail Will Determine the 

Level of Federal Involvement 88

Conclusions 111

Recommendations for Executive Action 112

Matter for Congressional Consideration 113

Agency Comments and Our Evaluation 114

Appendixes

Appendix I: Scope and Methodology 118

Appendix II: Selected Performance Characteristics of Amtrak 

Long-Distance and Corridor Routes 123

Appendix III: Reform Overviews in Five Site Visit Countries 128

Canada 128

France 130

Germany 132

Japan 135

The United Kingdom 137

Appendix IV: Current Amtrak Reform Efforts 140

Appendix V: Operational Challenges Associated with Access, Capacity, 

and Liability Issues 144

Appendix VI: Workforce Issues Associated with Intercity Passenger Rail 

Reform 150

Appendix VII: Financial Reporting, Internal Control, and Governance 

Requirements and Practices for Federal Entities and Public 

Companies 157

Current Accountability Requirements and Practices 157

Opportunities for Improvement at Amtrak 171
Contents

Page ii GAO-07-15 Intercity Passenger Rail

Appendix VIII: Comments from National Railroad Passenger

Corporation 174

GAO Comments 182

Appendix IX: GAO Contact and Staff Acknowledgments 184

Tables Table 1: Key Aspects of Selected Recent Intercity Passenger Rail 

Reform Proposals 13

Table 2: Summary of State-Owned Rail Services (Pre- and 

Post-Reform) in Countries We Visited 44

Table 3: Post-Reform Financial Involvement by National 

Governments of Five Countries We Visited 45

Table 4: Application of Critical Reexamination Questions Defining 

the Federal Role in Intercity Passenger Rail 89

Table 5: Three Components of Framework for Defining Federal 

Involvement in Intercity Passenger Rail 90

Table 6: Coach Class versus Sleeper Class: Net Loss per Passenger, 

Fiscal Year 2004 123

Table 7: On-Time Performance of Long-Distance Trains, Fiscal Year 

2005 124

Table 8: List of States with Corridor Services, Fiscal Year 2005 125

Table 9: Objectives and Status of Amtrak’s 15 Reform 

Initiatives 141

Table 10: Examples of Costs Paid by Commuter Rail Agencies to 

Gain Infrastructure Access 146

Figures Figure 1: Amtrak’s Route Map, Fiscal Year 2005 10

Figure 2: Amtrak Annual Operating Losses and Cash Losses, Fiscal 

Years 2002 through 2005 16

Figure 3: Amtrak Annual Passenger Revenue and Ridership, Fiscal 

Years 2002 through 2005 18

Figure 4: Amtrak’s Annual Budget Request and Appropriation 

Levels, Fiscal Years 2003 through 2006 20

Figure 5: Trip Distance on Long-Distance Routes, Fiscal Year 

2005 23

Figure 6: Annual Revenues and Costs of Amtrak’s Long-Distance 

Routes, Fiscal Years 2002 through 2005 25

Figure 7: Average Annual On-time Performance of Long-Distance 

Routes, Fiscal Years 2000 through 2005 30

Figure 8: Corridor Ridership Trends by Route Class, Fiscal Years 

2002 through 2005 32
Contents

Page iii GAO-07-15 Intercity Passenger Rail

Figure 9: Annual State Operating and Capital Contributions, Fiscal 

Years 2000 through 2005 35

Figure 10: Annual On-time Performance of Corridor Routes, Fiscal 

Years 2000 through 2005 39

Figure 11: Reform Approaches Used by Site Visit Countries 48

Figure 12: Class I Ton-Miles per Route-Mile Owned 76

Figure 13: Applying the Framework for Deciding the Future of 

Federal Involvement in U.S. Intercity Passenger Rail 92

Figure 14: Commuter Rail Agency Contributions to Amtrak on the 

NEC 94

Figure 15: Amtrak’s Market Share Compared to Air Services for 

Selected Origins and Destinations 126

Figure 16: Amtrak’s Route System—1971 127

Figure 17: Changes in Amtrak’s Union and Nonunion Workforce, 

Fiscal Years 2001 through 2005 151
Contents

Page iv GAO-07-15 Intercity Passenger Rail

Abbreviations

ATDA Accountability of Tax Dollars Act of 2002

ARC Appalachian Regional Commission

CBO Congressional Budget Office

CEO chief executive officer

CFO Act Chief Financial Officers Act of 1990

CFO chief financial officer

CRS Congressional Research Service

DB DeutscheBahn AG

DOT Department of Transportation

FFMIA Federal Financial Management Improvement Act of 1996

FMFIA Federal Managers’ Financial Integrity Act of 1982

FRA Federal Railroad Administration

GAAP generally accepted accounting principles

GFOA Government Finance Officers Association

GMRA Government Management Reform Act of 1994

GPRA Government Performance and Results Act of 1993

JR Japan Railway

MBCR Massachusetts Bay Commuter Railroad

MD&A management's discussion and analysis

NASD National Association of Securities Dealers

NEC Northeast Corridor

NYSE New York Stock Exchange

OIG Office of Inspector General

OMB Office of Management and Budget

PAR performance and accountability report

RFF Réseau Ferré de France

RPS Route Profitability System

SEC Securities and Exchange Commission

SNCF Société Nationale des Chemins de Fer Français

U.K. United Kingdom

WMATA Washington Metropolitan Area Transit Authority
Contents

Page v GAO-07-15 Intercity Passenger Rail

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Page 1 GAO-07-15 Intercity Passenger Rail

United States Government Accountability Office

Washington, D.C. 20548

A

November 13, 2006 Letr

The Honorable Don Young

Chairman

Committee on Transportation and Infrastructure

House of Representatives

Dear Mr. Chairman:

The future of intercity passenger rail service in the United States has come 

to a critical juncture. The National Railroad Passenger Corporation 

(Amtrak) continues to rely heavily on federal subsidies—over $1 billion 

annually in recent years—and operating losses have remained high. In 

addition, Amtrak will require billions of dollars to address deferred 

maintenance and achieve a “state of good repair.”1

 These needs for Amtrak 

come at a time when the nation faces long-term fiscal challenges. As we 

reported in February 2005, the federal government’s financial condition and 

long-term fiscal outlook present enormous challenges to the nation’s ability 

to respond to emerging forces reshaping American society, the United 

States’ place in the world, and the future role of the federal government.2

Addressing the projected fiscal gaps will require policy makers to examine 

the affordability and sustainability of all existing programs, policies, 

functions, and activities throughout the federal budget.

Our February 2005 report outlines some of the criteria that should be 

considered in reexamining the future federal role toward intercity 

passenger rail in this country. These criteria include: (1) the relevance of 

and purpose for the federal role, (2) measures of success, (3) targeted 

benefits, and (4) the affordability and cost effectiveness of federal 

expenditures. A reexamination will include asking questions such as: Does 

intercity passenger rail have a clear federal role and mission? Does 

intercity passenger rail have outcome-based performance measures? Do 

intercity passenger rail expenditures target areas with the greatest needs 

and least capacity? Do federal expenditures and investments encourage 

state and local governments, and the private sector, to invest resources? Do 

1

“State of good repair” is the outcome expected from the capital investment needed to 

restore Amtrak’s right-of-way (track, signals, and auxiliary structures), other infrastructure 

(e.g., stations), and equipment to a condition that requires only routine maintenance.

2

GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, GAO05-325SP (Washington, D.C.: Feb. 2005).
Page 2 GAO-07-15 Intercity Passenger Rail

these expenditures appear affordable and sustainable in the long term? 

Considering the performance of the current system relative to all these 

factors will be critical in deciding the future of intercity passenger rail, the 

federal role in intercity passenger rail, and how intercity passenger rail is 

structured, operated, and funded in the United States.

Reexamining the federal role and expenditures on intercity passenger rail 

service will be particularly difficult because of the divergent opinions about 

what this service should be. Some advocate a greatly expanded federal role 

and the expansion of intercity passenger rail to relieve growing congestion 

on highways and airways and (as energy prices increase) to provide more 

fuel-efficient transport; others believe the federal role should be scaled 

back, and that at least some federal operating subsidies should be 

eliminated. Specific proposals vary—while one proposal would keep 

Amtrak largely intact and provide more funding for capital and other 

improvements, another proposal would significantly restructure the 

management and accountability for intercity passenger rail with regional, 

state, and local entities making fundamental decisions about what intercity 

passenger rail services are justified and will receive public financial 

support. Amtrak itself has proposed a new vision for intercity passenger 

rail service that would include a greater role for states in planning and 

developing passenger rail corridors. The acting president of Amtrak told us 

that, in his view, Amtrak itself is not a substitute for a national intercity 

passenger rail policy and that Congress needs to develop such a policy. One 

of the primary difficulties in developing a clear national intercity passenger 

rail policy will be reconciling the wide diversity of views about what 

intercity passenger rail service should be and what it should achieve.

To assist Congress as it assesses the future of intercity passenger rail 

service in the U. S., and the federal role in such service, you asked us to 

identify critical issues and options that Congress should consider in 

deciding the future federal role. In response to your request, this report 

addresses the following:
Page 3 GAO-07-15 Intercity Passenger Rail

• the characteristics of the current U.S. intercity passenger rail system 

and the potential benefits obtained from this system3

;

• foreign experiences with passenger rail reform and observations for the 

United States;

• how well the United States is positioned for reforming4 its intercity 

passenger rail system;

• challenges the United States faces in overcoming obstacles to reform; 

and

• potential options for the future of intercity passenger rail service.

To address these issues, we collected information on the characteristics of 

Amtrak’s routes, including ridership, costs, and the extent of public 

subsidies provided on routes. We conducted extensive analyses of both 

long-distance routes and short-distance corridor routes.5

 We analyzed data 

on passenger demographics, financial performance, on-time performance, 

and connectivity between routes, and synthesized the results to determine 

the actual and potential benefits provided by both types of routes. We also 

collected and analyzed data on passenger rail operations and restructuring 

efforts in Canada, France, Germany, Japan, and the United Kingdom (U.K.). 

3

The benefits that might be obtained from use of the intercity passenger rail system include 

both private transportation benefits and public benefits. By transportation benefits, we 

mean the benefits that individuals receive from completing trips from their origin to their 

destination. Because passenger rail trips have value to the individuals making them, 

economic reasoning suggests that the individuals would be willing to pay fares to make 

these trips, as long as the fares do not exceed the benefits that they receive. These trips may 

also generate public benefits, such as reductions in highway congestion, air congestion, or 

air pollution; or the social benefits of connecting individuals throughout the country. These 

are considered public benefits because they do not accrue specifically to the travelers 

themselves and travelers do not have an economic incentive to consider public benefits in 

making their travel decisions. For this reason, government subsidies would be needed to 

help fund the system if the fares passengers are willing to pay to obtain private 

transportation benefits are not sufficient to cover the cost of providing the service.

4

For purposes of this report, the word reform is intended to cover both incremental changes 

that might be made within the current structure of intercity passenger rail, as well as more 

significant changes that could be made, including wholesale restructuring in how intercity 

passenger rail service is provided.

5

We defined long-distance routes to be 750 miles or more and to generally involve an 

overnight trip; we defined short-distance corridor routes to generally be 500 miles or less.
Page 4 GAO-07-15 Intercity Passenger Rail

This included interviews with government and private sector officials in 

these countries, and reviews of passenger-rail-related policies and funding. 

We interviewed officials from Amtrak as well as the Federal Railroad 

Administration (FRA), states, various travel and tour associations, rail 

labor unions, freight railroads, and the operator of a luxury passenger rail 

service in the United States. We also compared Amtrak’s current 

accountability and financial reporting mechanisms to the basic 

requirements and practices for federal entities and public companies in the 

United States. Finally, we reviewed studies on passenger rail reform efforts 

around the world and consulted with international rail experts 

knowledgeable about passenger rail reform efforts. Our work was 

conducted from January 2006 to October 2006 in accordance with generally 

accepted government auditing standards.

Results in Brief The existing U.S. intercity passenger rail system remains in poor financial 

condition, characterized by continued high operating losses and substantial 

levels of deferred capital and maintenance projects. Moreover, the current 

structure does not appear to effectively target federal funds where they 

may provide the greatest level of public benefits, such as reduced traffic 

congestion and pollution. Amtrak currently operates two types of intercity 

routes—long distance and corridors—that provide service to a wide range 

of passengers in urban and rural communities across the country. These 

routes exhibit markedly different financial characteristics and operating 

characteristics. Long-distance routes account for about 80 percent of 

Amtrak’s financial losses although they serve 15 percent of Amtrak’s total 

ridership, and are characterized by poor on-time performance. Support for 

these routes is often linked to a number of potential public benefits—one 

public benefit is the provision of transportation for rural residents located 

along the route who might have few, if any, other transportation options; 

another is the national connectivity between regional rail corridors. 

However, these benefits may be limited by infrequent or inconvenient 

service, and are provided at high cost to the federal government. In 

contrast, corridor routes account for most of Amtrak’s ridership and 

growth in recent years, account for about 20 percent of the financial losses 

(which do not include federal capital grants to maintain Amtrak-owned 

infrastructure in the Northeast), and appear to offer greater potential to 

provide public benefits. For example, these services tend to be more timeand cost-competitive with other modes of transportation—potentially 

mitigating highway and air congestion—and they offer increased flexibility 

over long-distance rail services to adapt schedules and services to meet 

potentially shifting demographics and trends in passenger travel. To 
Page 5 GAO-07-15 Intercity Passenger Rail

maximize the public benefits for federal expenditures for intercity 

passenger rail services in this country, a reevaluation of the existing 

structure may be required to better target federal funding to services where 

rail may have a comparative advantage, is more effectively positioned to 

provide public benefits, and is better integrated into the national 

transportation system.

Intercity passenger rail reform efforts in other countries illustrate that, to 

be more cost effective and offer increased benefits in relation to 

expenditures, there are a variety of approaches—and several key reform 

elements—that need to be addressed when implementing any approach. 

Over the past 20 years, several countries have employed a variety of 

approaches in reforming their intercity passenger rail systems to meet 

national intercity passenger rail objectives—that is, primarily achieving 

more cost effective, value-added passenger service for the level of 

subsidies spent. These approaches, alone or in combination with each 

other, have been used to support other national objectives as well, such as 

increasing transparency in the use of public funds and providing 

transportation benefits and public benefits. Prior to, or during, 

implementation of these various approaches, several elements key to 

comprehensive reform were addressed. The national governments of most 

countries we visited focused their efforts on the following elements: (1) 

clearly defining national policy goals; (2) clearly defining the various roles 

and responsibilities of all government entities involved; and (3) 

establishing stable, sustainable funding for intercity passenger rail. These 

elements were important to determining how passenger rail fit into the 

national transportation system and to increase the value of both federal 

and nonfederal expenditures on such systems.

The United States is not well positioned to undertake any reform of 

intercity passenger rail. The experience of the countries we studied 

indicates that U.S. reform will require a more fundamental reexamination 

of the goals and performance of the system by policymakers than has taken 

place to date. Specifically, the United States will need to address the three 

reform elements—clearly defined national policy goals, clear definition of 

government and stakeholder roles, and establishing consistent funding 

devoted to these goals—to better position itself for improving the 

performance and benefits of intercity passenger rail system. The goals and 

expected outcomes of the current passenger rail policy are ambiguous, 

stakeholder roles are unclear, and funding has been constrained due to 

competing priorities and a lack of consensus on the level of funding to 

devote to these goals. The primary provider of U.S. intercity passenger rail, 
Page 6 GAO-07-15 Intercity Passenger Rail

Amtrak, has the authority to take a number of actions, but has a history of 

poor financial and operating performance. Recently, Amtrak has proposed 

a reform strategy and is undertaking efforts to reduce costs and increase 

efficiency within Amtrak’s authority. However, the benefits Amtrak can 

achieve are limited by constraints. For example, possible route and service 

changes could trigger expensive labor protections payments. Even if 

Amtrak could manage its operations more efficiently, Amtrak is not in a 

position to address the key elements of reform we observed in other 

countries. Federal leadership will be needed to fundamentally improve the 

performance of intercity passenger rail. 

There are a number of challenges associated with addressing the key 

elements of reform for intercity passenger rail. The variety of stakeholders, 

all with different interests and issues, makes reaching consensus on any 

change difficult. Central among federal challenges is determining what the 

vision and role for intercity passenger rail in the U.S. should be and the 

federal role, if any, within this vision and reconciling the wide diversity of 

views about intercity passenger rail service. Challenges in promoting a 

more equitable federal-state partnership include the varying ability and 

willingness of states to participate in funding intercity passenger rail and 

identifying appropriate policy changes to overcome the disadvantages 

intercity passenger rail faces relative to leveraging of federal funds. 

Currently, states are challenged to leverage their expenditures on such 

service. However, federal-state cost sharing is common in highway and 

transit programs where investment is encouraged through matching grants. 

Other challenges include freight railroad concerns about infrastructure 

access and capacity, workforce issues, and defining the role of the private 

sector. Addressing important funding issues will also present challenges. 

This includes identifying funding sources to achieve national policy goals 

and developing incentives for state participation. Each of these challenges 

presents opportunities to increase the benefits of federal and nonfederal 

expenditures on intercity passenger rail and not addressing them will likely 

continue the stalemate in moving toward a well defined role for federal 

subsidies for intercity passenger rail in the U.S. 

For simplicity in outlining the choices, we discuss four possible options for 

the future of the federal role in intercity passenger rail service. The first 

option would be no change in the current structure or funding of intercity 

passenger rail. The second option would focus on incremental reforms 

within the current intercity passenger rail structure. The third option would 

discontinue federal involvement and devolve responsibility for intercity 

passenger rail service to states and others. The fourth option would 
Page 7 GAO-07-15 Intercity Passenger Rail

reexamine the entire structure of intercity passenger rail service with the 

focus on optimizing its performance and benefits for both federal and 

nonfederal expenditures. All four options for the future of intercity 

passenger rail present challenges that could impede both their selection 

and their effectiveness once chosen. Of the four options, however, 

restructuring presents the opportunity to substantially improve the 

intercity passenger rail system. This option would allow Congress and 

policymakers to establish intercity passenger rail’s goals, define the roles of 

stakeholders, and develop funding mechanisms that could provide 

improved performance and accountability for intercity passenger rail 

expenditures. 

To maximize the transportation benefits and public benefits of intercity 

passenger rail service and any federal funds expended on this service, we 

recommend that Congress consider restructuring the current intercity 

passenger rail system in the United States. In restructuring the intercity 

passenger rail system, Congress should establish clear goals for the system, 

define the roles of government and other stakeholders, and develop 

funding mechanisms that include sharing costs between the federal 

government and other beneficiaries. Due to the complex nature of intercity 

passenger rail issues and the wide diversity of views about its future, an 

independent and properly designed commission may be effective in 

developing a consensus on the approach for changing its structure. We also 

recommend bringing Amtrak’s financial reporting, internal control, and 

governance practices in line with basic requirements for federal entities or 

public companies. 

We provided draft copies of this report to Amtrak and the Department of 

Transportation for their review and comment. In general, Amtrak did not 

take an overall position on the report. However, Amtrak did agree that 

intercity passenger rail in the United States has come to a critical juncture 

and that a national dialogue about the future direction of rail service is 

needed. Amtrak also strongly agreed that the three key elements to 

comprehensive reform of intercity passenger rail are establishing clearly 

defined national policy goals, clearly defining government and stakeholder 

roles, and establishing committed funding. In response to our 

recommendation, Amtrak offered comments about specific steps that 

could be taken in that regard. For example, Amtrak agreed that including a 

Management Discussion and Analysis with its annual audited financial 

statements is reasonable. Amtrak took exception to other examples of 

oversight such as the chief executive officer and chief financial officer 

certifying Amtrak’s financial statements similar to requirements in the 
Page 8 GAO-07-15 Intercity Passenger Rail

Sarbanes-Oxley Act. Amtrak also took exception to bringing its reporting 

under the Securities and Exchange Commission and believes such an effort 

would not be an effective use of federal funds given the oversight currently 

provided by FRA and the Amtrak and Department of Transportation 

Inspector Generals’. While we recognize that Amtrak is subject to oversight 

already, we believe there are opportunities to improve current reporting 

practices, while identifying opportunities for potential streamlining. The 

Department of Transportation did not indicate agreement or disagreement 

with the report or its recommendations. Instead, it provided primarily 

technical comments that we incorporated where appropriate. 

Background The Rail Passenger Service Act of 1970 created Amtrak to provide U.S. 

intercity passenger rail service because existing railroads found such 

service unprofitable. Today, Amtrak continues to be the main provider of 

intercity passenger rail service in the United States, operating a 22,000-mile 

network that provides service to 46 states and Washington, D.C., primarily 

over tracks owned by freight railroads.6

 Federal law requires that freight 

railroads typically give Amtrak trains priority access and, in general, charge 

Amtrak the incremental cost—rather than the full cost—associated with 

the use of their tracks. Amtrak also owns about 650 miles of track, 

primarily on the Northeast Corridor (NEC), which runs between Boston, 

Massachusetts, and Washington, D.C. Access to this corridor is also critical 

for the operations of nine commuter railroads run by state and local 

governments serving 1.2 million passengers each work day. According to 

Amtrak, four freight railroads also use the corridor each day. Amtrak 

employs about 19,000 people.

The Amtrak Reform and Accountability Act of 1997 gave Amtrak significant 

flexibility with respect to its route system, but directed it to continue to 

operate “a national passenger rail transportation system which ties 

together existing and emergent regional rail passenger service and other 

intermodal passenger service.”7

 To meet this mandate, Amtrak currently 

operates 41 intercity passenger rail routes that fall into two distinct types, 

6

Intercity passenger rail service is also provided by the state of Alaska via the Alaska 

Railroad. For the purposes of this report, intercity passenger rail service does not include 

commuter rail service between cities in metropolitan areas or service provided by the 

Alaska Railroad.

7

49 U.S.C.§24701.
Page 9 GAO-07-15 Intercity Passenger Rail

long-distance routes and short-distance corridors (see fig. 1). There are 14 

long-distance routes, which generally travel over 750 miles and include an 

overnight component.8

 Twenty-seven routes are short distance, or 

“corridor” services, and are further classified into two distinct categories. 

The first is the NEC. According to Amtrak, about two-thirds of its ridership 

is either wholly or partially on this corridor. The second category of 

corridor service is primarily comprised of routes partly funded by states, 

but also includes several other routes that Amtrak continues to operate as 

part of the original or “legacy” system.9

 These corridor services have 

several similarities, such as a relatively high frequency of service and route 

distances generally under 500 miles. 

8

Amtrak runs 15 long-distance trains on 14 routes. One of the 14 long-distance routes, the 

Silver Service, is comprised of three different trains: The Silver Star, Silver Meteor, and the 

Palmetto, with service between New York City, Georgia, and Florida. 

9

“Legacy routes” refer to routes that were established when Amtrak began operating a basic 

system in 1971. In this report, the term “state supported” refers to routes that receive 

financial assistance from a state for some or all of its distance.
Page 10 GAO-07-15 Intercity Passenger Rail

Figure 1: Amtrak’s Route Map, Fiscal Year 2005

The 1997 act also established a Reform Board (to assume the 

responsibilities of Amtrak’s Board of Directors) and a Reform Council (to 

review and recommend changes in Amtrak's route structure). The act 

provided for the Reform Board to serve for 5 years and then be replaced by 

a new Amtrak Board of Directors; meanwhile, the Reform Council’s 

mandate was to look at “Amtrak’s operation as a national passenger rail 

Pa.

Ore.

Nev.

Idaho

Mont.

Wyo.

Utah

Ariz. N.Mex.

Colo.

N.Dak.

S.Dak.

Nebr.

Tex.

Kans.

Okla.

Minn.

Iowa

Mo.

Ark.

La.

Ill.

Miss.

Ind.

Ky.

Tenn.

Ala.

Fla.

Ga.

S.C.

N.C.

Va.

Ohio

N.H.

Mass.

R.I.

Mich.

Calif.

Wash.

Wis. N.Y.

Maine

Vt.

W.Va.

Conn.

N.J.

Del.

Md.

D.C.

Corridor service (may also include long distance)

Long-distance service

Source: GAO, Corel (map).

States currently providing financial support for Amtrak services
Page 11 GAO-07-15 Intercity Passenger Rail

system which provides access to all regions of the country and ties together 

existing and emerging rail passenger corridors.”10 In November 2001, the 

Reform Council reported that Amtrak would not achieve operational selfsufficiency by December 2, 2002, as envisioned by the act and, in 2002, the 

Reform Council recommended restructuring and rationalizing the national 

intercity passenger rail system—a move that envisioned, among other 

things, breaking up Amtrak and introducing competition to provide rail 

service. As of October 2006, Congress was still considering Amtrak issues, 

such as its funding level, the size of its network, the introduction of 

competition for routes, and Amtrak restructuring.

Since Amtrak’s inception, it has struggled to become financially solvent. 

Amtrak has run a deficit each year and required federal assistance to cover 

operating losses and capital investment. Amtrak has received 

approximately $1.2 billion in annual appropriations since fiscal year 2003 

for operational support, capital improvements, and debt obligations. 

Amtrak, like other intercity transportation systems, is capital-intensive. 

From fiscal years 1971 through 2006, Amtrak has received just over $30 

billion in federal support, of which about $11 billion has been for 

infrastructure improvements and equipment overhauls.11 Additional capital 

funding has also been obtained from state and local governments, generally 

for specific capital investments required to support corridor routes 

operating within their jurisdiction. 

The Amtrak Reform and Accountability Act of 199712 removed Amtrak from 

the list of government corporations under 31 U.S.C. § 9101. While listed, 

Amtrak was required to submit annual management reports to Congress 

under the Government Corporation Control Act of 1945. Relieved from this 

requirement, Amtrak remains a government-established private 

corporation which is neither an agency nor instrumentality of the U.S. 

government, nor an issuer of securities to the public. Therefore, since 1997, 

Amtrak has not been subject to the basic accountability requirements of 

either federal entities or public companies. Such requirements cover 

financial reporting, internal control, and governance. Through its loan 

agreement and grant agreements for operating and capital expenses, 

1049 U.S.C. § 24101 Note § 203(g).

11Amount in nominal dollars and includes about $4 billion for the Northeast Corridor 

Improvement Project.

12Pub. L. No. 105-134, § 415, 111 Stat. 2570, 2590 (1997).
Page 12 GAO-07-15 Intercity Passenger Rail

Amtrak is subject to a variety of reporting requirements—including 

providing a monthly performance report to its board, the Department of 

Transportation (DOT), and Congress; providing FRA with a daily cash 

balance report; and providing FRA with a monthly progress report on 

actions addressing our previous recommendations. Due to Amtrak’s longterm challenges, several reform proposals and legislation have recently 

been introduced to address Amtrak’s financial problems. The suggested 

reforms vary in the level of federal subsidies proposed and the extent to 

which the current U.S. intercity passenger rail system would be 

restructured. Among these proposals is the administration’s 2005 proposal, 

which would phase out federal operating subsides for long-distance trains 

and split Amtrak into three entities: an oversight company to manage the 

restructuring process, a private infrastructure management company, and a 

train operating company.13 This proposal would ultimately give states 

greater decision-making authority with respect to rail service and capital 

improvements. Conversely, the Senate Committee on Commerce, Science, 

and Transportation proposed a reauthorization bill in 2005 that would 

authorize just under $2 billion per year over a 6-year period to fund 

Amtrak’s capital and operating expenses to maintain current operations, 

upgrade equipment, and return the NEC to a state of good repair. Although 

operating subsidies over the life of this bill would be reduced 40 percent 

through cost cutting and other actions, capital funding to Amtrak and 

states would increase. See table 1 for key aspects of recent intercity 

passenger rail reform proposals and legislation. 

13The administration’s proposal was introduced as H.R. 1713, Passenger Rail Investment 

Reform Act.
Page 13 GAO-07-15 Intercity Passenger Rail

Table 1: Key Aspects of Selected Recent Intercity Passenger Rail Reform Proposals 

Source: GAO analysis.

The U.S. system is not the only intercity passenger rail system that has 

experienced financial deficits and economic inefficiencies. Many countries 

have undertaken efforts to reform their systems in order to alleviate 

financial and structural problems. While the intercity passenger rail 

experiences of other countries are often cited in the debate over the U.S. 

system, there are some key differences between the U.S. system and other 

foreign systems, including:

• Infrastructure ownership. In the United States, nearly all of the 

infrastructure that intercity passenger rail operates on is owned by 

private freight rail companies and is located on private land. Although 

Amtrak, by law, has a statutory right of access to infrastructure at 

incremental cost, it enters into operating agreements with freight and 

other railroads to use their lines. In contrast, in most of the countries in 

Europe, infrastructure is publicly owned.

Proposal Key aspects 

Amtrak Reauthorization Act of 2005 

(H.R. 1630) 

• Authorizes $2 billion per year for FY 2006–2008 with funds set aside for retirement and commuter 

rail obligations

• Requires no restructuring, but allows Amtrak to continue with its current 5-year plan

• Requires periodic reporting by Amtrak on its annual business plan

Passenger Rail Investment and 

Improvement Act of 2005 (S. 1516)

• Authorizes $11.4 billion in appropriations for 6 years (FY 2006–2011)

• Authorizes the issuance of $13 billion in federal bonds for additional capital improvements

• Reduces operating subsidies by 40 percent over 6 years

• Requires Amtrak to evaluate long-distance routes to improve performance

• Allows transfer of Amtrak operating rights to host freight railroads

• Allows the Surface Transportation Board to levy penalties against freight railroads for failing to 

give scheduling priorities to Amtrak trains on freight railroad tracks

Passenger Rail Investment Reform 

Act (H.R. 1713). (This is the 

administration’s bill.)

• Subjects Amtrak to annual appropriations with specific reform requirements

• Authorizes appropriation of funds for the purposes of the act over a 6-year period

• Phases out operating subsidies 

• Reorganizes Amtrak into three functional entities: (1) an oversight company to manage the 

restructuring process, (2) a private infrastructure company, and (3) a train operating company

• Proposes to create an interstate compact to operate the NEC

• Gives states greater participation with respect to provision of rail service and capital 

improvements

• Establishes a matching grant program for capital projects

• Allows potential operators to bid to operate intercity passenger rail service

• Authorizes buyouts for current employment contracts

Systemic Passenger Infrastructure 

and Network Overhaul through 

Financial Freedom Act (H.R. 3851)

• Transfer ownership of property along the NEC to the Secretary of Transportation

• Allow companies to compete for the maintenance and operation of services on the NEC
Page 14 GAO-07-15 Intercity Passenger Rail

• Freight and passenger railroad industry. In addition to owning the 

infrastructure, freight rail dominates the rail industry in the United 

States. This is a stark contrast to most other countries, where passenger 

rail is the primary component of the rail industry and freight plays a 

more secondary role.

• Geography and demographics. Geographic and demographic factors 

also make the United States significantly different from other countries, 

in particular those in Europe and Japan. The United States is relatively 

larger geographically than most of these other countries. Europe and 

Japan are more compact than the United States, making more intercity 

travel by rail between major cities as fast as by air. Additionally, experts 

and prior research highlight the greater population density of European 

cities—making rail a more attractive option for transportation.

Existing U.S. Intercity 

Passenger Rail System 

Is in Poor Financial 

Condition and Appears 

to Provide Limited 

Benefits for Federal 

Expenditures 

The existing U.S. intercity passenger rail system remains in poor financial 

condition, characterized by continued high operating losses and substantial 

levels of deferred capital and maintenance projects. Moreover, the current 

structure does not appear to effectively target federal funds where they 

may achieve the greatest level of public benefits.14 That is, many services 

are not focused on the markets where rail may have a comparative 

advantage over other modes and is most likely to be a viable and costeffective option to meet public transportation demands.

Amtrak operates two types of intercity routes—long distance and 

corridors—that provide service to a wide range of passengers across the 

country; however, each of these route types exhibit markedly different 

financial and operating characteristics. Long-distance routes account for 

about 80 percent of Amtrak’s financial losses although they serve about 15 

percent of Amtrak’s total ridership, and are characterized by poor on-time 

performance. These routes are often associated with a number of public 

benefits, including offering service to a number of rural residents and 

providing national connectivity; however, these benefits may be limited by 

infrequent or inconvenient service and are provided at high cost to the 

federal government. In contrast, corridor routes account for most of 

Amtrak’s ridership and appear to offer greater potential to provide 

passenger transportation benefits and public benefits. For example, these 

14DOT, in comments on a draft of this report, observed that this is not one of the existing 

goals for Amtrak.
Page 15 GAO-07-15 Intercity Passenger Rail

services tend to be more time- and cost-competitive with other modes of 

transportation—potentially mitigating highway and air congestion—and 

they offer greater flexibility over long-distance rail services to adapt 

schedules and services to the demands of the traveling public. While 

several challenges related to funding and capacity constraints exist, 

corridors appear to be where the comparative strength for intercity 

passenger rail services lies and where the greatest potential exists for rail 

to provide increased public benefits for federal expenditures. Corridors 

could also facilitate integrating intercity passenger rail into the national 

transportation system. 

Existing U.S. Intercity 

Passenger Rail System 

Appears Unsustainable at 

Current Levels of Federal 

Funding

Although the Amtrak Reform and Accountability Act of 1997 proposed that 

Amtrak reach operational self-sufficiency by December 2002, Amtrak did 

not achieve this goal and its financial condition since this legislation was 

enacted remains precarious.15 In addition, to stabilize and sustain the 

existing system, Amtrak is likely to need increased levels of funding. 

Amtrak continues to incur substantial operating deficits and is faced with 

billions of dollars in deferred capital maintenance and debt obligations. No 

combination of service cuts or productivity improvements can fully 

eliminate the need for public operating and capital subsidies, particularly if 

Congress continues to mandate that Amtrak operate a national system. 

However, at a time when the federal government faces a long-term 

structural fiscal imbalance, these poor financial characteristics lead to 

questions about how the system should be structured and funded in the 

future. 

Operating Losses The U.S. intercity passenger rail system ends each fiscal year with 

substantial operating losses. Although Amtrak has made some progress in 

containing operating expenses in recent years, it continues to run an 

annual operating deficit (total operating revenues minus operating 

expenses) of over $1 billion dollars and relies heavily on federal subsidies 

to cover this deficit. In fiscal year 2005, Amtrak reported a net operating 

15The Amtrak Reform and Accountability Act of 1997 placed Amtrak on notice that it was 

expected not to use federal funds for operating expenses after 2002. However, Congress has 

opted to specifically appropriate funds to Amtrak for operating expenses each fiscal year 

beyond that date, through fiscal year 2007.
Page 16 GAO-07-15 Intercity Passenger Rail

loss of $1.2 billion, including an annual cash loss of $450 million (see fig. 

2).16 Although exhibiting a slight decrease from the record deficit in fiscal 

year 2004, operating losses have shown few signs of substantial long-term 

improvement. In fact, Amtrak projected in its 2005–2009 Strategic Plan 

that, under the existing structure, annual operating losses will increase to 

over $1.5 billion by 2009.17

Figure 2: Amtrak Annual Operating Losses and Cash Losses, Fiscal Years 2002 

through 2005 

16The operating loss is the net result per Amtrak’s statement of operations. This figure 

includes additional income and expenses, such as capital depreciation, employee benefits, 

state capital payments, and net interest expenses. The cash loss excludes depreciation 

expenses and other non-cash items.

17Amtrak, Amtrak Strategic Plan, FY 2005–2009 (June 29, 2004). Amtrak officials have 

since stated that the 2005 Strategic Reform Initiatives, and subsequent reports on these 

initiatives, indicate that the company has taken, and plans to take, actions to reduce annual 

operating losses. 

Source: GAO analysis of Amtrak data.

0

200

400

600

800

1,000

1,200

1,400

2002 2003 2004 2005

Fiscal year

Operating lossa

Cash lossb

Dollars in millions

1,132

497

1,274 1,309

1,192

496 486 450
Page 17 GAO-07-15 Intercity Passenger Rail

a

Operating losses represent the net results reported per Statement of Operations in Amtrak’s audited 

financial statements

b

Cash losses include Amtrak reported earnings before interest, taxes, depreciation, and other postemployee benefits.

While Amtrak has experienced a steady increase in ridership over the last 

decade, there has not been a corresponding increase in total annual 

revenues. Between fiscal years 2002 and 2005, passenger revenues 

remained relatively stable—declining from $1.34 billion to $1.29 billion (3.3 

percent)—despite growth in annual ridership of nearly 2 million passengers 

during this period, an increase of 8.2 percent (see fig. 3).18 These results 

suggest that it is unlikely that Amtrak can grow its way out of financial 

difficulty through additional increases in ridership. Further, these trends of 

continued high operating losses and stagnating passenger revenues, 

despite a number of cost-cutting efforts, have led the DOT Inspector 

General and others to conclude that Amtrak also cannot “save its way to 

financial health” and—in the absence of increased federal funding—may 

require long-term structural operating reforms.19

18As of September 2006 Amtrak estimated that revenues for fiscal year 2006 will be 

approximately 10 percent above fiscal year 2005 levels ($1.29 billion).

19Mark R. Dayton, Senior Economist, U.S. Department of Transportation, Office of Inspector 

General, Intercity Passenger Rail and Amtrak. Testimony before the House Committee on 

Appropriations, Subcommittee on Transportation, Treasury, the Judiciary, Housing and 

Urban Development, and Related Agencies, March 16, 2006. Jeffrey A Rosen, General 

Counsel, U.S. Department of Transportation. Testimony before the Subcommittee on 

Railroads, Committee on Transportation and Infrastructure, House of Representatives, 

September 21, 2005.
Page 18 GAO-07-15 Intercity Passenger Rail

Figure 3: Amtrak Annual Passenger Revenue and Ridership, Fiscal Years 2002 through 2005

Substantial Capital Needs and 

Debt Obligations

In addition to the burden of its annual operating deficit, the intercity 

passenger rail system is faced with substantial financial obligations related 

to capital repairs and infrastructure maintenance, as well as accumulated 

debt. Both of these obligations have received substantial federal subsidies 

each year and are likely to continue affecting the financial outlook of 

Amtrak into the foreseeable future.

• Capital needs and deferred maintenance. Lacking the funds to 

complete all of its identified capital repair and maintenance projects, 

Amtrak has deferred an estimated $6 billion in capital and infrastructure 

maintenance spending.20 In addition to increasing the risk of a major 

failure on the system, the deteriorated condition of Amtrak’s rolling 

0

23.5

24.0

24.5

25.0

25.5

26.0

2002 2003 2004 2005

Annual ridership (in millions)

Source: GAO analysis of Amtrak data.

Fiscal year

0

1,275

1,300

1,325

1,350

Annual passenger revenue (in millions of dollars)

Annual passenger revenue

Annual ridership

20GAO, Intercity Passenger Rail: Issues for Consideration in Developing an Intercity 

Passenger Rail Policy, GAO-03-712T (Washington, D.C.: Apr. 30, 2003). In April 2005, the 

Department of Transportation Office of Inspector General estimated this backlog at about 

$5 billion. 
Page 19 GAO-07-15 Intercity Passenger Rail

stock and infrastructure may contribute to higher operating costs and 

reduced reliability of service.21 Further, over 60 percent of this deferred 

maintenance is attributable to Amtrak’s mainstay NEC service. 

Disruptions of service on this corridor, due to needed repairs or safety 

concerns, would have significant financial impacts. While Amtrak has 

identified the restoration of rail infrastructure to a state of good repair 

as one of its primary goals, the cost and extent of the needed 

improvements remain a significant burden to the financial viability of 

the existing intercity passenger rail system. Although the level of federal 

capital funding has increased in recent years, there remains a 

fundamental mismatch between the level of investment Amtrak and the 

DOT Office of Inspector General (DOT OIG) have estimated is needed to 

maintain the existing network and the amount of funding provided. For 

example, in fiscal years 2005 and 2006, Amtrak identified capital funding 

needs of nearly $800 million dollars annually; however, actual funds 

appropriated for capital projects in those years totaled $369 million and 

$495 million, respectively. 

• Debt obligations. Significant federal funds are also spent each year to 

service Amtrak’s substantial debt burden. At the end of fiscal year 2005, 

Amtrak carried a total of $3.6 billion in debt and capital lease 

obligations.22 Principal and interest payments on these accumulated 

debts is estimated at $295 million for fiscal year 2007 and will likely 

remain at about this level for the foreseeable future. These payments 

accounted for over 20 percent of Amtrak’s total federal appropriation 

for fiscal year 2006 and, in light of Amtrak’s other financial obligations, 

are likely to continue to require funding from other sources. 

Federal Funding Given high annual deficits, deferred capital spending, and debt obligations, 

the current levels of federal subsidies are likely insufficient to maintain the 

existing level of passenger rail service being provided by Amtrak. Since 

Amtrak’s authorizing legislation expired in 2002, federal funding for 

intercity passenger rail has been far below what Amtrak and others have 

estimated is needed to sustain and stabilize the current system. For 

example, Amtrak submitted budget requests of approximately $1.8 billion 

21Rolling stock refers to locomotives and passenger or other cars, such as sleeping or dining 

cars.

22This amount includes long-term debt and capital lease obligations (about $3.5 billion) plus 

the current maturities of long-term debt and capital lease obligations (about $138 million).
Page 20 GAO-07-15 Intercity Passenger Rail

for fiscal years 2004 through 2006. However, the average amount of federal 

funding received over this period totaled about $1.24 billion per year—

enough to keep the system operating but not enough to meet the level 

Amtrak estimated is needed to prevent the continued deferral of significant 

maintenance projects (see fig. 4). The President’s budget in fiscal year 2006 

proposed no funding for Amtrak in the absence of significant operating and 

structural reforms; however, Amtrak eventually received federal funding in 

the amount of $1.29 billion. 

Figure 4: Amtrak’s Annual Budget Request and Appropriation Levels, Fiscal Years 

2003 through 2006 

For fiscal year 2007, Amtrak’s budget request totaled $1.6 billion. This 

figure included $498 million to support cash operating losses, $730 million 

for capital spending, $295 million for debt service, and $75 million for 

Dollars in millions

Source: GAO analysis of Amtrak data.

Fiscal year

Budget requests

Debt service

Federal capital funding

Federal operating grants

0

500

1,000

1,500

2,000

2003 2004 2005 2006
Page 21 GAO-07-15 Intercity Passenger Rail

working capital.23 The DOT OIG issued estimates similar to those proposed 

by Amtrak, reporting that $1.4 billion would be required in fiscal year 2007 

just to maintain the currently configured system in a steady state, without 

addressing the backlog of infrastructure projects or investing in new 

corridor development.24 This report also identified that up to $125 million 

in additional working capital may be needed to protect Amtrak from 

insolvency risks posed by any significant unforeseeable events, such as the 

Acela brake problem experienced in 2005.25

Current Intercity Passenger 

Rail Network Appears to 

Provide Limited Public 

Benefits at a High Cost to 

the Federal Government

The nation’s intercity passenger rail system serves a variety of purposes, 

but many routes appear to provide limited public benefits for the level of 

federal expenditures required to operate them. While none of the 41 routes 

comprising the current U.S. intercity passenger rail network earn sufficient 

revenue to fully cover the operating and capital costs of providing the 

service, the two types of routes that Amtrak operates—long distance and 

corridors—have markedly different operating and financial characteristics. 

Some of these differences include annual ridership and passenger 

demographics, financial performance, and the scope of potential 

transportation benefits and public benefits that the service is likely to 

provide. 

Long-Distance Routes are 

Characterized by Relatively High 

Costs and Potentially Limited 

Benefits 

While Amtrak’s 14 long-distance routes serve a number of different 

geographical and traveler markets, they often do so inefficiently and at a 

high cost to the federal government. That is, long-distance routes account 

for nearly 80 percent of Amtrak’s financial losses although they serve 15 

23Working capital is generally defined as current assets minus current liabilities. Amtrak and 

DOT officials indicate additional working capital may also function similar to a line of 

credit, bolstering cash reserves and reducing the risk to the corporation as a result of 

unexpected events.

24Dayton, p. 2.

25In April 2005, Amtrak removed all Acela services on the NEC following the discovery of 

cracks in many of the trains’ brake discs. The service did not return to full operation until 

September 26, 2005. Amtrak’s premium Acela service and its companion Metroliner service 

are Amtrak’s only train operations that make a positive financial contribution (excluding 

depreciation and capital expenses).
Page 22 GAO-07-15 Intercity Passenger Rail

percent of Amtrak’s annual ridership.26 In addition, long-distance rail 

services also tend to be infrequent and exhibit poor dependability—as 

measured by on-time performance—due to increased trip distances and 

potential issues associated with operating on freight-owned infrastructure. 

As a result, actual transportation and public benefits potentially deriving 

from these routes, such as rural transportation and national connectivity, 

may be limited. 

Ridership and Financial 

Characteristics

Long-distance routes comprise a relatively small percentage of total 

Amtrak ridership, yet they consume a disproportionate amount of federal 

subsidies. Ridership on Amtrak’s long-distance routes has remained 

relatively stable, averaging approximately 3.8 million passengers per year 

between fiscal years 2002 and 2005. This figure represents approximately 

15 percent of Amtrak’s total reported ridership of 25.4 million passengers in 

fiscal year 2005. Since many of these passengers travel longer distances 

than passengers on corridor routes, long-distance routes accounted for 47 

percent (2.5 billion) of Amtrak’s total of 5.4 billion passenger miles in fiscal 

year 2005.27 However, many of the trips taken on these routes are for 

relatively shorter distances as opposed to end-to-end trips, with riders 

often traveling between city pairs on existing Amtrak corridors or planned 

corridor routes. For example, the DOT OIG issued a statement in 2003 

which estimated that the share of trips taken on long-distance routes that 

were corridor in nature was 34 percent.28 In fiscal year 2005, nearly 30 

percent of all trips on long-distance routes were for fewer than 300 miles 

and 46 percent were for fewer than 500 miles (see fig. 5). In this regard, 

many passenger trips on long-distance routes may be similar to those on 

Amtrak’s corridor services, where rail service is more likely to be time- and 

cost-competitive with other modes of intercity transportation. For 

26Data on route financial performance are based on Amtrak’s Route Profitability System 

(RPS). We have previously identified concerns with this database related to the reliability of 

cost-allocation methods for individual routes. See GAO, Amtrak Management: Systemic 

Problems Require Actions to Improve Efficiency, Effectiveness, and Accountability, GAO06-145 (Washington D.C.: Oct. 4, 2005). However, we believe the data are reasonably 

sufficient to illustrate aggregate financial trends and make general comparisons between 

route types for the purposes of this report.

27A passenger mile is one passenger traveling one mile.

28Kenneth M. Mead, The Future of Intercity Passenger Rail Service and Amtrak, Statement 

before the Committee on Commerce, Science, and Transportation, U.S. Senate, Oct. 2, 2003. 

In this analysis, the Pennsylvanian is included as a long-distance train; however, Amtrak 

currently classifies this route as a corridor service. Omitting this route revises the estimate 

to 30 percent. 
Page 23 GAO-07-15 Intercity Passenger Rail

example, on the Empire Builder—one of Amtrak’s best-performing longdistance routes—over 24 percent of all passenger trips on the 2,200-mile 

route take place on the 417-mile stretch between Chicago, Illinois, and 

Minneapolis/St.Paul, Minnesota; this stretch represents 1 of 10 potential 

high-speed rail corridors designated by FRA.29

Figure 5: Trip Distance on Long-Distance Routes, Fiscal Year 2005

Ridership demographic data also indicate that Amtrak’s long-distance 

routes serve a large percentage of vacation and leisure travelers. According 

to Amtrak passenger profile surveys, most passengers (over 80 percent) 

report utilizing long-distance routes for recreational and “leisure” trips, 

including visits with family and friends and for personal business, 

compared with other types of travel, such as business or commuting. In 

addition, Amtrak passenger data indicate that, overall, many long-distance 

29FRA does not define high-speed rail transportation in terms of the speed of travel, but in 

terms of an intercity passenger service that is time-competitive with airplanes or 

automobiles on a door-to-door basis for trips ranging from 100 to 500 miles. The 10 

designated corridors are generally in various stages of planning.

Source: GAO analysis of Amtrak data.

18%

1,000+

0-299

36% 500-999

29%

17%

300-499
Page 24 GAO-07-15 Intercity Passenger Rail

customers tend to be retirees—33 percent versus 16 percent for the total 

travel market.30

Long-distance routes operate with substantial financial losses and consume 

a disproportionate amount of federal operating subsidies. Financial losses 

allocated to long-distance routes amounted to $539 million in fiscal year 

2005, accounting for approximately 80 percent of Amtrak’s total reported 

loss of $659 million. This figure also accounts for nearly 95 percent of the 

total federal appropriated operating grant of $570 million provided to 

Amtrak for that year. Based on data provided by Amtrak, operating losses 

on long-distance routes averaged $154 per passenger with considerable 

variation illustrated between the individual routes.31 Financial performance 

over the past several years also indicates that Amtrak is unlikely to 

substantially reduce these losses through increased revenue or cost 

reductions. Between fiscal years 2002 and 2005, Amtrak reported a nearly 

30 percent decline in annual long distance revenue.32 However, during this 

time period, operating costs decreased only about 9 percent. As a result, 

the budget gap between revenues and costs shows no sign of improvement 

(see fig. 6). 

30Survey data were collected by a third-party contractor in 2005, via 5,400 phone interviews 

sampled among customers who traveled on each of Amtrak’s long-distance routes in each of 

the four seasons of the year. We did not assess the accuracy or precision of these estimates.

31Amtrak reported financial losses on individual long-distance routes ranging from $84 to 

$433 in fiscal year 2005. However, we have previously identified concerns related to the 

accuracy of Amtrak’s allocation of costs to individual routes (See GAO-06-145).

32According to Amtrak, most of the decrease in revenue is attributable to the elimination of 

mail and express business. Express is the transportation of higher-value, time-sensitive 

merchandise, such as food and automobile parts. In addition, Amtrak attributed revenue 

decreases to the elimination or truncation of three long distance routes, deterioration in ontime performance on some host railroads, and excessive bad weather events.
Page 25 GAO-07-15 Intercity Passenger Rail

Figure 6: Annual Revenues and Costs of Amtrak’s Long-Distance Routes, Fiscal 

Years 2002 through 2005

a

Revenues were calculated as the aggregate of all reported revenues for individual long-distance 

routes in Amtrak’s Route Profitability System (RPS).

b

Costs include FRA-defined train costs (primarily train crews, food and beverage, fuel, railroad costs, 

commissions, and certain shared costs—primarily equipment maintenance and reserves), as well as 

additional direct and non-direct costs identified by Amtrak, such as training, infrastructure repair and 

maintenance, and overhead costs allocated to individual routes. 

Contributing to the high operating losses on many of Amtrak’s longdistance trains are the costs of extra services and amenities, such as 

sleeper services and dining cars.33 While these auxiliary services generate 

additional revenue over coach-class seats, the additional revenues do not 

cover incremental costs. In fact, passengers traveling in first-class sleeper 

cabins on Amtrak long-distance trains are actually more heavily subsidized 

33Sleeper-class service includes a sleeping room and prepaid meals in the train’s dining car; 

coach-class passengers on long-distance trains sleep in their seats on overnight trips and 

generally purchase food in the train’s lounge car. 

Source: GAO analysis of Amtrak data.

0

200

400

600

800

1,000

1,200

2002 2003 2004 2005

Fiscal year

Revenuea

Cost

b

Dollars in millions
Page 26 GAO-07-15 Intercity Passenger Rail

than coach passengers. The DOT OIG estimated that sleeper services 

increase the operational loss over coach class seats by an average of $109 

per passenger.34 When capital costs for providing such services are also 

included, these additional losses average $206, with losses on some routes 

as high as $358 per passenger (see app. II). Amtrak is currently evaluating 

several alternatives to their existing sleeper services in an aim to eliminate 

incremental financial losses. Some of these alternatives include making 

equipment and service enhancements on the Empire Builder to reposition 

it as a luxury service and potentially outsourcing premium sleeper services 

on select routes for passengers seeking a luxury “land cruise” experience.35

Transportation Benefits and 

Public Benefits

Amtrak’s long-distance routes are generally associated with a number of 

transportation benefits and public benefits; however, these benefits are 

obtained at high cost to the federal government and may be limited by 

infrequent or undependable service. In addition to offering a relatively safe 

mode of transportation, long-distance routes are commonly associated 

with their role in providing (1) an intercity transportation option for a 

number of rural passengers, and (2) national connectivity to link regional 

corridors and other long-distance routes. While there are public benefits 

associated with filling these roles, it appears that other transport modes 

may be better positioned to provide these benefits at reduced cost to the 

federal government. Moreover, the infrequent service and poor on-time 

performance of many of Amtrak’s long-distance trains may further limit the 

benefits provided by intercity passenger rail along these routes.

Intercity passenger rail provides access to many of the nation’s rural 

residents but air and bus services continue to be the principal modes of 

public or common carrier transportation for these residents. In 2005, the 

Bureau of Transportation Statistics estimated that scheduled intercity 

public transportation (e.g., by air, bus, rail, or ferry) provides coverage to 

34Inspector General, Department of Transportation, Analysis of Cost-Savings on Amtrak’s 

Long-Distance Services, Report Number CR-2005-068, July 22, 2005.

35As part of the rail reforms implemented in Canada, VIA Rail, the primary operator of 

intercity passenger rail, largely remarketed the Canadian—its principal long distance 

route—as a premium service for a premium price, which led to improvements in costrecovery for that route. Amtrak initiated a similar effort in fiscal year 2005 to improve 

operating margins by relaunching the Empire Builder with upgraded equipment and 

improved customer service. As of April 2006, operating losses on this route were $4.2 

million below the prior year level, likely indicating positive financial impact from these 

changes; however, the route continued to post a $29.2 million loss over this period.
Page 27 GAO-07-15 Intercity Passenger Rail

93 percent of the 82.4 million residents classified as rural.36 Intercity bus 

and air services have the deepest penetration within rural America—at 89 

and 71 percent of the population, respectively—and rail services were 

reported to cover approximately 42 percent of the rural population. While 

many of these residents have access to more than one transportation 

option, the Bureau of Transportation Statistics estimated that intercity 

passenger rail (i.e., Amtrak) is the sole public transportation option for 

approximately 350,000 people nationwide.37 Georgia and South Carolina 

were reported as the two states with the largest number of rural residents 

(with a combined total of 94,000) that were solely dependent on scheduled 

intercity passenger rail. In contrast, scheduled intercity air and bus services 

provide the sole transportation option for 2.4 million and 14.4 million rural 

residents nationwide, respectively. In addition, it appears that if rural 

transportation were a targeted public policy objective, other modes of 

transport could be better positioned to provide this benefit to a greater 

number of residents at lower cost. For example, in fiscal year 2004, federal 

grants available to the intercity bus industry to support rural service 

amounted to just $22 million, with rural coverage for that mode exceeding 

twice the level provided by rail. However, as the DOT reported in 2005, the 

goal of rural mobility should be to offer flexible and sustainable travel 

options to those with the greatest mobility needs—and not necessarily to 

preserve or promote use of any specific transportation mode.38 Achieving 

this goal may require the establishment of objective criteria by which to 

evaluate the needs of these communities. It may also require the awarding 

of competitive franchise agreements to whatever mode that could provide 

service with the least amount of subsidy.39

36For this analysis, the Bureau of Transportation Statistics defined as rural any area that the 

Census Bureau did not identify as either an “urbanized area” or an “urban cluster.”

37DOT, Bureau of Transportation Statistics, Scheduled Intercity Transportation: Rural 

Service Areas in the United States, June 2005.

38DOT, Study of Intercity Bus Service, Report to the United States Congress, July 2005. 

39We have previously reported on potential options to improve the long-term viability and 

effectiveness of other federal programs targeted to smaller communities, such as the 

Essential Air Service program. These options included redefining or clarifying program 

criteria and potentially shifting federal subsidies from air carriers to local grants 

administered directly to communities with identified needs. See GAO, Options to Enhance 

the Long-Term Viability of the Essential Air Service Program, GAO-02-997R (Washington, 

D.C.: Aug. 30, 2002).
Page 28 GAO-07-15 Intercity Passenger Rail

Intercity passenger rail also provides connectivity between different 

regions of the country and other rail routes; however, alternatives may 

exist to meet passenger demands at reduced cost. Federal law currently 

directs Amtrak to tie together existing and emerging regional rail passenger 

service. On a system wide basis, relatively few passenger trips (8 percent) 

include a train-to-train connection—that is, a passenger changing from one 

train to another. However, on long-distance routes the percentage of trainto-train connections is somewhat higher (an estimated 22.6 percent in 

fiscal year 2004). Consequently, national interconnectivity provided by 

long-distance routes appears to be a potential benefit to approximately 3.5 

percent of Amtrak’s total annual passengers. While this population is a very 

small proportion of the overall intercity passenger market, some rail 

proponents believe national connectivity may also provide public benefits 

by providing transportation redundancy to the country. Such redundancy 

may be important, particularly if air services were grounded as they were in 

the immediate aftermath of the September 11, 2001, terrorist attacks. 

However, to the extent that transportation redundancy is a meaningful 

policy option, intercity passenger rail may not be positioned to provide 

cost-effective service to the greatest number of people. As previously cited, 

intercity buses currently provide much greater coverage across the United 

States without federal operating assistance. Therefore, determining 

whether these public benefits warrant federal subsidies involves 

consideration of the substantial costs required to achieve them, as well as 

evaluation of alternative options, such as intercity buses, that may be better 

positioned to provide these benefits.

Amtrak’s long-distance services are often infrequent and hindered by poor 

on-time performance, which may further diminish the benefits provided by 

these services and offer reduced potential to meet the public’s 

transportation demands. For example, nearly all of the long-distance trains 

have limited frequencies—typically one daily departure in each direction—

and, due to increased travel times, they are often scheduled to arrive 

outside of convenient traveling hours.40 For example, many of Amtrak’s 

long-distance trains operating within Georgia and South Carolina—the 

states with the most rural residents dependent solely on rail—are 

scheduled to arrive at the station between 3:20 a.m. and 6:50 a.m. The 

infrequent and inconvenient nature of many long-distance schedules is 

likely to severely limit rail as a viable transportation option for many 

40All long-distance trains are currently scheduled for one daily departure except the 

Cardinal and the Sunset Limited, which have three weekly departures.
Page 29 GAO-07-15 Intercity Passenger Rail

passengers. While increased frequency of service may potentially address 

these limitations, this option could be costly due to the increased level of 

federal subsidies that more frequent service would entail if the population 

and other characteristics of long-distance corridors did not warrant 

increased frequency of service. 

On-time performance also continues to be a major limitation affecting the 

potential benefits provided by Amtrak’s long-distance services. In fiscal 

year 2005, Amtrak reported an average on-time performance of 41.4 

percent for long-distance routes, ranging from a low of 7.1 percent on the 

Sunset Limited to a high of 83 percent on the City of New Orleans (see 

app. II). While several factors contribute to the wide variation in 

performance, Amtrak attributes operating delays on the six host 

railroads—on which Amtrak trains operate—as the largest single factor 

affecting Amtrak on-time performance, contributing as much as 75 to 80 

percent of the delay minutes.41 Since fiscal year 2000, average on-time 

performance for all long-distance trains has been in decline (see fig. 7).42

41Delays for which the host railroad is responsible include, among others, delays caused by 

freight trains; temporary slow orders; meeting up or following other passenger trains; and 

signal, routing, dispatching, or detour delays.

42In fiscal year 2005, a 30-minute tolerance from scheduled arrivals was used to determine 

on-time performance for long-distance trains.
Page 30 GAO-07-15 Intercity Passenger Rail

Figure 7: Average Annual On-time Performance of Long-Distance Routes, Fiscal 

Years 2000 through 2005

On average, in fiscal year 2005, trains on long-distance routes arrived at 

their final destinations approximately 98 minutes late. Trains on the 

poorest performing route, the Sunset Limited, averaged nearly 5 hours 

late. Such poor on-time performance is likely to significantly affect the 

extent that passengers choose rail services to meet their transportation 

needs. 

Corridor Services Appear to 

Provide More Public Benefits at 

Reduced Cost, but Opportunities 

for Improvement Remain

Corridor rail services—which include NEC operations, as well as state 

supported and legacy corridor routes—appear to offer increased potential 

to provide transportation benefits and public benefits to a greater number 

of people at reduced cost to the federal government. Corridor routes 

comprise most of Amtrak’s annual ridership—providing service to a wide 

variety of business and leisure travelers—and they account for much of the 

growth in passenger rail in recent years, particularly on the state-supported 

routes (see app. II for a list of states and associated corridor services). 

Relative to the long-distance routes, corridor services also operate with 

lower costs and better on-time performance. They also appear to be better 

aligned to provide more cost-effective transportation benefits and public 

benefits. For example, they are generally more time- and cost-competitive 

0

40

50

60

2000 2001 2002 2003 2004 2005

Source: GAO analysis of Amtrak data.

Percentage

Fiscal year
Page 31 GAO-07-15 Intercity Passenger Rail

with other transport modes and offer increased flexibility over longdistance rail services, adapting schedules and services to changing 

demographics and passenger travel demands. However, despite their 

relative financial and operating performance, many of the corridor routes 

face challenges such as capacity constraints and funding issues, which may 

limit opportunities for rail to increase market share and play a more 

significant role in the nation’s transportation system. 

Ridership and Financial 

Characteristics

Corridor routes account for most of the intercity passenger rail travel in the 

United States and they illustrate substantially reduced financial losses 

relative to the long-distance routes. Most intercity passenger rail travel in 

the United States is comprised of relatively short trips on a small number of 

corridor routes. In fiscal year 2005, the average trip length for all routes—

both long distance and corridor—was 213 miles, with corridor routes 

servicing approximately 85 percent of the total Amtrak ridership. Among 

these corridor routes, over half of the ridership in fiscal year 2005—nearly 

11 million passengers—occurred on the NEC alone. The Washington–New 

York City–Boston main line of the NEC remains the most heavily utilized 

rail route in the country, forming an essential link for intercity passenger 

and freight transportation, as well as nine different commuter rail 

operations in the Northeast. On an average weekday, over 1,800 commuter 

and Amtrak trains operate over the NEC.

On the 26 non-NEC corridors, ridership in fiscal year 2005 was 10.6 million, 

with 52 percent of this total generated on the four most heavily traveled 

routes.43 These corridor services, namely the state supported routes, also 

represent the market that is exhibiting the strongest ridership growth. 

Since fiscal year 2002, there has been an 18-percent increase in ridership on 

state-supported routes as states continue to increase spending for 

operations and capital improvements of corridor rail services (see fig. 8). 

43These routes include the Empire Service between New York City, New York, and Toronto, 

Canada; and the Pacific Surfliner, Capitols, and San Joaquin services that operate within 

California. 
Page 32 GAO-07-15 Intercity Passenger Rail

Figure 8: Corridor Ridership Trends by Route Class, Fiscal Years 2002 through 2005

Given the high number of passengers and the relative importance of the 

NEC, passenger profiles for Amtrak-operated trains on this corridor 

illustrate some clear distinctions from those on long-distance routes. For 

example, a much higher percentage of ridership is comprised of 

commuters and business travelers in comparison to the long-distance 

routes, particularly on the higher-end NEC trains, the Acela Express and 

Metroliner. Amtrak survey data indicates that in fiscal year 2004, 82 percent 

of travel on these services was business-related. Passengers on Amtrak’s 

Regional Service—the other primary NEC trains—reported that 49 percent 

were traveling or commuting for business or school; 50 percent reported 

traveling for personal or family business, or traveling primarily for leisure 

purposes.44

44Amtrak’s Regional Service operates primarily on sections of the NEC between Newport 

News, Virginia, and Boston, Massachusetts.

0

7

8

9

10

11

2002 2003 2004 2005

Source: GAO analysis of Amtrak data.

State-supported and other corridors

Northeast corridor

Ridership (in millions)

Fiscal year
Page 33 GAO-07-15 Intercity Passenger Rail

For non-NEC corridors, the designated trip purpose varied widely between 

the routes because they operate in a number of different states and 

passenger markets. For example, the Empire service in New York caters to 

a number of business travelers and commuters, while the California 

corridor routes are characterized by a larger share of leisure and personal 

travel.

As for financial performance, the Acela Express and Metroliner trains 

operating on the NEC are Amtrak’s only services in which passenger 

revenues cover the cost of operation (excluding depreciation and interest). 

In fiscal year 2005, Amtrak reported a positive total annual contribution of 

$65.3 million for this service. However, Amtrak’s other scheduled trains on 

the NEC ended the year with operating losses, resulting in a net 

contribution of approximately $45 million for intercity passenger rail 

service on this corridor. While these results indicate relative financial 

success, they do not take into account the substantial amount of capital 

spending invested to fund infrastructure improvements and maintain 

operations on the NEC. For example, in fiscal year 2005, Amtrak reported a 

capital allocation to the NEC of $190.4 million—over four times the 

reported operating contribution. In addition, Amtrak has an estimated 

system backlog of up to $6 billion in deferred maintenance and 

infrastructure improvements, with the NEC comprising more than 60 

percent of this total.

All of the non-NEC corridor routes also incur financial losses to Amtrak; 

however, considerable variation exists among them. In fiscal year 2005, 

Amtrak reported a total annual loss from all non-NEC corridor services of 

approximately $164 million, with losses on individual services ranging from 

a low of $200,000 (Illinois Zephyr) to a high of $23.3 million (Empire 

Service).45 In the aggregate, these losses represent an average operating 

subsidy of about $20 per passenger for non-NEC operations. One reason for 

the wide variance in Amtrak’s financial performance among these corridor 

routes is the level of state support provided. Overall, state payments to 

Amtrak for operating and capital costs have increased considerably in 

recent years—rising from $148 million to $272 million between fiscal years 

2000 and 2005 (see fig. 9). However, states have generally not been required 

45We have previously identified potential data reliability concerns related to Amtrak’s 

allocation of costs to individual routes (see GAO-06-145). However, for the purposes of this 

report, we believe the data are the best available and reasonably sufficient to illustrate 

general financial trends between Amtrak’s different routes.
Page 34 GAO-07-15 Intercity Passenger Rail

to pay the full subsidies for these routes.46 Moreover, many states that have 

corridor services have not paid anything at all, thus producing issues of 

equity among states. For example, Amtrak operates a number of weekly 

departures of the Hoosier State service—between Indianapolis and 

Chicago—although it has the lowest cost recovery of any short-distance 

route and neither state contributes any level of operating support.47

46As part of its Strategic Reform Initiatives, Amtrak is currently undertaking efforts to 

transition the states to paying the full subsidy of operating corridor services, which would 

include allocation of additional overhead costs and other shared costs (excluding 

depreciation and interest), as well as an applicable equipment charge that Amtrak envisions 

will be eligible for a federal capital match (if one were enacted). Under this initiative, 

starting in fiscal year 2008, state funding requirements would be stepped up by 25 percent 

each year over a 4-year period until the full subsidy for operating these routes is recovered. 

47Amtrak officials indicated that the Hoosier Service also operates for the purpose of 

moving equipment to and from Amtrak’s Beech Grove maintenance facility near 

Indianapolis. According to Amtrak, there have been preliminary discussions with the 

Indiana Department of Transportation about making this a state-supported route.
Page 35 GAO-07-15 Intercity Passenger Rail

Figure 9: Annual State Operating and Capital Contributions, Fiscal Years 2000 

through 2005

Potential Transportation 

Benefits and Public Benefits

Both types of Amtrak’s corridor routes illustrate significant potential to 

provide transportation benefits and public benefits, but they each illustrate 

a number of unique attributes and opportunities for improvement. 

Transportation experts generally agree that intercity passenger rail services 

that serve large, relatively close population centers—and that are time- and 

cost-competitive with other transportation modes—represent the greatest 

potential markets for rail worldwide. Moreover, these markets are the ones 

most likely to offer the greatest opportunity to mitigate pollution and 

reduce the growth of highway congestion through increased rail use. 

However, the ability of intercity passenger rail to generate these benefits 

depends on the likelihood that travelers will choose rail service over other 

modes of transportation. As we have reported previously, congestion is 

most likely to be alleviated when rail routes run parallel to congested 

roadways and where travelers view rail as a more attractive “door-to-door” 

Source: GAO analysis of Amtrak data.

State-contributed capital 

State-contributed operating funds

Dollars in millions

Fiscal year

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005
Page 36 GAO-07-15 Intercity Passenger Rail

travel option (in terms of price, time, comfort, and safety) than driving.48

Similarly, rail becomes less competitive with other modes of 

transportation, particularly air services, as travel time and prices increase 

over longer distances (see app. II). For these reasons, corridor services 

appear to be most competitive with automobile and air travel in markets 

between 100 and 300 miles. In this regard, many existing and developing 

corridor rail services appear to be well positioned to provide a viable 

alternative to other modes of transport and potentially offer a number of 

public benefits:

• NEC. With over 30 million metropolitan residents, the NEC has a 

population density of over 65,000 residents per route mile. According to 

the American Association of State Highway and Transportation 

Officials, such a large population density helps to explain why the NEC 

accounts for such a large proportion of Amtrak’s total corridor 

ridership.49 Many of the rail services on the NEC are very competitive 

with air and auto travel in several markets. For example, Amtrak serves 

50 percent of the combined air/rail market between Washington, D.C., 

and New York, and 40 percent between New York and Boston. 

Moreover, in fiscal year 2005, Amtrak reported air/rail market shares 

greater than 90 percent for other shorter distance city pairs such as 

Philadelphia–New York and Philadelphia–Washington, D.C. The 

Northeast region also illustrates characteristics of the type of urban 

congestion and capacity constraints that may benefit the most from 

travelers being diverted away from the highways and onto rail. 

• State-Supported Corridors. State-supported routes are the fastest 

growing routes and illustrate significant potential to provide a viable 

transportation option; however, further development of new and 

existing rail corridors may require funding beyond what has been 

previously provided. A growing number of individual states and groups 

of states have made the public policy decision to utilize state funds to 

subsidize additional corridor rail service and invest in related capital 

projects. Some of the potential benefits cited for such expenditures 

include the potential for rail to accommodate regional growth and 

enhance economic competitiveness. Over 80 percent of the nation’s 

48GAO, Intercity Passenger Rail: Congress Faces Critical Decisions in Developing a 

National Policy, GAO-02-522T (Washington, D.C.: Apr. 11, 2002).

49American Association of State Highway and Transportation Officials, Intercity Passenger 

Rail Transportation, Standing Committee on Rail Transportation, 2002. 
Page 37 GAO-07-15 Intercity Passenger Rail

population now lives in a metropolitan area. Officials in many states are 

interested in identifying and developing regional rail corridors that link 

these economies and provide a viable transportation option to large 

numbers of residents. Officials in several states with whom we spoke 

also indicated that corridor rail services are an important component of 

state and local transportation plans. For example, in Washington State, 

corridor rail service between Seattle, Washington, and Portland, Oregon, 

comprised over 60 percent of the air/rail market share in fiscal year 2005 

and was identified for its potential role in reducing the growth rate of 

highway congestion within the region. The nine member states of the 

Midwest Regional Rail Initiative also identified where potential public 

benefits may be provided through additional funding for increased train 

frequencies and extensions of existing corridor routes.50 In addition, this 

group has set out a “grand vision” to link all of the major industrial 

centers in the region with high-speed rail service (operating at speeds up 

to 110 miles per hour). If completed, this network would reach over 35 

million residents—a number that exceeds the entire metropolitan 

population of the NEC. An additional benefit attributed to increased 

development of corridor services is that the state (or other public 

authority) has the ability to contract for the specific services that it 

chooses to subsidize, including scheduling, frequency, and the stations 

served. In this manner, services can be adjusted over time according to 

regional growth patterns and changing population demographics. 

Potential Opportunities for 

Improvement

While Amtrak’s corridor routes serve millions of passengers each year and 

appear to provide a number of public benefits, there may be additional 

opportunities to further develop rail corridors to improve existing services 

and reach new markets. For example, a number of issues associated with 

infrastructure improvements and capacity constraints may need to be 

addressed to ensure that rail services continue to provide an effective 

alternative to other transport modes. To be successful, corridor trains must 

operate with adequate on-time performance to provide competitive travel 

times and reasonably predictable schedules. In addition, overcoming 

funding issues will likely be required in order to realize the opportunities 

identified by states for the further development of regional rail corridors. 

Infrastructure improvements and capacity constraints are critical issues on 

the NEC. Although it is Amtrak’s most viable route, the NEC faces a high 

50The nine member states of the Midwest Regional Rail Initiative include: Illinois, Indiana, 

Iowa, Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin.
Page 38 GAO-07-15 Intercity Passenger Rail

level of unmet infrastructure spending, maintenance spending, and growing 

capacity constraints, which may affect its ability to effectively compete 

with other transportation modes in the future. Amtrak’s most recent 

legislative grant request asks for $730 million in fiscal year 2007 to 

complete major projects such as replacing bridges, ties, power supply 

systems, and overhauling the existing fleet of rolling stock, with the NEC 

being targeted as a critical priority for such investments. In addition, the 

many users operating on the NEC present a constraint on capacity that may 

impact the ability of Amtrak trains to reach their destinations on time. 

Backups are becoming more common among freight, commuter, and 

Amtrak trains, causing delays that result in dissatisfaction among riders. 

Delays affecting on-time performance may be particularly important on the 

NEC, where a high number of business and commuter travelers rely on 

these services.

In fiscal year 2005, Amtrak reported that train services on the NEC reached 

their destinations on time an average of 78 percent of the time.51 While this 

represents a slight improvement over fiscal year 2004 levels, this indicator 

has decreased from fiscal year 2000 levels (see fig. 10).52 Recognizing that 

the deteriorated condition of the infrastructure contributes to increased 

operating costs and reduced reliability of services, Amtrak has committed 

to developing a NEC master plan in conjunction with the states and 

commuter agencies that utilize it. This effort aims to identify long-term 

needs and service improvements, and work together to fund such 

projects.53 An example of such a project designed to address capacity 

constraints and improve service is illustrated by Amtrak’s current efforts 

working with the state of Virginia to develop an additional track dedicated 

51Amtrak defines Acela Express trains as “on-time” if they arrive within 10 minutes of their 

scheduled time. Regional trains are defined with a higher degree of tolerance based on 

route mileage: 10 minutes for trips less than 250 miles, up to a maximum of 30 minutes for 

trips exceeding 551 miles. 

52Amtrak officials indicated that on-time performance of the primary trains operating on the 

NEC was 81 percent for fiscal year 2006 (as of September 8, 2006). 

53We have previously reported shortcomings in Amtrak’s coordination with applicable states 

along the NEC to effectively identify and prioritize capital projects. See GAO, Intercity 

Passenger Rail: Amtrak's Management of Northeast Corridor Improvements 

Demonstrates Need for Applying Best Practices, GAO-04-94 (Washington, D.C.: Feb. 27, 

2004).
Page 39 GAO-07-15 Intercity Passenger Rail

to passenger trains between Washington, D.C., and Richmond, Virginia.54

The benefits identified by Amtrak for projects such as this one include 

increased capacity, potentially higher speeds, reduced trip times, and 

overall improvement in reliability and on-time performance. 

Figure 10: Annual On-time Performance of Corridor Routes, Fiscal Years 2000 

through 2005

Non-NEC corridor routes also face a number of the same infrastructure and 

capacity challenges affecting train speeds and the predictability of travel 

times as the NEC services. In fiscal year 2005, on-time performance for 

these services was reported at 70.4 percent, reflecting a 6-percent decline 

since fiscal year 2000. A state official in New York cited the Empire Service

as an example of one such corridor facing significant congestion and 

capacity constraints associated with heavy use by freight trains, commuter 

54Amtrak does not own the track between Washington, D.C., and Richmond, Virginia, but 

operates both corridor and long-distance trains along this route.

0

60

70

80

90

100

2000 2001 2002 2003 2004 2005

Source: GAO analysis of Amtrak data.

State-supported and other corridors

NEC combined (Acela Express/Metroliner and Regional trains)

Percentage

Fiscal year
Page 40 GAO-07-15 Intercity Passenger Rail

services, and Amtrak trains. A recent study estimated that $700 million 

would be needed just to complete infrastructure improvement projects on 

one segment of this corridor, the 141-mile line between Albany and New 

York City. Similar projects to reduce congestion and increase speeds have 

been identified on a number of other state supported and “legacy” corridors 

in Pennsylvania, California, and the Midwest.

Overcoming funding challenges is another issue that needs to be addressed 

if Amtrak and state partners are going to work together to continue 

developing and expanding intercity passenger rail services. Although some 

states have identified where additional corridor services may provide 

significant transportation benefits and public benefits, these projects often 

require substantial levels of public funding. For example, the total cost 

required to develop the 3,000-mile high-speed rail network as envisioned by 

the Midwest Regional Rail Initiative is estimated at $4.8 billion. All the state 

officials with whom we spoke indicated that any additional state funding 

for rail will require some type of federal match program similar to other 

transportation modes. Moreover, Amtrak’s plans to recover additional 

overhead and other shared costs expended on state-supported corridor 

routes beginning in 2008 will place further demands on limited state 

funding for rail. Undertaking the significant infrastructure improvement 

projects needed to expand capacity and improve operational performance 

on existing corridors would also be expensive. For example, a report 

issued by a coalition of rail stakeholders in the Mid-Atlantic region 

estimated that funding to address major congestion bottlenecks in that 

region would cost approximately $6.2 billion over 20 years.55 In addition, a 

report issued by state transportation officials in 2002 estimated that capital 

investment projects outlined for 21 corridors across the country could cost 

as much as $60 billion over a 20-year period.56 Regardless of which projects 

are ultimately funded, it appears that, if rail is to play a more significant 

role in the nation’s transportation system, overcoming issues of funding 

and capacity will be an important component. 

55I-95 Corridor Coalition, Mid-Atlantic Rail Operations Study – Summary Report, April 

2002. 

56The American Association of State Highway and Transportation Officials, 2002.
Page 41 GAO-07-15 Intercity Passenger Rail

Current Intercity Passenger 

Rail System Is Not 

Adequately Focused Where 

It Can Be the Most 

Financially Viable and 

Provide the Most Public 

Benefits 

The current intercity passenger rail system is not adequately focused on its 

comparative strengths; it exists much as it did when Amtrak began over 35 

years ago. While Amtrak has made notable upgrades along the NEC and 

implemented a number of contractions and expansions of its route 

structure over the years, the system remains similar in its size and 

endpoints as the original “basic system” that the DOT designated in 1971 

(see app. II for a map of Amtrak’s routes in 1971). As the DOT General 

Counsel recently testified, this system has not effectively adapted to 

shifting demographics and market demands over time, as other 

transportation modes have done.57 While the current model may provide 

limited service offerings across the country’s broad geography, it does so at 

a very high cost to the federal government. Amidst a number of fiscal 

constraints and increased pressure to reduce or better target federal rail 

subsidies in the future, this model may no longer be viable. However, 

intercity passenger rail continues to illustrate the potential to become an 

important element with greater integration into the nation’s overall 

transportation system if it is focused on the markets where rail exhibits 

comparative strength. As reported by the Congressional Budget Office 

(CBO) in September 2003, these opportunities are most likely to be found 

on routes of about 100 to 300 miles that connect cities with large 

populations. In these markets, rail is most likely to be both time- and costcompetitive with highway and air travel, and may be best positioned to 

meet both the demands of the traveling public and the demands of 

sponsoring public authorities.58

As our work illustrates, the current intercity passenger rail system targets 

substantial resources toward the operation of long-distance services, 

which the CBO and others have reported is an area of comparative 

weakness for rail services. In addition to accounting for about 80 percent of 

Amtrak’s operating losses, these services do not appear to be meeting 

Amtrak’s goal of providing “basic transportation” very effectively. Services 

are often unreliable—averaging 41 percent on-time performance—and 

serve communities infrequently or at inconvenient times (often one train 

daily in each direction). 

While these characteristics do not serve Amtrak’s long-distance passengers 

well, the several distinct “client” markets on these routes are also not 

57Rosen, 2005.

58CBO, The Past and Present of U.S. Passenger Rail Service, Sept. 2003.
Page 42 GAO-07-15 Intercity Passenger Rail

efficiently targeted. For example, many passengers on long-distance trains 

travel relatively short distances—400 miles or less—suggesting that a 

substantial share of long-distance service may actually be corridor service. 

However, these services are not managed like corridors, which are 

characterized by higher speeds and more frequent train service. Passengers 

in rural communities along these routes also do not appear to be effectively 

targeted by rail services. These services are inherently limited to those 

communities fortunate enough to be located next to historical rail lines. 

Further, there is reason to believe that alternative modes of transportation 

may be better positioned to provide much greater rural coverage at 

potentially lower cost to the government. Finally, for those passengers 

traveling longer distances, Amtrak often operates costly amenities (e.g., 

sleeper and dining cars) which account for even higher levels of federal 

subsidies than coach-class seats. Amtrak survey data also suggests that, on 

average, the 16 percent of riders on long distance trains who utilize sleeper 

services are typically the most affluent passengers. For example, 

passengers in Sleeper/First Class reported an average household income 

over one-third higher than coach-class passengers.59 Consequently, 

substantial federal dollars are currently being spent to subsidize costly 

services to individuals with higher-than-average incomes. All of these 

characteristics raise questions about the appropriate federal role in longdistance service, such as whether federal expenditures should be used to 

subsidize leisure services to affluent travelers, and whether there may be 

more cost-effective alternatives to provide corridor services and efficient 

rural transportation.

In contrast, the current intercity passenger rail system also includes 

corridor services, which have been identified as the comparative strength 

of passenger rail and where passenger rail services hold the most promise 

to be financially viable and provide a number of potential public benefits. 

There has been a relative growth of passenger rail ridership on corridor 

routes, especially state-supported corridors, and 85 percent of Amtrak’s 

riders live and work along corridors. Aside from the heavily populated NEC 

where Amtrak has achieved its best results, a number of other corridors—

such as those in California, New York, the Midwest, and the Pacific 

Northwest—exhibit many of the key characteristics that indicate there may 

59Amtrak survey data indicates an average household income of $83,000 per year for 

Sleeper/First Class passengers compared with $60,000 for coach-class passengers. However, 

we have not assessed the accuracy or precision of these estimates. In comparison, the U.S. 

Census Bureau reported that the median household income in 2005 was about $46,200 (in 

2005 inflation-adjusted dollars).
Page 43 GAO-07-15 Intercity Passenger Rail

be potential public benefits that could justify public subsidies for passenger 

rail services, namely clusters of densely populated areas within 300 miles 

of each other. Moreover, many officials with whom we spoke agreed that 

the promise of intercity passenger rail is likely along corridors, not over 

long distances. States have further supported this view by providing 

substantial funds to support corridor operations and/or capital investments 

on these routes. 

Foreign Experiences 

Illustrate Various 

Approaches to 

Restructuring and Key 

Reform Elements 

Over the past 20 years, several countries have employed a variety of 

approaches in reforming their intercity passenger rail systems in order to 

meet national intercity passenger rail objectives. These approaches—alone 

or in combination with each other—have been used to support national 

objectives such as increasing the cost effectiveness of public subsidies, 

increasing transparency in the use of public funds, and providing 

transportation benefits and public benefits. Despite the variation or 

combination of approaches used, during the restructuring process these 

countries addressed several key elements of reform, such as establishing 

clear goals for intercity passenger rail, clearly defining stakeholder roles 

that are necessary in implementing any approach, and establishing stable 

sustainable funding. 

Prior to implementing these new approaches, many countries’ passenger 

rail systems consisted of “monolithic” state-owned and state run 

organizations in which customer service and financial performance were 

not the main concerns of the railroad. Rather, other concerns, such as 

socioeconomic issues (e.g., providing employment) were more important. 

Similar to the current situation in the United States, passenger rail in many 

countries was losing market share to other modes of transportation and 

this loss of market share, along with mounting dependence on public 

subsidies and decreasing transparency with respect to where public funds 

were being spent, prompted change in the passenger rail industry. Table 2 

discusses the different passenger rail structures that existed in the five 

countries in which we conducted site visits for this report. These countries 

were chosen because they have transitioned from state-owned fully 

integrated organizations to more consumer driven market-dependent 

entities. 60 While it is important to be aware of the key differences between 

60Rail systems consist of two main functions—infrastructure management and operations. 

To varying degrees, these two functions can be integrated, that is, conducted by the same 

entity, or separated from each other.
Page 44 GAO-07-15 Intercity Passenger Rail

these countries and the United States (e.g., infrastructure ownership, 

geography, and political culture) the general catalyst for reform—the need 

to deliver a better value for the expense of public funds—is the same as the 

current passenger rail environment in the United States.

Table 2: Summary of State-Owned Rail Services (Pre- and Post-Reform) in Countries We Visited

Source: GAO analysis of site visit data.

a

Our summary of the railway reform effort in the U.K. encompasses two major efforts in 1993 and 

2004. In 1993, the U.K. began privatizing its rail system partly to control cost and improve quality. As 

part of the continuing effort to improve the rail system, the U.K. undertook another major restructuring 

effort in 2004. See app. III for further details.

Canada France Germany Japan United Kingdoma

Pre-reform 

structure

Operations 

integrated with 

infrastructure.

Operations 

integrated with 

infrastructure.

Operations 

integrated with 

infrastructure.

(Two existed, East 

Germany and West 

Germany).

Operations integrated 

with infrastructure.

Operations 

integrated with 

infrastructure.

Reason for reform To increase focus on 

cost control and 

customer service.

To reduce national 

government debt, 

deficits, and the rate 

of public subsidy 

growth.

To improve efficiency, 

reduce the federal 

debt, and reduce the 

burden on the federal 

budget.

To improve financial 

performance and 

management of the 

system, and reduce 

mounting long term 

debt.

To improve efficiency 

and cost control, 

improve the 

business plan, and 

depoliticize 

inconsistent capital 

funding.

Post-reform 

operations

Single operator 

(State-owned private 

stock company).

Single operator 

(State-owned 

company).

Multiple private 

operators after 2012.

Multiple private 

operators

(Primary operator 

state-owned jointstock company; 

infrastructure owner 

is owned by same 

holding company).

State-owned split into 

six passenger 

operators organized 

geographically and 

integrated with 

infrastructure. 

Multiple private 

operators, which 

compete for 

franchises. 

Post-reform 

infrastructure

Multiple owners. 

(Primarily freight 

railroads, with 130 

miles owned by 

passenger operator).

Single owner. (Stateowned company).Single owner. (Jointstock company; 

primary operator is 

owned by same 

holding company).

Multiple owners. 

(Three largest owners 

are privatized and 

three smallest lease 

some infrastructure 

from the 

government).

Integrated with 

operations.

Single owner. (First a 

public stock 

company; now, a 

private corporation 

governed by 

members).
Page 45 GAO-07-15 Intercity Passenger Rail

Various Approaches Have 

Been Used Abroad to 

Support a Broad Range of 

National Intercity Passenger 

Rail Objectives Aimed at 

Improving Value for Funds 

Spent 

The foreign countries we visited61 have met a broad range of national 

objectives by implementing various approaches to improve the cost 

effectiveness of their intercity passenger rail systems. All the countries we 

visited reformed their systems in large part to improve the value of service 

they were receiving for the amount of public money being spent on the 

service. For example, the desire for increased transparency in the use of 

public funds, mounting public subsidies and rail-related debt, and a desire 

for economic efficiency were all key factors in the European Union’s 2001 

directive requiring all member states to improve the efficiency of their rail 

systems. Three of the five countries we visited—France, Germany, and the 

U.K.—are members of the European Union and have all begun 

implementing changes to meet these goals. Similarly, Canada and Japan 

both reformed their systems to increase the value in service they were 

receiving for the funds being spent. While the countries we studied 

reformed their systems in order to meet financial objectives, the national 

governments of these countries still provided heavy financial support to the 

system after the reforms. Table 3 shows the current levels of financial 

support provided by these governments.

Table 3: Post-Reform Financial Involvement by National Governments of Five Countries We Visited

61Canada, France, Germany, Japan, and the U.K.

Canada France Germany Japan U.K.

Debt at time of 

reform

None 30€ billion debta 35€ billion debt b ¥37.1 trillion debtc £540 milliond

Post-reform debt None, and operator 

has no authority to 

issue debt 

instruments or to 

go into the debt 

market to raise 

funds

20€ billione

transferred to 

infrastructure 

company in 

(estimated value 

of infrastructure 

debt); 10€ billionf

to operations 

company

35€ billiong

transferred to 

national 

government with all 

employees of 

former rail 

authorities

¥25.5 trillionh and all 

pensions of former national 

rail employees transferred to 

a government-owned 

corporation. Remainder was 

transferred to a holding 

company and to the four rail 

companies 

£8 billioni

infrastructure debt 

accumulated after 

reform. Current 

infrastructure debt 

is about £18 billion.j

Expected to rise to 

£21 billionk by 2009
Page 46 GAO-07-15 Intercity Passenger Rail

Source: GAO analysis of site-visit data.

a

Approximately $35 billion at the time of reform in 1997. Conversion of France’s debt to U.S. dollars 

was done using the exchange rate for the Euro introduced January 1999, and therefore is not the exact 

value of the actual debt in 1997. 

b

Approximately $39 billion at the time of reform in 1994.

c

Approximately $257 billion at the time of reform in 1987.

d

Approximately $806 million at the time of reform in 1994.

e

Approximately $24 billion at the time of reform in 1997. Conversion of France’s debt to U.S. dollars 

was done using the exchange rate for the Euro introduced January 1999, and therefore is not the exact 

value of the actual debt in 1997.

f

Approximately $12 billion at the time of reform in 1997. Conversion of France’s debt to U.S. dollars was 

done using the exchange rate for the Euro introduced January 1999, and therefore is not the exact 

value of the actual debt in 1997.

g

Approximately $39 billion at the time of reform in 1994.

h

Approximately $176 billion at the time of reform in 1987.

i

Approximately $15 billion in September 2006.

j

Approximately $34 billion in September 2006.

k

Approximately $39 billion in September 2006.

l

Approximately $152 million in September 2006.

mDue to fluctuations in exchange rate, the subsidy varied from approximately $1.7–$2.5 billion between 

1999–2006.

n

Due to fluctuations in exchange rate, the subsidy varied from approximately $4.7–$7 billion between 

1999–2006.

o

Due to fluctuations in exchange rate, the subsidy varied from approximately $5.9–$8.9 billion between 

1999–2006.

p

Due to fluctuations in exchange rate, the subsidy varied from approximately $8.5–$12.7 billion 

between 1999–2006.

Post-reform 

operating 

subsidies

$170 million 

CAD/yearl

2€ billion/year to 

regionsm (fixed 

subsidy).

5.5€ billion/yearn

to repay debt; 

support some 

pension plans and 

social fares.

7€ billion/year to 

regionso

 

10€ billion/yearp to 

repay debt and 

support federal rail 

employees. 

(Fixed regional 

subsidy, but current 

debate to reduce 

regional subsidy).

Three of the six passenger 

rail companies are fully 

privatized and receive no 

subsidies. A 

business/management 

stabilization fund was set up 

for the other three to invest 

and use interest for operating 

and capital improvements.

Subsidies provided 

based on 

contracted 

franchise 

agreements. 

(Remaining costs 

covered by fares.)

Post-reform 

infrastructure 

subsidies

Periodic subsidy 

(Variable— 

requested from 

Parliament)

Annual subsidy 

provided from 

national and 

regional 

government. 

State provided 

interest free loans 

and grants to 

develop/renew 

infrastructure.

A negotiated cost sharing 

arrangement between the 

national and local 

governments, and the 

railroads.

Government 

provides an 

indemnity for the 

network manager’s 

debt of up to 50% 

of income. 

(Remainder is in 

access fees.)

(Continued From Previous Page)

Canada France Germany Japan U.K.
Page 47 GAO-07-15 Intercity Passenger Rail

Passenger rail reform in the countries we visited was also undertaken to 

achieve a number of other objectives. For example, reform was used as an 

opportunity to provide viable transportation benefits and public benefits 

that might not otherwise be achieved. The Canadian, Japanese, and French 

governments all financially support passenger rail service to areas of the 

country that have small or isolated populations and that may not be well 

served by other means of transport. For the most part, this service is 

unprofitable and would not otherwise be provided. Another objective was 

to address growing urban congestion through enhanced passenger rail 

service. In the European Union member countries we visited passenger rail 

reform was used to address environment and urban congestion issues. 

Finally, the countries we visited used reform to improve the operational 

performance of existing intercity passenger rail systems. For example, in 

Germany, a large part of its reform was to consolidate the two highly 

inefficient rail systems that existed after the country was reunified into one 

cost-efficient rail system. Similarly, in Canada a major reexamination of 

long-distance intercity passenger rail service took place in order to better 

market these routes and, therefore improving the routes’ financial 

performance. Additionally, Germany and France have established 

performance metrics such as on-time performance and train cleanliness, 

which result in bonuses or penalties for the rail operators based on their 

ability to meet the standards established in the metrics. 

These reform objectives have been addressed through various approaches. 

Each approach reorganized a different aspect of the existing intercity 

passenger rail system. See figure 11 for a summary of the approaches each 

country took. These approaches are not mutually exclusive of each other, 

and have included, but are not limited to: 1) changing the roles and 

responsibilities of the various stakeholders involved in the intercity 

passenger rail system, 2) changing the funding structures of the existing 

system, 3) changing the organizational structure of the existing passenger 

rail entity, and 4) the introduction of competition or privatization in rail 

operations. 
Page 48 GAO-07-15 Intercity Passenger Rail

Figure 11: Reform Approaches Used by Site Visit Countries

Shifts in the Roles and 

Responsibilities of Intercity 

Passenger Rail Stakeholders

One approach taken by the five countries we visited was a shift in the roles 

and responsibilities of the stakeholders involved in intercity passenger 

rail—primarily the national and regional governments. This was generally 

undertaken to remove political and state interests from the operation of the 

rail system in order to increase efficiency. 

Approach Canada France Germany Japan United

Kingdom 

Restructuring existing passenger rail organizational 

structure 

Introducing competition/privatization in intercity 

passenger rail operations 

Changing the public funding structure used to 

support intercity passenger rail 

Clearly establishing the roles and responsibilities of 

intercity passenger rail stakeholders

Source: GAO analysis of foreign data.

Shift from service operator to service 

regulator/oversight 

•

Shift away from infrastructure manager, yet 

remaining full owner 

•

Devolving decision-making authority to local and 

regional governments

•

• Shift from service operator to customer

• Changes in government commitment to funding 

• Changes to infrastructure funding mechanisms 

• Changes to funding dissemination 
Page 49 GAO-07-15 Intercity Passenger Rail

• Shift from service operator to service regulator/oversight. In both the 

U.K. and Germany, the national government shifted from being the 

operator of intercity passenger rail service to taking on more of a 

regulatory role, overseeing the competitive bidding process used by 

private operators.62 By taking on an oversight role, these governments 

are facilitating competition and, in turn, supporting their objective of 

creating a more cost effective and transparent use of public funds. A 

more cost effective and transparent use of public funds helps facilitate 

improved operational performance of intercity passenger rail operators. 

• Shift away from infrastructure manager, yet remaining owner. In the 

countries we visited, some of the national governments no longer 

provide day-to-day management of the infrastructure; however, they 

remain the owner of the infrastructure companies in order to ensure 

that the state’s best interests with respect to decision making can be 

maintained. For example, in France and Germany, government-owned 

private companies were established to manage and maintain the entire 

rail infrastructure, including granting access to operators and collecting 

access fees.63 In the U.K., a member-owned private company handles 

infrastructure matters. By moving away from the day-to-day 

management of the infrastructure, governments are able to put those 

tasks in the hands of individuals best suited to manage the 

infrastructure, while still being able to set the strategic direction. 

Shifting away from day-to-day management allows the government to be 

more of a customer of the infrastructure manager, thereby enhancing 

transparency in costs as well as accountability in the financial 

performance of the infrastructure companies.

• Devolving decision-making authority to local and regional 

governments. One of the most prevalent changes made in two of the 

three European Union countries we visited was the devolution of 

specific roles and responsibilities from the national government to local 

or regional governments. These roles included decision making (e.g., 

selecting the operator through a bidding process), as well as 

62Although the German government no longer operates the intercity passenger rail system, 

the primary operator, DeutscheBahn AG, is a private state-owned, joint-stock company 

whose rail components are 100 percent owned by the German government.

63In France, this took the form of a new monopoly company established by the government 

to manage the infrastructure; in Germany one of the businesses of DeutscheBahn AG is 

dedicated to infrastructure management.
Page 50 GAO-07-15 Intercity Passenger Rail

determining the quantity and frequency of intercity passenger rail 

service. By letting governments that were geographically closest to the 

service make decisions about it, the national governments have been 

able to be more cost effective by targeting public and transportation 

benefits to the specific preferences of the localities. In cases where the 

localities are able to select their operator through competitive bidding, 

service can be purchased for the lowest bid—as opposed to having no 

choice if there were only one operator to choose from.64 For example, in 

Germany, all of the national operation subsidies are given directly to the 

Länder (analogous to U.S. states); the Länder are then able to issue a 

request for proposal outlining specific service needs, and receive 

competing bids for the level of service they request. 

• Shift from service operator to customer. The U.K. and Germany, as well 

as France and Canada, have transitioned their relationships with rail 

operators from that of operator to that of customer—the governments 

determine what type of service they want to make available to their 

citizens, and then purchase that service from the rail operators. 

Frequently, the governments establish performance metrics to hold the 

operators accountable. In the U.K. and Germany there are multiple 

operators that can bid to provide this service, but in France and Canada 

the service is provided by a single national operator.65 By taking on a 

customer role—even if the national provider is still fully owned by the 

government—these nations have been better able to define the type of 

service they want, and then pay for those services. This can lead to more 

cost-effective service, and better provision of public benefits and 

transportation benefits. For example, officials in the Ile de-France 

region (greater Paris area) told us that they have received better service 

from the national operator since they were able to deal with them 

directly, and in 2004 the operator received 1.8€ million66 in bonus 

64The European Union directive requires countries to accept the lowest bid despite other 

possible selection criteria, such as service or quality. 

65This is expected to change in France after the European Union’s “Third Railway Package” 

is enacted. This package will require all member states to open their passenger rail services 

to multiple operators. This process already exists in their freight industry. French officials 

anticipate that this package will be considered for enactment by 2010. In Canada, while the 

shift in roles was not as significant as in other countries, the Canadian government mainly 

determines the supply of rail services it wants VIA Rail to provide to citizens.

66Approximately $1.3 million in December 2004.
Page 51 GAO-07-15 Intercity Passenger Rail

payments from the region for meeting metrics such as the handling of 

passenger claims and station cleanliness.

Changing the Public 

Funding Structure Used to 

Support Intercity Passenger 

Rail

Another approach taken by some of the countries we visited involved 

changing the public funding structure used to support intercity passenger 

rail. 

• Changes to government commitment to funding. In all the countries we 

visited, the national governments made commitments to fund intercity 

passenger rail. Four of these countries dedicated annual funding 

towards investing in the intercity passenger rail system in order to 

provide the resources needed to achieve a desired level of rail service. 

Japan established a one-time fund for its railroads that needed financial 

assistance, allowing the railroads to invest these funds in order to 

operate off the interest earned on these investments. Changing the 

commitment to funding allows these countries to get the best value for 

their money by requiring rail operators to provide specified levels of 

service for the amount of funds required to conduct these services. Also, 

as shown by Canada, cuts to the level of annual funding can push an 

operator to improve its operations, reduce costs, and grow revenues in 

order to operate within its funding limits.

• Changes to funding mechanisms for infrastructure. Another major 

funding change made in the three European Union countries we visited 

was the establishment of new funding mechanisms (i.e., grants and 

loans) for intercity passenger rail operations and infrastructure. By 

splitting the funding sources for these two distinct functions, the 

governments are better able to determine what the subsidy is being used 

for and increase the transparency in the use of public funds; in addition, 

constant and expensive infrastructure projects now have a specific 

source of funding, allowing infrastructure managers to better plan for 

future projects. 

• Changes to funding dissemination. Another funding change made by 

both France and Germany occurred in conjunction with the devolution 

of decision making to local and regional governments. These two 

countries now provide national funds directly to local and regional 

governments in order to support the purchase of intercity passenger rail 

service. By doing this, these countries have enabled local and regional 

governments to be more flexible and purchase service that best fits the 
Page 52 GAO-07-15 Intercity Passenger Rail

preferences of the users; funds can therefore be targeted at the 

transportation benefits and public benefits preferred by local areas. 

In addition to these changes in the structure of the public funds, another 

factor played an important role in changing the funding structure—a 

national commitment to provide stable sustainable funding. For example, 

in Germany, part of the motor fuel excise tax was dedicated to rail; 

meanwhile, Japan created Business Stabilization Funds in order to support 

operations and capital improvements of the three island railway companies 

with smaller passenger rail markets. In Canada, officials told us the 

national government has informally made an ongoing commitment to 

support intercity passenger rail operations by consistently providing the 

same level of funding each year.67 By committing to provide the funds each 

year, all the national governments above allowed rail operators to better 

manage their resources and planning capabilities.

As part of this commitment, four of the five countries we visited 

transferred or reduced the debt that the railways were carrying. In 

Germany, reform took place in 1994 and the debt was transferred to the 

government; a new public agency was then created to take over and pay off 

the 35€ billion in debt (about $39 billion)68 incurred by the preexisting 

railways, as well as by the employees of the former railways. In Japan, 

during the 1987 reform, the national government relieved the railway of its 

¥37.1 trillion debt (about $257 billion)69 by transferring most of it—along 

with part of the railway’s employee pensions—to the national government, 

and splitting the remainder of the debt among the operators.70 In France, 

the 1997 reform resulted in 20€ billion in debt (about $24 billion) being 

67Transport Canada officials said that the government agreed to provide VIA Rail with an 

annual base subsidy of $171 million (CAD) per year starting in 1998. This subsidy was 

subsequently reduced to $169 million (CAD) in 2003 following a governmentwide 

expenditure-review exercise. VIA Rail officials said this subsidy is not set in law and can 

vary from year to year. However, it has remained essentially the same since 1998. VIA Rail 

officials also noted that this subsidy is fixed and does not include an allowance for inflation. 

The operating subsidy does not include money for capital improvements.

68Congressional Research Service, Foreign Intercity Passenger Rail: Lessons for Amtrak? 

(Washington, D.C.: 2002). 

69Ibid.

70Before Japanese reforms were initiated in 1987, that national railway’s current deficit 

reached 4.9 percent of the total national budget and 0.9 percent of the gross domestic 

product.
Page 53 GAO-07-15 Intercity Passenger Rail

transferred to the new infrastructure manager. In exchange, the new 

manager received the country’s entire rail infrastructure at no cost; the 

remaining 10€ billion in debt (about $12 billion) was transferred to the 

national operator.71 While the British government wrote off the initial debt 

of the railway in 1994, the U.K. is currently carrying an infrastructure debt 

of about £18 billion (currently about $34 billion). According to U.K. officials 

we interviewed, this amount is expected to increase to £21 billion 

(currently about $39 billion) by 2009. Officials with U.K.’s infrastructure 

manager noted, though, that borrowing is limited to 85 percent of the value 

of its regulatory asset base. Canada did not have debt at the time of their 

restructurings.72 Relieving the debt of the rail operators created a viable 

capital structure for the new railways to operate in, and has been an 

important factor in their ability to move forward more cost effectively.

Changing the Organization 

of Existing Passenger Rail 

Systems

Restructuring the organization of existing passenger rail systems is another 

approach often taken by governments when reforming their rail systems. 

Historically, most national rail systems have been comprised of monolithic 

government-owned and government-managed entities, where the two 

major functions—managing infrastructure (e.g., tracks and stations) and 

managing daily operations—were integrated. The three European 

countries we visited began their reform by separating the operational and 

infrastructure functions of their passenger rail systems. Separating these 

two functions from each other can result in more transparency and a better 

estimate of what the costs for each function are.

This separation can take place in a variety of ways. For example, the U.K. 

went from a government monopoly with full control over both functions to 

a private company owned by “members” that own and manage all of the rail 

infrastructure; operations were turned over to private operators in 1993. In 

France, the government monopoly was separated into two separate 

government-owned companies. One company is responsible for managing 

all rail operations and the other is responsible for managing the 

infrastructure. In Germany the government rail monopoly was turned over 

to a private state-owned holding company, with separate independent 

71Conversion of France’s debt to U.S. dollars was done using the exchange rate for the Euro 

introduced in January 1999, and therefore is not the exact value of the actual debt in 1997.

72In Canada, the operator has no authority to issue debt instruments or to go into debt 

markets to raise funds.
Page 54 GAO-07-15 Intercity Passenger Rail

subsidiary business units in charge of infrastructure and operations. 

Additionally, in Germany, although the same holding company that owns 

the infrastructure also includes the primary passenger rail operator, other 

private operators are permitted to provide intercity passenger rail service 

on their tracks. Conversely, in Japan, the infrastructure and operational 

function of the passenger rail system have remained integrated—instead, 

the country divided its rail system into six distinct geographic regions 

allowing each area of the country to address issues specific to its passenger 

markets. Restructuring the rail system is generally implemented to create 

more transparency in the costs incurred by the rail companies; once 

accurate costs are known, companies can better gauge how much to 

charge for their services, as well as identify opportunities for cost savings.

Introducing Competition and 

Privatization in Intercity 

Passenger Rail Operations

The introduction of competition and/or privatization in rail operations is 

another approach to reform intercity passenger rail. This approach was 

used by some of the countries we visited.73 Over the past two decades, 

countries have been reforming their railway systems through various forms 

of privatization in order to improve the quality of service and efficiency 

offered to customers, and to reduce costs. Competition and privatization 

are two market mechanisms that are often used to improve service 

efficiency while meeting financial objectives. The use of competition and 

privatization can lead to a market that is more responsive to customers as 

well as investors. However, regardless of the degree of success, deep and 

continuing government involvement will likely continue to be necessary in 

order to balance the financial needs of the railways with the transportation 

coverage desired by the state. 

Competition and privatization have been particularly prevalent in Europe, 

where a European Union directive requires the existence of competition in 

the freight rail industry; an additional directive has been proposed 

requiring the allowance of competition in the international passenger rail 

industry as well, although some countries have already opened their 

markets to multiple operators. Germany makes extensive use of private 

operators, with over 300 operators providing rail service on many regional 

routes. In the U.K., all passenger rail services are franchised and open to 

competitive bidding by operators. The introduction of competition and 

privatization is largely dependent on the government changing its role to 

73Competition in rail operations can take the form of multiple train operators competing on 

the same track. However, competition more often takes the form of franchises bidding for 

government contracts to perform rail services.
Page 55 GAO-07-15 Intercity Passenger Rail

that of a customer, with the primary focus on purchasing the best service 

for the best price. In Germany, the dissemination of national funding to 

regional governments has facilitated the extensive presence of multiple 

operators. Japan, meanwhile, aims to have its passenger rail system 

completely privatized; currently three of Japan’s six passenger rail systems 

are managed by individual private companies. By turning its passenger rails 

over to the private sector, Japan has improved its quality of service and 

substantially reduced the number of its employees; the demand for railway 

service continues to increase.

Foreign Countries 

Addressed Key Reform 

Elements in Implementing 

New Approaches to 

Intercity Passenger Rail

Several key reform elements were addressed by the five countries we 

visited as part of their planning and implementation of new approaches to 

intercity passenger rail. Based on our review, implementing these 

approaches appears to improve the cost effectiveness of intercity 

passenger rail service. For example, officials with the primary operator in 

Germany told us that their company has seen a 187-percent increase in staff 

productivity between 1993 and 2004; at the same time, the company was 

able to reduce its workforce by 40 percent.74 These officials stated that the 

German rail reform resulted in taxpayers paying 44€ billion less during this 

time period than what they would have been expected to pay if there had 

been no reform. The key reform elements addressed throughout 

implementation of these approaches include: 

• Establishing clearly defined national policy goals. In making major 

changes to an intercity passenger rail system, it is essential that the 

national government establish a clear vision for what the goals of the 

system should include while making decisions to implement new 

approaches to meet these goals. During our review of the five countries 

we visited, we observed that each country established goals that their 

reforms were intended to achieve. As we reported in February 2005, a 

key component in reforming a national program includes determining if 

there is a clear federal role and mission.75 All of the approaches taken by 

the five countries we visited were tailored to meet the specific national 

policy goals established by those countries. For example, in the U.K., 

there was a national goal to reduce the role government played in 

74DeutscheBahn AG officials define staff productivity in thousand passenger-ton 

kilometers/individual staff member.

75See GAO-05-325SP.
Page 56 GAO-07-15 Intercity Passenger Rail

managing the passenger rail system. To meet this national goal, the U.K. 

used approaches such as introducing competition in its system, and 

changing the role of the national government from service operator to 

that of a customer of private rail operating companies.

• Clearly defining government and stakeholder roles. The second key 

reform element we learned about during our site visits is that 

government and stakeholder roles should be clearly defined prior to (or 

during) implementation of any reform approach. Deciding what these 

roles should be was the first step in several of the approaches. For 

example, in order to shift the national government’s role, the 

responsibilities of the government first needed to be defined; it then had 

to be decided which of these responsibilities would continue to be 

government functions, and which would be those of other stakeholders. 

• Establishing consistent, committed funding. Consistent, committed 

funding is the final reform element key to successful implementation of 

a new approach to intercity passenger rail. In the five countries we 

visited, the national governments made a commitment to provide 

intercity passenger rail service. The governments also committed to 

provide the system, on an annual basis, with the funds necessary to 

maintain this service. Whether the approach taken was to increase the 

annual subsidy, provide subsidies to regional levels of government, or 

establish a consistent subsidy for each year, all of these governments 

made financial commitments to provide intercity passenger rail service.

See app. III for more detailed information about each of the countries we 

reviewed.

The United States is 

Not Well Positioned for 

Reform

The United States is not well positioned to reform or restructure intercity 

passenger rail service. Based on our review of foreign intercity passenger 

rail reforms, a more fundamental reexamination of the system by 

policymakers than has taken place to date will be needed if the United 

States wants to better position itself to improve the performance and 

benefits of the intercity passenger rail system in this country. The national 

governments of the countries we visited addressed three main elements 

through the process of reforming or restructuring their intercity passenger 

rail systems: (1) clearly defining national policy goals, (2) clearly defining 

the various roles and responsibilities of public and private sector entities 

involved, and (3) establishing consistent committed funding for intercity 

passenger rail. Currently, the goals and expected outcomes of U.S. 
Page 57 GAO-07-15 Intercity Passenger Rail

passenger rail policy are ambiguous, stakeholder roles are unclear, and 

funding is limited because of other priorities and a lack of consensus on the 

level of funding to devote to goals. As the primary provider of U.S. intercity 

passenger rail, Amtrak has the authority to take a number of actions, but 

has a history of poor financial and operating performance. Amtrak has 

recently proposed a reform strategy and is undertaking efforts to reduce 

costs and increase corporate efficiency. However, constraints, such as 

expensive labor protection payments that may be triggered by possible 

route and service changes, limit the benefits Amtrak can achieve on its 

own. Even if Amtrak were to fully exercise its authority, Amtrak is not in a 

position to address the key elements of reform we observed in other 

countries. Federal leadership will be needed to fundamentally improve the 

performance of intercity passenger rail. 

United States Will Need to 

Address Three Key 

Elements to Improve the 

Benefits of Intercity 

Passenger Rail

We found that other countries we visited addressed key reform elements in 

the process of reforming or restructuring their intercity passenger rail 

systems. U.S. policymakers will need to reexamine national policy goals 

and objectives, stakeholder roles and responsibilities, and funding 

mechanisms for intercity passenger rail if the United States wants to better 

position itself to improve the performance and benefits of federal 

expenditures on intercity passenger rail.

Policy Goals Based on our review of intercity passenger rail systems in five countries, 

we found that, in the process of reforming or restructuring their systems all 

five national governments clearly defined national policy goals and 

objectives for the system. For example, a specific goal of the reform 

process in France, Germany and the U.K. was to increase transparency in 

the use of public funds and restructuring included separating the 

management of their rail infrastructure and passenger operations. In 

Germany, the government’s objectives in consolidating two state railways 

into one private holding company, Deutsche Bahn AG (DB), was to improve 

efficiency, and to allow DB to function independently of the government 

and manage its railway like a private business. During the restructuring 

process in Japan, by defining specific goals and outcomes for the system, 

the national government was able to determine an overall structure for the 

system. Some of the goals Japan defined for the railway before 

restructuring it were reducing the accumulated debt, minimizing the 

national government’s role in maintaining the railway, increasing efficiency, 

and strengthening competitiveness. Additionally, a desired outcome of 

restructuring the state-owned provider into six private regional passenger 
Page 58 GAO-07-15 Intercity Passenger Rail

rail operating companies was to better position rail service to compete for 

passengers. 

Goals provided by Congress focus narrowly on Amtrak management, 

rather than providing guidance and direction for the entire U.S intercity 

passenger rail system. The current legislation governing Amtrak directs it 

to operate a national passenger rail transportation system that ties together 

existing and emerging regional corridors and other intermodal service. 

However, it does not provide specific objectives for the system Amtrak is 

required to operate, such as defining transportation benefits and public 

benefits or increasing the transparency of public funds, nor does it specify 

how the system should be structured to achieve certain outcomes. This 

broad mandate, as previously discussed, has resulted in the current 

intercity passenger rail system—a system that does not target markets 

where rail may have a comparative advantage over other transportation 

modes nor makes the most cost-effective choices to meet public 

transportation needs. In April 2005, Amtrak released a set of proposed 

strategic reform initiatives, which included a vision for the future of 

intercity passenger rail service and Amtrak’s role. Recently, Amtrak 

developed a mission statement, which aims to improve financial and 

operational performance by tying specific goals to the mission statement. 

Although the vision and mission statement provide a direction for the 

company, senior Amtrak officials told us that this mission for the company 

should not be a substitute for Congress setting a national intercity 

passenger rail policy. Furthermore, they said that a national rail policy 

should be explicit and clearly indicate the transportation services that the 

federal government wants operators to offer; Congress should then provide 

funding for the desired level of service. 

Determining the system’s structure, as well as determining how to position 

passenger rail within the entire U.S. transportation system, will remain 

uncertain without specific goals and outcomes for intercity passenger rail. 

To change the current structure of intercity passenger rail, policy decisions 

need to be made. As the Congressional Research Service (CRS) reported in 

December 2004, maintaining the status quo of passenger rail policy allows 

policymakers to avoid making decisions, such as shutting down Amtrak 

and eliminating its long distance routes or alternatively, committing to a 
Page 59 GAO-07-15 Intercity Passenger Rail

major financial program.76 Without a more explicit national policy, the 

future role of intercity passenger rail in the national transportation system 

is uncertain.

Stakeholder Roles and 

Responsibilities

Similarly, establishing clear stakeholder roles and responsibilities was 

important to helping improve the efficiency of intercity passenger rail 

systems in several of the countries we reviewed. For example, the U.K. 

reorganized its structure by creating separate organizations (e.g., 

organizations to provide train service, manage the rail infrastructure, and 

regulate infrastructure access fees and costs). Each of these organizations 

has defined responsibilities and is transparent with respect to the 

responsibility of achieving specific goals. According to a U.K. official, in 

privatizing some of these organizations, the U.K. sought greater efficiency, 

tighter cost control, a reduction in government interference in the railway 

industry, and more consistent and reliable funding. Our study also showed 

that clarifying stakeholder roles and responsibilities may require the 

creation of new entities. For instance, when Japan National Railways 

restructured its railways in 1987, the government created the Japan 

National Railways Settlement Corporation to settle the accumulated debt 

of Japan National Railways. In addition, an official from Japan’s Ministry of 

Land, Infrastructure, and Transport told us that the railway split into six 

passenger railroads in order to have more efficient regional service. 

In the United States, stakeholder roles and responsibilities for managing, 

operating, and funding intercity passenger rail services are unclear. For 

example: 

• It is unclear what Amtrak’s main responsibility should be as the primary 

intercity passenger rail operator in the United States, given that the 

purposes of Amtrak are in conflict. Although Amtrak is incorporated as 

a for-profit corporation, any expectation of being a profitable company 

has not been realized—partly because it is responsible for maintaining 

an intercity passenger rail system with many unprofitable routes.77

76Congressional Research Service, Amtrak Historical Background to the Political and 

Social Aspects of Federal Intercity Passenger Rail Policy (Washington, D.C.: December 

2004.

77Today, Amtrak is a private corporation in which the government has substantial ownership 

interests and control over selection of the Board of Directors. The government’s direct legal 

control over Amtrak takes the form of a grantor-grantee relationship.
Page 60 GAO-07-15 Intercity Passenger Rail

• The federal role in intercity passenger rail service has primarily been to 

subsidize Amtrak’s operations and, in the past, manage capital 

improvements to the infrastructure along the NEC.78 Only recently has 

the Secretary of Transportation been tasked with overseeing these 

funds, but such funding has been tied to Amtrak’s business plan and not 

a national policy or vision that articulates goals, objectives, and 

outcomes for intercity passenger rail services. 

• Current law offers states a narrow role in decision making, but permits 

states to subsidize additional intercity passenger rail service. Some 

states see benefits to subsidizing intercity passenger rail and choose to 

spend their own funds for additional service not provided as part of 

Amtrak’s national route system—a system that has not had substantial 

changes since 1971. Those states have had a role in making decisions, 

such as what stations will be served and whether food service will be 

provided on the subsidized route, unlike states that do not provide 

funding. Forty-two states receive basic long distance service with no 

state support, while 13 of these states have decided to subsidize 

additional corridor services based, partly, on demand. For example, 

Amtrak’s legacy route system has provided service on some corridors 

without state support, (e.g., from Pittsburgh, Pennsylvania, to New York 

City), but on other corridors, states have subsidized additional service, 

such as Washington state paying for additional frequencies for the 

Cascades Service between Seattle, Washington, and Portland, Oregon. 

Additionally, in December 2004, CRS reported that there are those who 

view that state governments may be better positioned to make regional 

service decisions.79 The administration’s proposal also favors giving 

states a greater role in decision making with respect to rail service and 

capital improvements.

• The role that freight railroads should play in shaping the future of 

intercity passenger rail service is not defined. Management of and 

access to infrastructure is dominated by the freight railroads. Since 

passenger railroads and freight railroads must often share access to 

privately owned tracks, the freight railroads’ control over infrastructure 

has an influence on both national passenger rail policy and day-to-day 

78The Secretary of Transportation also currently has a seat on Amtrak’s Board of Directors 

and FRA is responsible for rail safety issues, including Amtrak.

79Ibid., p.6.
Page 61 GAO-07-15 Intercity Passenger Rail

passenger rail operations. Specifically, freight railroads may be 

concerned with intercity passenger rail policy decisions that affect 

access to their rights-of-way and capacity on existing tracks; these 

decisions could potentially affect the freight business. While their 

decisions may influence passenger rail service, freight railroads do not 

have a defined role in decision making or the funding of intercity 

passenger rail. 

Funding Finally, as part of their overall restructuring process, all of the countries we 

reviewed committed to funding intercity passenger rail service. For 

example, in the U.K., the Secretary of State for Transport is tasked with 

determining what services the railway should deliver. This determination is 

made through a document called the High Level Output Specification: 

available funds for these services over a 5-year planning period are set 

down in a statement of funds available.80 An official in the U.K. Department 

for Transport told us that this funding cannot be reallocated for other 

purposes without great political and financial risk. In addition, a 2002 CRS 

report observed that reorganization of the railways in several countries 

required substantial political and financial commitment over an extended 

period. 81 Besides establishing funding tied to goals, countries we visited 

also devoted funds to capital improvements separate from operating 

subsidies. In France, about 2€ billion per year (currently this is 

approximately $2.5 billion) is provided for new rail lines: additionally, the 

government also offers interest-free loans to support new infrastructure 

projects. In addition to providing funding specifically for capital 

improvements, three of the five countries disseminate the national subsidy 

to regional governments, allowing passenger rail subsidy options to be 

decided by regional governments instead of the national governments. For 

instance, about 7€ billion per year (about $8.9 billion) in operating 

subsidies is divided among the 15 German Länder to be used at their 

discretion, and in France a 2€ billion per year (currently this is about $2.5 

billion) subsidy is divided among the 21 regions to support operations. 

80The Secretary of State for Transport is expected to produce the High Level Output 

Specification and a statement of funds available by July 2007.

81CRS, 2002. The Congressional Research Service also reported on Argentina and Mexico, in 

addition to the five countries we report on here.
Page 62 GAO-07-15 Intercity Passenger Rail

The U.S. federal government has annually subsidized Amtrak since its 

inception. The funding for intercity passenger rail has been constrained 

due to competing priorities; possibly, funding has also been constrained 

due to the inability to reach consensus over the federal role in intercity 

passenger rail, which is demonstrated in the status of Amtrak’s 

reauthorization. Grants to Amtrak have not been expressly reauthorized 

since its previous 5-year authorization expired in 2002, despite the number 

of proposals presented to the Congress.82 Nonetheless, Amtrak developed a 

5-year strategic plan (covering the period of fiscal years 2005 to 2009) that 

was designed to address its immediate needs.83 (The plan identified 

inadequate and uncertain levels of funding as a risk.) In recent years, 

Amtrak has received over $1 billion in annual operating grants and capital 

grants through the annual appropriations process. Some other 

transportation programs have established funding mechanisms that share 

costs between the federal government and other parties. For example, the 

Federal-aid Highway Program—a portion of which is subject to the annual 

appropriations process for budget authority—has a dedicated trust fund, 

the Highway Account, which is mainly funded by highway user fees, such 

as taxes on motor fuels, tires, and trucks.84 Transit projects have access to 

the Federal Transit Administration’s full-funding grant agreement—a 

mechanism that requires identifying and committing federal and nonfederal 

funds to support the multiyear capital needs of construction projects. 

According to the Federal Transit Administration, dependable levels of 

funding for the full-funding grant agreements have improved the ability of 

transit agencies to finance, plan, and execute projects.85 Without consensus 

over the federal role in funding intercity passenger rail and competing 

priorities for federal funds, Amtrak will continue to operate in an uncertain 

environment—impairing its ability to make strategic and operational 

decisions, and often deferring capital and infrastructure maintenance.

82The Amtrak Reform and Accountability Act of 1997 authorized funding for Amtrak for 

fiscal years 1998 through 2002.

83Amtrak, Amtrak Strategic Plan, FY2005—2009, (Washington, D.C.: 2004).

84The Highway Trust Fund was established in 1956 to ensure a dependable source of funding 

for the national system of interstate and defense highways and also as the source of funding 

for the remainder of the Federal-aid Highway Program. In 1983, the Highway Trust Fund was 

divided into two accounts: the Highway Account and the Mass Transit Account.

85DOT, Federal Transit Administration. Testimony before the Subcommittee on Housing and 

Transportation, Committee on Banking, Housing, and Urban Affairs. U.S. Senate, April 25, 

2002.
Page 63 GAO-07-15 Intercity Passenger Rail

Amtrak Can Take Actions to 

Reduce Costs and Increase 

Efficiency but It Is Not 

Positioned to Address Key 

Reform Elements

In general, Amtrak’s Board of Directors and management have the 

flexibility to make numerous changes in its corporate direction and 

organizational structure to improve financial performance. However, 

Amtrak has a history of poor financial and operating performance. As we 

have previously reported, many of its efforts at internal restructuring over 

the last decade have largely failed and the company lacks many basic 

management and reporting practices. More recently, in April 2005, Amtrak 

proposed a more strategic approach for the company with a broad set of 

reform initiatives. Amtrak is taking actions within its existing authority to 

implement these initiatives, although most of the actions currently being 

taken are operating in nature. While the Amtrak Reform and Accountability 

Act of 1997 provided Amtrak with greater flexibility to make more 

significant improvements, constraints limit the benefits that can be 

achieved from this increased freedom. For example, although Amtrak no 

longer requires approval by the Secretary of Transportation to make 

changes to its route structure, route changes that result in elimination of 

service could trigger expensive labor protection requirements.86 Regardless 

of the internal changes Amtrak could make to manage its operations more 

efficiently, Amtrak, as an operator, is not in a position to address the key 

elements of reform. Federal leadership is needed to establish national 

policy goals and stakeholder roles related to these goals, and to identify 

funding levels needed to support these goals. 

Amtrak Has the Authority to 

Take a Number of Actions to 

Reduce Costs and Increase 

Corporate Efficiency

Amtrak’s Board of Directors and management have the authority to make 

numerous changes and have made changes in its corporate direction and 

organizational structure. Amtrak is incorporated as a for-profit corporation, 

but has been the recipient of substantial federal financial assistance since 

its inception and has historically struggled to earn sufficient revenues and 

operate efficiently. Without annual federal subsidies for Amtrak’s operating 

costs, the corporation would not survive as presently configured and 

operated. Amtrak’s financial condition has never been strong and it has 

been on the edge of bankruptcy several times. In 2001, Amtrak lost about 

$1.2 billion and mortgaged a portion of Pennsylvania Station in New York 

City to generate enough cash to meet its expenses. In July 2002, Amtrak 

also received a federal loan of $100 million to meet expenses.

86Labor protection refers to payments, stemming from collective bargaining agreements, 

that Amtrak would owe to terminated employees.
Page 64 GAO-07-15 Intercity Passenger Rail

Management of Amtrak has also generally been ineffective and the 

company lacks basic tools for comprehensive planning. For example, some 

of Amtrak’s internal changes over the last decade, such as establishing 

strategic business units and modifying Amtrak’s routes, have not met 

expectations. Instead, Amtrak’s financial condition deteriorated. 

Additionally, as we reported in February 2004, Amtrak’s ineffective 

management of a large-scale infrastructure project resulted in the 

incompletion of many critical elements of the project, increased project 

costs, and the project goal—a 3 hour trip time between Boston and New 

York City—was not achieved.87 Finally, in October 2005, we reported that 

the corporation lacked many basic management and financial reporting 

practices.88 Among other things, we found that much of the financial 

information Amtrak used for day-to-day management purposes lacked 

certain relevant information or was of questionable reliability. 

Amtrak’s Board of Directors and management have recently taken actions 

to address these concerns. These actions include appointing a new 

president and creating a planning and analysis department to develop and 

manage a company-wide strategic plan. However, impacts on the 

corporation’s performance remain to be seen. Additionally, in April 2005, 

Amtrak’s Board of Directors and management proposed a set of broad 

strategic reform initiatives designed to improve the operational efficiency 

of the company, transition Amtrak into one of a number of competitors to 

provide intercity passenger rail service, and change how federal subsidies 

are distributed for intercity passenger rail.89 Specifically, changes outlined 

include reinforcing management controls, organizing planning and 

reporting by lines of business, and cultivating competition and private 

commercial activity in passenger rail functions and services. 

Amtrak’s proposed initiatives are a step toward a more strategic approach 

for the corporation and include both reforms Amtrak could pursue 

internally, such as changes to its maintenance services and facilities, and 

those that require legislative action, such as the enactment of a federalstate capital matching program for corridor development in partnership 

87GAO, Intercity Passenger Rail: Amtrak’s Management of Northeast Corridor 

Improvement Demonstrates Need for Applying Best Practices, GAO-04-94 (Washington, 

D.C.: February 27, 2004).

88See GAO-06-145.

89Amtrak Strategic Reform Initiatives and FY06 Grant Request, April 2005.
Page 65 GAO-07-15 Intercity Passenger Rail

with states. However, according to senior Amtrak officials, Amtrak is 

initially focused on internal reforms that Amtrak believes it has greater 

control over. Currently, Amtrak is implementing operational changes in 15 

areas based on the broader proposed set of strategic reform initiatives. 

(See app. IV for a list of Amtrak’s operational initiatives and their status.) 

These efforts are primarily associated with improving business efficiency 

and reducing costs. For example, Amtrak’s management proposed to 

redesign some aspects of the sleeper car service offered on long-distance 

trains, such as reducing the number of sleeper cars and offering new 

sleeper service products targeted at different markets. This effort is 

projected to reduce Amtrak’s losses from offering sleeper service by about 

46 percent.90

Although Amtrak’s recent efforts are expected to result in some savings, 

these changes alone will not be sufficient to address broader structural 

issues. According to a July 2006 DOT OIG report, Amtrak’s 15 operational 

changes have resulted in a $46 million reduction in annual operating losses 

through May 2006. But the projected incremental operating savings from 

full implementation of Amtrak’s operational changes over the next 5 or 6 

years will not be sufficient to fund needed improvements to the intercity 

passenger rail system such as addressing capital and maintenance needs, 

returning the system to a state-of-good repair, and promoting corridor 

development.91 In April 2005, Amtrak estimated that the strategic reform 

initiatives could achieve total operating savings of nearly $550 million by 

fiscal year 2011. Amtrak said achieving these savings would require a 

number of legislative actions, such as the enactment of an 80 percent 

federal capital match for state intercity passenger rail funds, as well as 

realizing increased revenues from passengers, obtaining additional state 

operating contributions for corridor trains, and having the federal 

government cover Amtrak’s legacy debt obligations. Some or all of these 

could increase federal costs.

Benefits of the Legislative 

Freedoms Are Limited by 

Constraints

The Amtrak Reform and Accountability Act of 1997 provided Amtrak with 

greater flexibility to alter its route network and undertake other cost saving 

changes to meet the goal of operating self-sufficiency by the end of 

90The baseline operating loss estimate for sleeper service for fiscal year 2005 was $92 

million. 

91U.S. Department of Transportation, Office of the Inspector General. Third Quarterly 

Report on Amtrak Financial Status, July 13, 2006. 
Page 66 GAO-07-15 Intercity Passenger Rail

December 2002, which Amtrak did not achieve. However, the benefits that 

Amtrak can achieve from these provisions are limited by practical 

constraints. For example, while the act eliminated the statutory ban on 

Amtrak contracting out or outsourcing work, except for food and beverage 

service that could already be contracted out, 92 it made outsourcing a part 

of the collective bargaining process. Amtrak officials also told us that this 

provides less flexibility rather than more since it is more difficult to change 

collective bargaining agreements with unions than for Congress to change 

a statutory requirement.93 This could limit the extent to which Amtrak 

could contract out services, depending on the outcome of negotiations with 

unions. Amtrak officials told us that little progress has been made on labor 

negotiations since only three contracts (of the 24 collective bargaining 

agreements Amtrak maintains with its agreement employees) have been 

signed and these all technically expired on December 31, 2004. As a result, 

Amtrak is currently in negotiations with all of its unions and employee 

councils over collective bargaining agreements. 

The benefits of making route changes to better meet the demands of the 

public may also be limited as a result of labor protection requirements, 

which are also part of the collective bargaining process. The Amtrak 

Reform and Accountability Act of 1997 relieved Amtrak from getting 

approval from the Secretary of Transportation to make changes to its route 

structure and allowed Amtrak to discontinue routes without having to 

preserve the “basic system” formerly mandated by Congress, as long as the 

remaining route structure tied existing and emergent regional rail 

passenger service and other intermodal passenger service.94 One Amtrak 

official told us that while Amtrak is legally allowed to change the route 

network, decisions are often met with a variety of reactions including 

resistance by Congress. In addition, if route changes result in the 

elimination of jobs, Amtrak employees may be entitled to labor protection 

benefits. As we reported in September 2002, if Amtrak had been liquidated 

on December 31, 2001, potential Amtrak employee claims for immediate 

labor protection payments could have been as much as $3.2 billion.95

9249 U.S.C. §24312(b).

93This is directly related to provisions in the Railway Labor Act that keep provisions of 

earlier contracts in place when they expire.

94Amtrak is still subject to notification requirements prior to discontinuing routes.

95GAO, Intercity Passenger Rail: Potential Financial Issues in the Event That Amtrak 

Undergoes Liquidation, GAO-02-871 (Washington, D.C.: September 20, 2002).
Page 67 GAO-07-15 Intercity Passenger Rail

Further, if an employee loses his or her job as a result of a reduction in 

service on a route or closing of a maintenance shop, then he or she could 

receive labor protection benefits for up to 5 years.96

Finally, several potential constraints exist in gaining benefits from Amtrak 

adopting a “user pays” principle for the provision of its services. Under the 

user pay concept, costs to build and maintain rail infrastructure, including 

along the NEC, would be paid for by the full range of users of the system, 

including states, commuter rail agencies, freight railroads, and the public. If 

adopted, a better matching of fees paid to costs incurred by the diverse 

users of the NEC could provide incentives for both public and private users 

to make modal choices and transportation options based on true costs.97

One issue in implementing this approach is Amtrak’s ability to accurately 

define the true costs of intercity passenger rail services. We discussed 

examples of this issue in two recent reports. In October 2005, we reported 

concerns with how Amtrak captured and reported financial information, 

such as Amtrak’s overreliance on indirect cost allocation methods.98 In 

April 2006, we reported that it is difficult to determine Amtrak’s revenues 

and costs associated with providing services and access to infrastructure to 

commuter rail agencies, in part due to the limitations of Amtrak’s 

accounting practices.99 Since then, Amtrak has made some changes to its 

reporting and financial systems, but according to Amtrak officials and 

progress reports, more work is needed. A senior Amtrak official told us that 

identifying direct route costs may be difficult since Amtrak uses many 

different systems to capture costs. 

Another constraint may be the ability and willingness of users to pay 

additional fees. For example, we recently reported that the ability and 

willingness of private rail companies to invest in infrastructure capacity to 

96The reduction in service on a route would have to be to less than three times per week 

before Amtrak would be required to pay wages and benefits.

97Better alignment of fees with the full costs of the use of infrastructure, including highways, 

airports, and airspace, is an issue far broader than national intercity passenger rail policy. In 

fact, better alignment of fees and costs across all transportation modes could increase the 

demand for rail services even if fees paid by users of rail were to be increased. 

98GAO-06-145, p. 68.

99GAO, Commuter Rail: Commuter Rail Issues Should Be Considered in Debate over 

Amtrak, GAO-06-470 (Washington, D. C.: Apr. 21, 2006).
Page 68 GAO-07-15 Intercity Passenger Rail

meet projected future demand for freight rail transportation is uncertain.100

While some states see a benefit to intercity passenger rail and pay for 

additional service, two state officials we spoke with opined that a proposal 

which required states to further subsidize existing intercity passenger rail 

service would face political opposition at the state level unless a federal 

capital matching program comparable to other transportation modes is 

enacted. In addition, commuter rail agencies that use the NEC raised 

several concerns about FRA’s efforts to establish a fee on them as 

mandated in Amtrak’s fiscal year 2006 appropriations. Among other 

concerns, these agencies stated that their usage of the NEC is different 

from Amtrak’s, which should dictate different levels of payment for use of 

the same infrastructure.

Amtrak Is Not Positioned to 

Address the Three Key Reform 

Elements 

Amtrak, as an operator, is not in a position to adopt and ultimately 

implement key elements to begin reforming intercity passenger rail in the 

United States. Amtrak’s efforts will not likely change the structure of 

intercity passenger rail without legislative action. Most of all, Amtrak 

cannot address the three key elements of reform we observed in other 

countries: 1) clearly defining national policy goals, 2) clearly defining the 

various roles and responsibilities of public and private sector entities 

involved, and 3) establishing a level of funding to devote to these goals. 

Amtrak’s role is to provide intercity passenger rail service to the public. 

Congress sets the national policy and goals for intercity passenger rail, 

especially in the context of the entire national transportation system. Since 

2002, federal policymakers have been struggling with what to do about U.S. 

intercity passenger rail in general. Policymakers have not adopted the 

legislative actions in Amtrak’s strategic reform proposal. Additionally, in 

June 2006, CRS reported that policymakers have not endorsed Amtrak’s 

strategy of maintaining its current route network while restoring its 

infrastructure to a state of good repair, nor did they provide Amtrak with 

the requested funds to meet these goals. CBO also said there has been a 

lack of consensus about the role intercity passenger rail service should play 

in the national transportation system and Amtrak’s role in providing such 

services. While Amtrak’s efforts are a step to improving the corporation’s 

financial and operating performance, these changes do not address the 

reform elements necessary to maximize transportation and public benefits 

100GAO, Freight Railroads: Industry Health Has Improved, but Concerns about 

Competition and Capacity Should Be Addressed, GAO-07-94 (Washington, D.C.: Oct. 6, 

2006).
Page 69 GAO-07-15 Intercity Passenger Rail

of, and the effectiveness of federal expenditures for, intercity passenger rail 

service. Any fundamental change of intercity passenger rail will involve a 

number of difficult operational challenges and policy decisions and all of 

them will require federal leadership.

Addressing Reform 

Elements for Intercity 

Passenger Rail Will 

Require Overcoming 

Stakeholder and 

Funding Challenges

There are a number of challenges associated with addressing the key 

elements of reform for intercity passenger rail. The variety of stakeholders, 

all with different interests and issues, makes it difficult to reach consensus 

on any change. Central among federal challenges is determining what the 

vision and role for intercity passenger rail in the United States should be, 

the federal role, if any, within this vision, and the reconciliation of the wide 

diversity of views on how the intercity passenger rail service fits into the 

national transportation system. Challenges in promoting a more equitable 

federal–state partnership include the varying ability and willingness of 

states to participate in funding intercity passenger rail and identifying 

appropriate policy changes to overcome the disadvantages intercity 

passenger rail faces relative to the leveraging of federal funds. Currently, 

states are challenged to leverage their expenditures on such service. 

However, federal-state cost sharing is common in highway and transit 

programs where investment is encouraged through matching grants. Other 

challenges include freight railroad concerns about infrastructure access 

and capacity, workforce issues, and the role of the private sector. 

Addressing funding issues will also present challenges. This includes 

identifying funding sources to achieve national policy goals and developing 

incentives for state participation. Each of these challenges presents 

opportunities to increase the benefits of federal and nonfederal 

expenditures on intercity passenger rail; not addressing them will likely 

continue the stalemate in moving toward a well-defined role for federal 

subsidies for intercity passenger rail in the United States. 

Variety of Stakeholder 

Interests and Challenges 

Makes Reaching Consensus 

on Change Difficult

One of the most difficult aspects of addressing reform elements for 

intercity passenger rail will be reaching consensus among stakeholders on 

the topic of change. Stakeholders include federal and state governments, 

freight and commuter railroads, the passenger rail workforce, and potential 

private sector operators. There are a variety of stakeholder interests in 

intercity passenger rail and, at virtually every level, there are challenges 

that will need to be overcome before consensus can be reached to change 

any policies, goals, or stakeholder roles involved with intercity passenger 

rail. 
Page 70 GAO-07-15 Intercity Passenger Rail

Federal Issues and Challenges The federal government’s interest, as laid out in statute, is in seeing that 

intercity passenger rail service is provided on a national basis. However, 

the Amtrak Reform and Accountability Act of 1997 removed direct federal 

involvement in making route decisions, and DOT and FRA have, until 

recently, largely taken a “hands-off” approach to Amtrak and intercity 

passenger rail. As we reported in October 2005, FRA officials have told us 

that, even though FRA has a seat on Amtrak’s Board of Directors, the 

agency has historically refrained from advocating a particular approach to 

running Amtrak; neither has it specifically held Amtrak management 

accountable for meeting particular goals.101 In addition, an FRA official told 

us that the agency must be careful about its involvement with management 

decisions since, legally, Amtrak is a private for-profit corporation. Since 

fiscal year 2003, Congress has imposed measures to increase the Secretary 

of Transportation’s responsibility for providing oversight of, and 

accountability for, the federal funds used for intercity passenger rail 

service. Among other things, these measures require Amtrak to transmit a 

business plan to the Secretary of Transportation and Congress and provide 

monthly reports about this plan. In response to these measures, FRA has 

entered into grant agreements with Amtrak. Although measures are in 

place to increase FRA’s oversight of Amtrak’s operations through grant 

agreements, FRA attributed the lack of resources for its limited and 

focused approach to Amtrak oversight. These measures address oversight 

and accountability but do not necessarily address establishing a vision for 

intercity passenger rail service, and the role of such service, in the national 

transportation system. DOT commented that FRA’s role has never been to 

“establish a vision for intercity passenger rail” regardless of resources 

available.

The challenges of establishing a national policy vision for intercity 

passenger rail and the federal role, if any, within this vision are illustrated 

by the wide diversity of intercity passenger rail service proposals 

introduced in recent years. For example, one recent congressional 

proposal would largely keep Amtrak intact and instead focus on various 

reforms related to improving financial management, corporate governance, 

and the development of metrics and standards for measuring performance 

and the quality of service. This proposal would, among other things, require 

Amtrak to develop a capital spending plan for restoring the NEC to a state 

of good repair, and would allow freight railroads to bid for operating long101GAO-06-145.
Page 71 GAO-07-15 Intercity Passenger Rail

distance trains.102 In contrast, a proposal by the administration would 

significantly restructure Amtrak. This proposal includes splitting Amtrak 

into three functionally independent entities: a corporate entity to oversee 

the restructuring and manage residual responsibilities; a passenger 

operating company; and an infrastructure management company. It would 

also, among other things, encourage the creation of an interstate compact 

made up of northeastern states and the District of Columbia, to operate the 

NEC.103 Amtrak itself has recognized the need for change. In April 2005, 

Amtrak’s management released a proposed set of strategic reform 

initiatives that, if fully implemented, could substantially change how it is 

operated. Under this proposal, states would play a larger role in deciding 

what services to offer, and there would be increased opportunities for 

competition in providing intercity passenger rail service.

Federal–State Partnership Issues 

and Challenges

There are also a variety of interests and challenges in promoting a more 

equitable federal–state partnership that make reaching consensus difficult. 

One is the number of states that have the interest or willingness to 

participate in intercity passenger rail. On the one hand, there are a number 

of states that are willing to participate in subsidizing intercity passenger 

rail and have made commitments to do so. In fiscal year 2005, 13 states paid 

about $140 million to subsidize additional service from Amtrak. Amtrak 

also received about $130 million from 8 states and 3 state agencies for 

capital improvements on passenger rail corridors and at stations. In 

addition, a coalition of 27 states—called the States for Passenger Rail—

have come together to promote the development, implementation, and 

expansion of intercity passenger rail services with the involvement and 

support from state governments. This organization’s policy statement 

indicates that states have taken, and will continue to take, a lead role in the 

planning and development of new, expanded and enhanced regional 

passenger rail corridor services. The states in the organization maintain 

that these systems cannot be fully programmed and implemented without a 

federal–state funding partnership similar to existing highway, transit, and 

aviation programs. On the other hand, there are a number of states that 

receive the benefits of intercity passenger rail service but do not subsidize 

such service, and may or may not be willing to do so. This situation reflects 

102This proposal, S. 1516, would also authorize the issuance of $13 billion in tax credit bonds 

to finance capital improvements.

103The administration’s proposal (H.R. 1713) would also require applicants to contribute 

matching funds for capital projects that qualify under planning and other criteria, and phase 

out operating subsidies for long-distance service. 
Page 72 GAO-07-15 Intercity Passenger Rail

the legacy service that existed when Amtrak was created in the early 1970s. 

For example, as of April 2006, there were 12 Amtrak trains scheduled to 

operate daily Monday through Friday between New York City and Albany, 

New York. The state subsidizes only 1 of these trains—the Adirondack. 

Even on this train the state only subsidizes service north of Albany to 

Montreal, Canada. New York City to Albany is part of the legacy service 

that dates to when Amtrak began service in 1971. The extent to which 

states would be willing to pay for the intercity passenger rail service 

currently received for free is an open question. 

Another federal–state challenge is the leveraging of financial assistance to 

intercity passenger rail. Recent surface transportation acts have authorized 

some federal financial assistance for the development of high-speed rail 

and other passenger rail corridors. In addition, states can finance 

passenger rail projects through the Federal Highway Administration’s 

Congestion Mitigation and Air Quality Improvement program when the 

project will result in demonstrable air quality improvements. However, 

states are challenged to leverage their expenditures on intercity passenger 

rail. In general, states work directly with Amtrak to obtain service above 

the basic service provided. Some states also work directly with Amtrak to 

finance intercity passenger rail capital improvement projects that benefit 

their state. An FRA official told us that states could start their own intercity 

passenger rail service, but doing so would be difficult given the potential 

cost and lack of statutory access to infrastructure at the incremental cost 

that Amtrak currently enjoys. Some other transportation programs—such 

as the interstate highway program and the Federal Transit Administration’s 

New Starts program for transit systems—share responsibility for planning, 

design, and funding between the federal government and state and local 

governments. Federal agencies generally set the design and quality 

standards for projects and encourage investment through matching grants. 

State and local governments prepare transportation plans which identify 

the need for investment, develop a business case for the investment, and 

contribute a portion of the funding.

Finally, reform initiatives designed to increase state roles in intercity 

passenger rail will likely face the challenge of finding mechanisms for 

states to work cooperatively together in the development of routes and 

corridors that cross state lines. One mechanism is an interstate compact. 

Interstate compacts for intercity passenger rail were proposed in the 

Amtrak Reform and Accountability Act of 1997. Interstate compacts are 

agreements between states that are constitutionally permitted when 

approved by Congress. Several interstate compacts are currently being 
Page 73 GAO-07-15 Intercity Passenger Rail

used to study the feasibility of, or advocate for, intercity passenger rail 

service. These include the Midwest Interstate Rail Passenger Compact and 

the Interstate High Speed Intercity Passenger Rail Compact. Currently, 

however, there are few passenger rail systems being operated under an 

interstate compact. State officials have told us that interstate compacts are 

a very difficult mechanism to use when more than two states are involved. 

They said that not only do compacts take a substantial amount of time and 

burden to create, but, in the context of passenger rail, there are practical 

issues involved—such as deciding what service is provided, how the costs 

of such service are allocated to participants, and what happens when one 

or more states do not fulfill their financial obligations to the compact. 

There may be other mechanisms available for states to work cooperatively 

with each other. For example, the Appalachian Regional Commission 

(ARC) is a federal–state partnership that, in general, was created to 

promote economic development in Appalachia.104 Although the current 

definition of Appalachia includes 13 states, the governance structure is 

made up of only two co-chairs—one representing the federal government 

and one representing the collective interests of 13 member states. Each cochair has one vote on ARC matters. ARC officials told us that because of 

the governance structure of ARC, virtually all decisions are reached by 

consensus. In fact, they said that one of the advantages of ARC is that more 

can be accomplished together than separately. They also cited as a 

disadvantage the difficulties in reaching decisions.

Freight Railroad Issues and 

Challenges

Freight railroads play an integral role in intercity passenger rail. Over 95 

percent of Amtrak’s route system operates over lines owned by freight 

railroads. As such, the freight railroads have a keen interest in the volume 

of passenger rail service provided and the potential impacts of such service 

on their business. One of the main challenges associated with passenger 

and freight railroads is infrastructure access and the cost of such access. 

Since Amtrak’s creation, federal law has generally required freight railroads 

to give Amtrak trains priority access and charge Amtrak an incremental 

cost—rather than the full cost—associated with the use of their tracks. 

These legal rights currently apply only to Amtrak. However, efforts to 

reform intercity passenger rail service raise questions about the status of 

Amtrak’s priority access and incremental charge rights—that is, can, or 

104ARC officials said ARC is a federal–state partnership with a model of governance designed 

to manage federal–state interactions and to force consensus in reaching decisions about 

Appalachia. The agency employs 11 federal staff and about 50 state employees.
Page 74 GAO-07-15 Intercity Passenger Rail

should, these rights be transferred to non-Amtrak operators or will some 

other arrangement need to be made? Other arrangements could 

significantly increase both the difficulty and cost of introducing nonAmtrak operators, possibly through competitive bidding for subsidies, to 

provide intercity passenger rail service.

Commuter rail service offers an example of access negotiations on 

commercial, rather than incremental, cost terms. As we reported in 

January 2004, unlike Amtrak, commuter rail agencies do not possess 

statutory rights of access to freight railroad track.105 As a result, commuter 

rail agencies must negotiate with freight railroads to purchase, lease, or pay 

to access the railroads’ right-of-way. Negotiations for these agreements can 

last from a few months to several years. Our report noted that when 

negotiating a lease or access agreement, freight railroads typically want to 

be compensated for all operating, capital, and other costs associated with 

hosting commuter and other trains. These costs would include direct costs, 

such as dispatching trains and maintaining the rights-of-way, and indirect 

costs, such as the cost of foregone opportunities (e.g., the incremental 

value of “lost” train slots). Infrastructure access is also difficult from the 

perspective of a freight railroad company. Since freight service is the 

companies’ core business, the ability to move freight through the system 

must be protected. Freight railroad officials with whom we spoke for our 

earlier report insisted that they must protect their systems’ capacity to 

handle both today’s freight traffic as well as future traffic projections. 

Protecting capacity becomes difficult when passenger trains, either 

intercity or commuter, consume available capacity without some sort of 

infrastructure enhancement, expansion, or market-based compensation for 

line capacity used. 

In addition to infrastructure access, capacity and capacity-availability 

issues—that is, the ability of rail lines and infrastructure to handle current 

and future traffic volumes—are also of concern to freight railroad 

companies. After years of reducing infrastructure and rationalizing their 

property, plant, and equipment, freight railroads have recently experienced 

a substantial growth in traffic—a growth that some project will continue 

into the future. In January 2006, the CBO reported that total freight carried 

105GAO, Commuter Rail: Information and Guidance Could Help Facilitate Commuter and 

Freight Rail Access Negotiations, GAO-04-240 (Washington, D.C.: Jan. 9, 2004).
Page 75 GAO-07-15 Intercity Passenger Rail

by all modes of transportation in the United States has been growing.106

CBO indicated that railroads, in particular, experienced a sharp increase in 

traffic in the 1990s, with traffic increasing more than 50 percent between 

1990 and 2003 (from about 1 trillion ton-miles to about 1.6 trillion tonmiles).107 This growth is expected to continue. For example, the 

Department of Energy’s Energy Information Administration has projected 

that railroad ton-miles will increase 1.7 percent annually between 2004 and 

2030, reaching about 2.4 trillion ton-miles in 2030.108 Other organizations 

have similarly predicted increases. This growth has acted to limit available 

capacity on the rail network, at least in some locations. In April 2006 

testimony before the U.S. House Committee on Transportation and 

Infrastructure, Subcommittee on Railroads, the president and chief 

executive officer of the Association of American Railroads said that the 

traffic density (i.e., ton-miles per route-mile owned) for Class I railroads 

had more than doubled from 1990 to 2005 (see fig. 12).109 He went on to say 

that the traffic increases had resulted in capacity constraints and service 

issues at certain junctions and corridors within the rail network. These 

constraints and service issues will all affect the ability of both passenger 

and freight rail carriers to provide the quality and frequency of service the 

carriers may be asked to provide.

106CBO, Freight Rail Transportation: Long-Term Issues (Washington, D.C.: Jan. 2006).

107Statistics include Class I, Class II, and Class III railroads. The three classes of railroads are 

designated by the Surface Transportation Board, the federal agency responsible for the 

economic regulation of the rail industry. In 2004, Class I railroads had $277.7 million or more 

in annual revenue. A ton-mile is one ton of freight transported 1 mile.

108Energy Information Administration, Annual Energy Outlook 2006 (Washington, D.C.: 

Feb. 2006).

109Association of American Railroads, Statement of Edward R. Hamberger, President and 

Chief Executive Officer, Association of American Railroads Before the U.S. House of 

Representatives, Committee on Transportation and Infrastructure, Subcommittee on 

Railroads, April 26, 2006. The Association of American Railroads is a trade organization for 

the railroad industry.
Page 76 GAO-07-15 Intercity Passenger Rail

Figure 12: Class I Ton-Miles per Route-Mile Owned

Any reform that changes the type and frequency of intercity passenger rail 

service will need to address system infrastructure access and capacity 

issues. In doing so, any federal policy responses regarding freight 

infrastructure should consider several things in this regard: (1) subsidies 

can distort the performance of markets; (2) the federal fiscal environment 

is constrained; (3) policy responses should occur within the context of a 

National Freight Policy that reflects system-performance-based goals and a 

framework for intergovernmental and public-private cooperation; and (4) 

federal involvement should occur where demonstrable wide-ranging public 

benefits—and mechanisms to appropriately allocate the cost of financing 

these benefits—exist between the public and private sectors.110 In addition, 

federal involvement should focus on benefits that are more national than 

local in scope.

110GAO, Freight Railroads: Preliminary Observations on Rates, Competition, and 

Capacity Issues, GAO-06-898T (Washington, D.C.: June 21, 2006).

Class I ton-miles per route-mile owned (in millions)

Year

Source: Association of American Railroads.

0

2

4

6

8

10

12

14

16

18

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005
Page 77 GAO-07-15 Intercity Passenger Rail

Freight railroads have other concerns as well. These include concerns 

about liability issues—that is, adequate protection against the risks of 

accidents involving passenger trains using their lines. In general, freight 

railroads seek full indemnification against any risks that might exist 

because of passenger rail service. See appendix V for a more complete 

discussion of infrastructure access, capacity, and liability issues.

Workforce Issues and Challenges Finally, efforts to reform intercity passenger rail require consideration of 

workforce issues. That is, having enough people with the requisite 

knowledge and skills to provide the amount and type of service called for in 

a reformed system. There are several issues that need to be considered in 

this regard, including the following:

• Availability of a qualified labor pool. The reform of intercity passenger 

rail resulting in new services or operators will require that there be 

sufficient staff to provide service, conduct maintenance, and perform 

other duties related to running passenger railroads. In the short term, 

obtaining sufficient staff could be a challenge. As we reported in April 

2006 (in the context of commuter railroad services), if Amtrak were to 

abruptly cease to provide service, some commuter railroad agencies 

would be able to replace Amtrak employees dedicated to their particular 

commuter rail service with employees from another railroad.111

However, there were a number of agencies that said they would not be 

able to quickly replace current Amtrak employees because of workforce 

limitations, such as the availability of a qualified labor pool. 

• Workforce flexibility and productivity. Reform of intercity passenger 

rail resulting in new services or operators will also require consideration 

of workforce flexibility and the extent that labor productivity can be 

increased. One key to providing cost effective intercity passenger rail 

service is to have high levels of labor productivity. Collective bargaining 

agreements and their related work rules specify the work that 

employees are expected to do and the amount of compensation they will 

receive for performing this work. Although such agreements can and do 

include changes designed to increase employee productivity by 

increasing or broadening the types of tasks that employees can perform, 

such agreements can also affect productivity by limiting the amount or 

type of work that employees can perform. 

111GAO-06-470, p. 27. 
Page 78 GAO-07-15 Intercity Passenger Rail

• Potential labor protection payments. If, as the result of a reform of 

intercity passenger rail, Amtrak employees lose their jobs, there could 

be liability for labor protection payments. In general, labor protection 

payments are made to employees who lose their jobs as a result of a 

discontinuation of service. The Amtrak Reform and Accountability Act 

of 1997 made a number of changes to labor protection, including 

eliminating the statutory right to such protection; this made labor 

protection subject to collective bargaining, and required Amtrak to 

negotiate new labor protection arrangements with its employees. 

Amtrak labor-relations officials observed that bringing labor protection 

under collective bargaining (and therefore subject to the constraints of 

the Railway Labor Act), as opposed to being statutorily mandated, has 

actually limited Amtrak’s flexibility to respond to marketplace changes. 

They observed that their flexibility was reduced because it is generally 

easier to change a statutory requirement than it is to change a collective 

bargaining agreement. With regard to the potential magnitude of labor 

protection payments, in September 2002 we reported that Amtrak would 

have had potential unsecured labor protection claims of about $3.2 

billion had it been liquidated on December 31, 2001.112 Although any 

restructuring might not involve a bankruptcy, potential labor protection 

payments could still be substantial if employees lose their jobs.

Workforce challenges also include determining how a potentially reformed 

intercity passenger rail system fits into the current scheme of railroadspecific labor–management relations, retirement, and injury-compensation 

systems. Amtrak is currently subject to, among other laws, the Railway 

Labor Act, the Railroad Retirement Act of 1974, and the Federal Employers’ 

Liability Act, which govern labor–management relations, retirement, and 

injury compensation, respectively, in the railroad industry. Amtrak’s 

collective bargaining agreements generally do not expire and are subject to 

requirements designed to reduce labor strikes; Amtrak participates in, and 

provides financial contributions to, the railroad retirement-system 

(approximately $400 million annually);113 and Amtrak and its employees are 

subject to a tort-based injury compensation system under the Federal 

112GAO, Intercity Passenger Rail: Potential Financial Issues in the Event That Amtrak 

Undergoes Liquidation, GAO-02-871 (Washington, D.C.: Sept. 20, 2002).

113The railroad retirement system is administered by a federal agency, the Railroad 

Retirement Board, and includes both passenger and freight railroads. Amtrak participates in 

the railroad retirement-system, under which each participating railroad pays a portion of the 

total railroad retirement benefit-costs for industry employees.
Page 79 GAO-07-15 Intercity Passenger Rail

Employers’ Liability Act.114 We have reported that these legal requirements 

raise railroad costs compared to nonrailroad industries.115 Amtrak’s April 

2005 Strategic Reform Initiatives also suggested that meaningful reform of 

intercity passenger rail will require changing how some of these 

requirements apply to passenger rail. On the other hand, rail labor has 

argued for the importance of these laws in protecting employee rights, 

providing critical retirement benefits, and adequately compensating 

employees injured on the job.

State officials with whom we spoke expressed general concerns about the 

potential impact of Amtrak’s labor agreements and obligations on the 

future of passenger rail. Some state officials viewed Amtrak’s labor 

agreements as a significant barrier to restructuring. One official stated that 

serious labor reform is needed for intercity passenger rail reform to 

succeed. State officials also questioned whether alternative operators 

would be bound by Amtrak’s labor agreements and thought that it was 

unlikely another operator could provide significant improvements in cost 

savings if they were. Another official stated that Amtrak’s labor agreements 

would put Amtrak at a considerable disadvantage over alternative 

operators in a competitive market if the alternative operators were not 

bound by the same agreements.

Rail labor union officials with whom we spoke expressed several concerns 

about the effects any potential reform of intercity passenger rail might have 

on their members. First and foremost, union officials told us of their 

concern about the history of Amtrak’s successive reforms and said these 

reforms had a detrimental effect on union employees. In their view, past 

Amtrak reforms have brought fewer union jobs and the loss of health and 

safety programs with no real improvement in Amtrak’s financial 

performance or service to the public. Union officials also told us that any 

reform should attempt to make Amtrak, among other things, find new 

leadership dedicated to working with employees and growing the business, 

fix basic business practices, and improve customer service. Finally, union 

officials emphasized that rail labor is the monopoly workforce for 

passenger rail. Any reforms of intercity passenger rail would still require 

114Under a tort-based compensation system such as the Federal Employers’ Liability Act, 

employees must demonstrate that the employer, its employees, or agents were negligent, in 

order to receive compensation for employment-related injuries.

115GAO, Railroad Competitiveness: Federal Laws Affect Railroad Competitiveness, 

GAO/RCED-92-16 (Washington, D.C.: Nov. 5, 1991).
Page 80 GAO-07-15 Intercity Passenger Rail

any operator—Amtrak, alternative operators, or a successor to Amtrak—to 

work through the unions to maintain a labor force. Rail union officials 

noted the success of the Massachusetts Bay Commuter Railroad, which 

provides commuter rail service in and around Boston, Massachusetts. In 

this instance, a private operator took over operations from Amtrak and was 

able to maintain existing work rules (collective bargaining agreement 

provisions that specify tasks employees can perform) while offering a 24-

percent increase in wages.116

See appendix VI for more information about workforce issues.

Private Sector Issues and 

Challenges

Private sector issues and challenges primarily focus on what role, if any, 

the private sector will play in any reformed intercity passenger rail system. 

Currently, there is little private sector involvement beyond the 

infrastructure provided by freight railroads to operate intercity passenger 

rail service. Amtrak is the sole operator of intercity passenger rail service, 

and, although organized as a private, for-profit corporation, is heavily 

dependent on federal subsidies to remain solvent. In general, there are no 

other private sector operators outside of leisure travel providers such as 

GrandLuxe Rail Journeys (previously American Orient Express). This 

contrasts with the pre-1971 situation when, before Amtrak began service, 

freight railroads provided all intercity passenger rail service.

There are suggestions that the private sector could play a larger role, 

including being contract operators under a system in which competition 

and bidding is used to select service providers. For example, Amtrak’s April 

2005 Strategic Reform Initiatives suggests that there are opportunities for 

increased competition, and part of Amtrak’s vision for itself under these 

initiatives is to evolve into one of a number of competitors for contracts to 

provide passenger rail service. However, there are a number of issues 

116Amtrak operated Massachusetts Bay Transportation Authority trains and maintained their 

equipment and infrastructure under a contract that expired on June 30, 2003. The contract is 

currently held by a partnership that includes Veolia Transportation, Bombardier, and 

Alternative Concepts, Inc.
Page 81 GAO-07-15 Intercity Passenger Rail

associated with increasing the private sector role in intercity passenger 

rail.117 These issues include the following:

• Availability of potential private sector operators. Since Amtrak is the 

sole provider of intercity passenger rail service, there has been little 

opportunity to test the market for potential new operators.118 However, 

there are indications that potential operators may exist and may be 

willing to participate in any opportunities that might arise, especially 

corridor service. For example, an official of one firm with worldwide 

rail and transportation operations said he believes there is a U.S. market 

for rail service in corridors—especially corridors with city-pairs 100 to 

300 miles apart. An official from another firm with extensive passenger 

rail operations in the U.K. said his firm is very much interested in 

entering the U.S. passenger rail market, especially in operating the NEC. 

In his opinion, the NEC is a very viable corridor and could be wholly or 

partially privatized.

• Costs of private sector operators and the need for public subsidies. One 

of the key questions associated with competition and the use of private 

sector operators is how costs will change, and whether public subsidies 

can be reduced or eliminated. Again, since the U.S. market has not been 

tested, it is difficult to know what the specific cost or subsidy impacts 

from competition might be. On the one hand, European experience has 

shown that franchising and competitive bidding has not necessarily 

reduced the need for government subsidies. In fact, in 2 of the European 

countries we visited (Germany and the U.K.) there is substantial 

government financial involvement in competitively bid systems. On the 

other hand, in the U.K., some franchise operators have recently been 

financially successful enough to allow them to pay the 

117Amtrak noted there are currently statutory restrictions on its ability to outsource. Amtrak 

cited section 121(c) of the Amtrak Reform and Accountability Act of 1997, which prohibits 

outsourcing that results in layoffs of employees other than food and beverage employees 

(unless negotiated with Amtrak’s unions pursuant to the Railway Labor Act). Amtrak also 

cited 49 U.S.C. § 24305, which requires Amtrak to “operate and control directly, to the extent 

practicable, all aspects of the rail transportation it provides.”

118In April 2006, Amtrak issued a request for proposal to solicit bids from states for private 

companies to operate state-supported routes. As of July 2006, Amtrak was in the process of 

evaluating proposals from four states to do such things as designing and restructuring 

service on a state-supported route in Vermont and to develop and test a new reservations 

system.
Page 82 GAO-07-15 Intercity Passenger Rail

government a premium for excess profits they have made.119 Aside from 

government financial assistance, foreign officials also pointed to other 

things—such as increases in ridership and quality of service—as the 

benefits of a more competitive system. For example, data from the 

Association of Train Operating Companies indicate that passenger rail 

ridership in the U.K. increased about 38 percent over roughly the last 

decade (from about 745 million trips to just over 1 billion trips 

annually).120 The largest growth was in the long-distance market.121

Similarly, government data show that the number of complaints per 

100,000 passenger trips in the U.K. generally decreased from about 120 

in April 1999 to 70 in April 2005.122

• Potential requirements to encourage private sector participation. 

There may be certain requirements for encouraging private sector 

participation in providing intercity passenger rail service. These 

requirements may include maintaining Amtrak’s current statutory rights 

of infrastructure access. An official from one firm with worldwide 

transportation operations with whom we spoke emphasized that access 

to tracks, stations, rights-of-way, and maintenance facilities would be 

key for his firm and other operators to be successful participants in the 

intercity passenger rail market. This firm would look to states or Amtrak 

to provide these access arrangements prior to their taking over 

operations. Officials from all 5 states we talked to agreed there would be 

a number of barriers to competition and that access issues would be a 

critical issue. Flexibility in allowing firms to branch into nonrail 

operations may also be important. In Japan, passenger rail officials told 

119Train operating companies in the U.K. pay fees to access tracks and stations owned by the 

infrastructure manager, Network Rail, to provide service. These fees are largely paid by the 

train operating companies and are considered during the franchise award process. 

According to an official with the Department for Transport, U.K. franchise agreements 

contain provisions allowing the regulation of profit and loss. In general, if franchise revenue 

growth exceeds a certain level specified in the franchise agreement, then 50 percent of the 

additional revenue growth is shared with the government.

120The Association of Train Operating Companies is a trade association representing the 

interests of the U.K.’s train operating companies.

121According to the Association of Train Operating Companies, in general, trains run by long 

distance operators in the U.K. travel anywhere from about 120 miles up to about 600 miles 

and may or may not include sleeper cars.

122Office of Rail Regulation, National Rail Trends Yearbook 2005–2006 (covering the period 

April 2005 to March 2006). 
Page 83 GAO-07-15 Intercity Passenger Rail

us that their firms not only provide passenger rail service but are also 

involved in other activities such as real estate development, retail 

stores, and light manufacturing.

Funding Issues also Present 

Challenges 

There are also a number of challenges associated with funding for intercity 

passenger rail service. One is identifying funding sources to meet long-term 

funding needs. Being in a capital intensive business, intercity passenger rail 

has substantial ongoing and long-term funding needs. For example, Amtrak 

is currently receiving over $1 billion annually in federal subsidies and it has 

an estimated $6 billion in deferred capital backlog of infrastructure 

improvements, including about $4 billion on the NEC. In March 2006, the 

DOT OIG reported that, for fiscal year 2007, Amtrak would need about $1.4 

billion just to maintain Amtrak and keep its system from falling into further 

disrepair.123 This would not include amounts to address the backlog of 

capital maintenance, invest in short-distance corridors, or renew 

equipment. This official went on to say that none of the corridors around 

the country, including the NEC, can provide the type of mobility needed 

without significant capital investment. This limitation applies to the 

development of new corridors as well, including high-speed rail corridors. 

As we testified in April 2003, the total cost to develop high-speed rail 

corridors is unknown because these types of corridors are in various stages 

of planning.124 However, the costs could be substantial. The American 

Association of State Highway and Transportation Officials—a trade 

association of state and local transportation officials—has reported that 

about $60 billion would be required to develop these corridors, including 

Amtrak’s NEC, over a 20-year period. 

Funding challenges also include finding funding sources to meet whatever 

national intercity passenger rail policy goals are established. Currently, 

virtually all federal funding for intercity passenger rail comes from general 

appropriations; therefore, intercity passenger rail must compete with a 

myriad of other needs to obtain funding. This practice allows Congress to 

set spending priorities. As discussed earlier, the existence of funding 

sources to meet national policy goals was a component in many foreign 

passenger rail reform efforts. Even in Canada, where there was no major 

123See Mark Dayton testimony.

124GAO, Intercity Passenger Rail: Issues for Consideration in Developing an Intercity 

Passenger Rail Policy, GAO-03-712T (Washington, D.C.: Apr. 30, 2003).
Page 84 GAO-07-15 Intercity Passenger Rail

restructuring, the government was willing to commit, albeit not on a formal 

basis, to identifying funding amounts so as to provide a stable level of 

annual operating funding for its intercity passenger rail provider, VIA Rail. 

This commitment has continued for about 8 years125 and through several 

changes in government. According to Transport Canada officials, this 

commitment allowed VIA Rail management some stability in planning. 

They also said that, while there was no explicit rationale for the amounts 

provided, the objective was clearly to “set VIA’s feet to the fire” by not 

increasing the subsidy. However, reducing the level of support would make 

it difficult to preserve services. Finding funding sources to meet national 

policy goals for intercity passenger rail will not be easy, especially as the 

nation faces increasing fiscal constraints at the federal level. As discussed 

earlier in this report, the federal government faces significant fiscal 

challenges in future years and will need to reexamine its role and financial 

support for virtually all federal programs, including intercity passenger rail. 

The challenge will be in finding a funding source(s) that can meet long-term 

needs while retaining the accountability of an annual appropriations 

process. 

Funding challenges include aligning the decision making for, and the 

benefits of, intercity passenger rail service with the responsibility for 

paying for such service. Currently, there is a basic misalignment in these 

elements. Historically, states have not been required to subsidize basic 

intercity passenger rail service. States may subsidize additional service that 

would benefit residents. As discussed earlier, in fiscal year 2005, 13 states 

paid about $140 million to subsidize additional service from Amtrak. 

However, there were over 30 states that did not subsidize intercity 

passenger rail service even though such service was provided in their state. 

In general, Amtrak is the focal point for decision making about what 

intercity passenger rail service is provided and where.126 Under this 

structure, some states benefit from having intercity passenger rail service 

but play little role in deciding what service is provided or in subsidizing the 

services received. Some states are aware of the benefits of this structure—

125In 1998, the government committed to providing VIA Rail with ten years of stable 

operating funding at $171 million CAD per year. This was reduced in 2004 by $2 million CAD 

as part of a government wide review of expenditures.

126Although states are not required to subsidize basic intercity passenger rail service, federal 

statute (49 U.S.C. §24706) does require Amtrak to provide notification 180 days prior to 

discontinuance of service to give states, a regional or local authority, or another entity the 

opportunity to agree to share or assume the cost of any part of the train, route, or service to 

be discontinued.
Page 85 GAO-07-15 Intercity Passenger Rail

for example, an official from one state we contacted told us that Amtrak is 

“a great deal” for the state because the state pays nothing for service, even 

though there are numerous Amtrak trains that operate daily within the 

state. This official said his state would like to see additional service, but the 

state has little voice in the matter because the state does not pay. On the 

other hand, an official with another state said his state believes it is paying 

an inequitable amount for service compared to other states. As we reported 

in April 2003, the willingness and ability of states to provide and maintain 

financial support for intercity passenger rail is unknown.127 This willingness 

and ability is a challenge that will need to be considered in aligning the 

decision making and benefits of intercity passenger rail with payment for 

such benefits.

Finally, funding challenges will involve developing incentives to ensure 

participation and cost sharing by states and other stakeholders. Currently, 

there are few means for cost sharing of federal and nonfederal 

expenditures on intercity passenger rail. The current funding structure 

provides appropriations for both federal operating and capital 

improvement funds directly to Amtrak by way of grant agreements. These 

grant agreements specify what federal funds are to be used for but do not 

require Amtrak or others to contribute matching funds, either for operating 

or capital purposes. Some other federal surface transportation programs 

require matching contributions to create incentives and leverage federal 

funds. For example, the Federal-aid Highway program generally limits the 

federal financial share of the cost of highway projects (generally 80 percent 

of costs) and requires states or others to contribute matching funds for the 

remaining cost of such projects. Similarly, federal statute limits the 

maximum federal share for some mass transit projects and requires project 

sponsors to contribute matching funds.128 In fact, one of the criteria the 

Federal Transit Administration considers in selecting new transit projects 

to finance under its New Starts program is the amount of local financial 

commitment. The absence of similar cost sharing mechanisms makes it 

difficult for intercity passenger rail projects to compete for federal or state 

dollars. 

127GAO-03-712T.

128The New Starts program is a Federal Transit Administration program for starting fixed 

guideway projects. The program funds up to 80 percent of a project’s net capital cost. See 

GAO, Public Transportation: Preliminary Information on FTA’s Implementation of 

SAFETEA-LU Changes, GAO-06-910T (Washington, D.C.: June 27, 2006).
Page 86 GAO-07-15 Intercity Passenger Rail

The equitable and sustainable response to funding challenges is more 

complex than providing some “comparable” funding for intercity passenger 

rail to that provided for other transport modes. First, while advocates for 

increased federal support for passenger rail often cite the billions of dollars 

provided to highways and airports, in fact these funds are derived from 

explicit taxes or user fees. Second, in spite of the historical user-based 

funding of these modes, we have recently reported that commitments made 

are no longer sustainable; there is an urgent need for identifying new, more 

sustainable, and adequate funding to support the defined federal role.129

Finally, the modal comparisons of the magnitude of federal funding are 

most appropriately grounded in the magnitude of current and potential 

public benefits. As such, the order of magnitude of public funds to support 

intercity passenger rail would appropriately be grounded in the role 

intercity passenger rail does (or could) play in national mobility, relative to 

the dominance of highway and air travel for medium- and long-distance 

travel and the public benefits that would result. Any consideration of 

dedicated funding for intercity passenger rail also needs to account for the 

potential downsides of such funding. In May 2006, we reported that, despite 

the advantages of dedicated funding, there are risks of revenue volatility 

and loss of budgetary flexibility. That is, there is a risk that revenues may 

fluctuate and not meet funding expectations; and, that setting government 

funds aside for a specific use may affect the funding available for other 

spending priorities.130

Not Addressing Challenges 

Will Hinder Opportunities to 

Increase the Benefits of 

Federal and Nonfederal 

Intercity Passenger Rail 

Expenditures

Not addressing the challenges discussed earlier may very well hinder 

opportunities to increase the benefits of both federal and nonfederal 

expenditures on intercity passenger rail. Amtrak has efforts under way to 

analyze and implement various changes to its operations to reduce costs, 

increase efficiency, and move states closer to paying for the services they 

receive. Although these efforts are a step in the right direction, they are 

expected to have only marginal impacts on the financial performance of 

intercity passenger rail service. These efforts will not, and should not be 

expected to, address some of the more fundamental reform elements (e.g., 

clearly defining both a national policy and stakeholder roles for intercity 

129GAO-05-325SP; GAO, Highway Trust Fund: Overview of Highway Trust Fund 

Estimates, GAO-06-572T (Washington, D.C.: Apr. 4, 2006).

130GAO, Mass Transit: Issues Related to Providing Dedicated Funding for the Washington 

Metropolitan Area Transit Authority, GAO-06-516 (Washington, D.C.: May 15, 2006).
Page 87 GAO-07-15 Intercity Passenger Rail

passenger rail service, and finding funding to support national policy goals) 

associated with increasing public benefits provided by intercity passenger 

rail service. Amtrak itself has said that its existence is not a substitute for a 

national policy. The incremental changes being taken by Amtrak do not 

necessarily go to the root of the challenges that policymakers need to 

address to bring about increased public benefits of any federal expenditure 

on intercity passenger rail service.

Not addressing the challenges makes it likely that a well-defined role for 

federal subsidies for intercity passenger rail in the United States will also 

remain elusive. As CRS reported in June 2006, Congress has essentially 

reached a stalemate with respect to Amtrak and intercity passenger rail.131

This stalemate was illustrated by the fact that both the 107th and 108th

Congresses were unable to reauthorize funding for Amtrak or reach 

consensus on what kind of passenger rail system it would be willing to 

fund. This stalemate has largely continued in the 109th Congress. As 

discussed earlier, part of this stalemate has resulted from the wide diversity 

of views and opinions on how the intercity passenger rail system should be 

structured, what role the federal government, states, and others should 

play in the system, and required funding levels. All of these speak to the 

fundamental challenges described above.

Finally, addressing challenges has been integral to reform efforts elsewhere 

in the world. Although passenger rail reform efforts worldwide are still 

largely evolving and continue to face challenges, addressing such 

challenges has been part of moving forward. For example, in the early 

2000s, the U.K. realized it faced problems with insufficient infrastructure 

investment and rising costs of train operators. In response, a new structure 

was developed that changed the infrastructure manager and the 

governance structure of this manager, and significantly increased 

government involvement in specifying the services to be provided by train 

operating franchises. The U.K. has also established a process that will 

develop expected national outputs for its passenger rail system in 2007, 

develop a cost estimate for these outputs, and ensure that adequate funds 

are available to support these outputs. Accompanying this output 

document will be a broader and longer-term strategy document looking 

ahead to about 2035. Similarly, to address the costs of intercity passenger 

rail service and growing federal budget pressures, Canada initially 

131Congressional Research Service, Amtrak: Budget and Reauthorization, Order Code 

RL33492 (Washington, D.C.: June 22, 2006).
Page 88 GAO-07-15 Intercity Passenger Rail

considerably reduced VIA Rail’s annual subsidy from 1992 to 1998 from 

$344 million (Canadian) to $171 million (Canadian), then imposed informal 

caps on VIA Rail’s operating subsidy. Along with the caps came informal 

funding commitments designed to facilitate management stability in 

planning. The funding also came with incentives by allowing VIA Rail to 

finance capital improvements or meet operating shortfalls by retaining any 

annual operating subsidy amounts not used.132 Further, Japan addressed 

funding challenges associated with financially weak passenger rail systems 

by establishing a business stabilization fund that is expected to provide 

sufficient income to continue operations without using an annual federal 

subsidy. Japanese rail officials told us that the business stabilization fund 

has allowed smaller railroads to operate more independently of 

government interference.

Options for the Future 

of Intercity Passenger 

Rail Will Determine the 

Level of Federal 

Involvement

As the federal government is the primary provider of funds, oversight, and 

direction for intercity passenger rail service, federal policy makers should 

take the lead in deciding what the federal government’s role in intercity 

passenger rail service should be and what changes, if any, need to be made 

to its goals, structure, and funding. Using our previous work, the work of 

other government agencies, and our review of other selected countries, we 

defined four basic options that represent the potential range of options for 

reforming intercity passenger rail service in the United States. They are 

maintaining the status quo, introducing incremental changes within the 

existing structure, discontinuing federal support, and restructuring the 

entire intercity passenger rail system. This section discusses each option 

separately, although some combination of these options could also be 

implemented. All four options for the future of intercity passenger rail 

present challenges that could impede both their selection and their 

effectiveness once chosen. Of the four options, however, restructuring 

presents the opportunity to substantially improve the intercity passenger 

rail system. This option would allow Congress and policymakers to 

establish intercity passenger rail’s goals, define the roles of stakeholders, 

and develop funding mechanisms that provide performance and 

accountability for intercity passenger rail expenditures. Any substantial 

reorganization of intercity passenger rail will be difficult and can be 

expected to occur over a long period of time.

132VIA Rail also receives capital improvement funds from Parliament. Canadian officials said 

VIA Rail last received such funds (about $402 million CAD) in 2000 to be spent over a 5 year 

period.
Page 89 GAO-07-15 Intercity Passenger Rail

In the sections that follow, we (1) lay out the framework for examining the 

options, (2) describe each option in more detail, and (3) offer observations 

on the advantages, disadvantages, and challenges associated with each 

option.

Fundamental 

Reexamination Criteria and 

Key Components of 

Decision-Making 

Framework Could Help 

Guide Consideration of 

Options for Future Federal 

Role in Intercity Passenger 

Rail

It is important for federal policy makers to determine whether or not the 

federal government should be involved in intercity passenger rail and, if so, 

how federal participation can be both cost-effective and sustainable, 

particularly in light of the federal government’s long-term structural fiscal 

imbalance. In our report on 21st century challenges facing the federal 

government, we defined a set of fundamental reexamination criteria that 

are useful for evaluating the federal role in any government program, 

policy, function or activity. The criteria are designed to address the 

legislative basis for the program, its purpose and continued relevance, its 

effectiveness in achieving goals and outcomes, its efficiency and targeting, 

its affordability, its sustainability, and its management. These fundamental 

criteria can be used to inform and evaluate the continued federal 

involvement in intercity passenger rail service (see table 4 below for an 

example of how these criteria may be applied). 

Table 4: Application of Critical Reexamination Questions Defining the Federal Role 

in Intercity Passenger Rail 

Source: GAO analysis.

If policy makers determine that there is a clear federal role in subsidization 

of intercity passenger rail service, the implementation of that role should 

have several essential elements. From our past work on federal 

Fundamental criteria Critical questions

Relevance and purpose of the 

federal role

Does intercity passenger rail, as currently provided, have 

a clear federal role and mission? 

Measuring success Does intercity passenger rail, as currently provided, have 

outcome-based performance measures? 

Targeting benefits Do current intercity passenger rail expenditures target 

areas with the greatest needs and least capacity? 

Affordability and cost 

effectiveness

Do these expenditures encourage state and local 

governments, and the private sector, to invest their own 

resources? 

Are these expenditures affordable and sustainable in the 

long term?
Page 90 GAO-07-15 Intercity Passenger Rail

investments in transportation,133 and our analysis of foreign efforts on 

intercity passenger rail reform, we have defined a framework that can 

guide the implementation of any of the basic options for the future of 

intercity passenger rail. This framework includes three components: 

creation of solid goals, establishment of clear stakeholders’ roles, and the 

provision of sustainable funding. This framework has three components 

(see table 5).

Table 5: Three Components of Framework for Defining Federal Involvement in Intercity Passenger Rail

Source: GAO analysis.

All four basic options we identified would also benefit from a process for 

evaluating performance periodically to determine if the anticipated 

benefits are being realized. Evaluations also provide a means to 

periodically reexamine established goals, stakeholder roles and funding 

approaches, and provide a basis to modify them, as necessary. Leading 

private and public organizations we have studied in the past, such as 

133GAO, Intermodal Transportation: Potential Strategies Would Redefine Federal Role in 

Developing Airport Intermodal Capabilities, GAO-05-727 (Washington D.C.: July 26, 2005); 

GAO, Marine Transportation: Federal Financing and a Framework for Infrastructure 

Investments, GAO-02-1033 (Washington D.C.: Sept. 9, 2002); and GAO, Freight 

Transportation: Short Sea Shipping Option Shows Importance of Systematic Approach to 

Public Investment Decisions, GAO-05-768 (Washington D.C.: July 29, 2005).

Component Description

Set national goals for the system These goals, which would establish what federal participation in the system 

is designed to accomplish, should be specific, measurable, achievable, and 

outcome-based.

Establish and clearly define stakeholder roles, especially 

the federal role relative to state, local, and privatebusiness transportation roles

The federal government is one of many stakeholders involved in intercity 

passenger rail service. Others include state and local governments and 

riders themselves, all of whom benefit from intercity passenger rail service. 

Given the broad range of beneficiaries, it is important in order to gain 

consensus as to what the system is to achieve and to help ensure that the 

federal role does not negatively affect the participation or transportation role 

of other stakeholders.

Determine which funding approaches, such as cost 

sharing for investment in new infrastructure, will maximize 

the impact of any federal expenditures and investment

This component can help expand the ability to provide funding resources 

and to promote cost sharing responsibilities. Given the current budgetary 

environment and the long-range fiscal challenges confronting the country, 

federal funding for future transportation projects involving intercity passenger 

rail service will require a high level of justification. This justification should 

have a solid vision and identify funding that will deliver maximum public 

benefits for money expended for intercity passenger rail. 
Page 91 GAO-07-15 Intercity Passenger Rail

General Electric and the state of Washington, have stressed the importance 

of developing performance measures and then linking investment decisions 

and their expected outcomes to overall strategic goals and objectives.134

While federal funding is currently a major source of financial support for 

intercity passenger rail service in the United States, currently there are no 

requirements for a periodic, regular evaluation of the use of federal funds 

(outside of annual appropriations legislation and yearly FRA grant 

reviews).135

Each of the four options we identified has different implications for the 

three elements of our framework—goals, roles, and funding. (See fig. 13 for 

an overview.) For example, the federal role changes from managing the 

different aspects of a federal exit from intercity passenger rail service in 

the discontinuance option to one where it provides strategic direction and 

targeted funding to increase the benefits of intercity passenger rail service 

in the restructuring option. 

134GAO, Executive Guide: Leading Practices in Capital Decision-Making, GAO-AIMD-99-

32 (Washington, D.C.: Dec. 1998).

135Amtrak also makes certain information available about its business. Each year, Amtrak is 

required to submit to Congress, by February 15th, an annual operations report that identifies 

such things as ridership, revenues, and federal subsidies for each of its intercity routes. 

Amtrak is also required to annually submit to Congress a general and legislative report that 

discusses its operations and activities and includes a statement of revenues and 

expenditures for the prior fiscal year.
Page 92 GAO-07-15 Intercity Passenger Rail

Figure 13: Applying the Framework for Deciding the Future of Federal Involvement in U.S. Intercity Passenger Rail 

Keep existing

structure and 

funding of intercity 

passenger rail

Current structure for 

intercity passenger rail 

is retained with no 

significant reform efforts

or increase in federal 

support 

Goals: Keep current 

structure, service levels

with no change in 

federal funding 

Roles: Existing roles

would remain the same

Funding: Same level of 

federal support 

appropriated annually

Reform existing intercity 

passenger rail structure 

incrementally within 

current structure, with a

possible cap on 

operational support

Goals: Federal 

involvement in intercity 

passenger rail could 

focus on improved 

performance 

Roles: Existing roles

would remain the same

Funding: Federal funds

are used to incentivize 

improved performance

Incremental change 

within existing

intercity passenger 

rail structure

Federal support of 

intercity passenger rail 

as more integral to 

national transportation 

system, using tools

such as franchising, 

competition, matching 

funds, or privatization

Goals: Restructure 

intercity passenger rail 

service to increase the 

realization of its

transportation and 

public benefits

Roles: Federal 

leadership secures a

consensus with all 

stakeholders to support 

new vision for intercity 

passenger rail system

Funding: Mechanisms

that align intercity 

passenger rail benefits

with costs to all 

stakeholders

Discontinue federal 

role in intercity 

passenger rail

Exit strategy from 

intercity passenger rail 

should outline an orderly 

transition from federal 

role for rail, divest major 

portions of current 

system and devolve 

responsibility and 

support of intercity 

passenger rail service 

and the NEC to state 

and local government 

and other stakeholders

Goals: Elimination of 

the federal role

Roles: States and local 

governments must 

contract with Amtrak or 

other providers for 

intercity passenger rail 

service

Funding: Federal 

government will be 

responsible for some 

shutdown costs and 

face pressure to 

assume other 

shutdown costs (such 

as employee labor 

protection)

Discontinue federal 

role in intercity 

passenger rail

Four main options

Possible

implementation

of options

Applying the

three components

of federal

involvement

Source: GAO.
Page 93 GAO-07-15 Intercity Passenger Rail

First Option: Keep Existing 

Structure and Funding of 

Intercity Passenger Rail

This option would continue the existing structure and about the same level 

of federal funding for intercity passenger rail service. Under this option, the 

federal government would continue to ensure that a national intercity 

passenger rail system exists. However, the existing inefficiencies, uneven 

service levels, and limited capital investment would also continue. 

Establish Goals to Maintain 

Current Structure

The goal of this option would be to preserve and maintain the current 

intercity passenger rail structure and federal funding levels. This option 

would also maintain the current route structure and levels of capital 

investment. The federal mandate to have a national route structure 

connecting intercity corridors would continue to influence the route 

structure of the intercity passenger rail system. With no increased federal 

direction to change Amtrak, intercity passenger rail operations would 

continue without any major structural changes or increased federal 

expenditure. 

Define the Federal Role within 

the Current Structure

The federal role under this option would be to continue to support the 

current structure of intercity passenger rail. The federal requirement to run 

a national system would remain and Amtrak’s route structure and 

management of the NEC would continue. The current stakeholder roles of 

the federal government, state and local governments, freight railroads, and 

commuter rail agencies would also remain the same. This option would 

also retain the current relationships between Amtrak and the states and 

commuter rail agencies, which in some cases are uneven. For example, 

extensive service provided by Amtrak for some city pairs allows some 

states to benefit from basic or “free” intercity corridor services from 

Amtrak, while other states pay Amtrak to run corridor services that were 

not part of Amtrak’s original service structure. Likewise, some commuter 

rail agencies would continue to pay lower access fees than other commuter 

rail agencies for using Amtrak-owned infrastructure. These access fee 

differences, the result of a 1982 Interstate Commerce Commission ruling, 

are depicted in figure 14. 
Page 94 GAO-07-15 Intercity Passenger Rail

Figure 14: Commuter Rail Agency Contributions to Amtrak on the NEC

Washington, DC

Perryville

Baltimore

Wilmington

Newark

Philadelphia

Trenton

Sunnyside Yard

New York

New

London

Providence

Boston

RI/MA

State Line

New Rochelle

Boston

AMTRAKowned

AMTRAKowned

gto

NY/CT

State Line

New

Haven

No commuter

railroad operations

No commuter

railroad operations

No commuter

railroad operations

Sources: GAO, Amtrak, Corel (map).

Avoidable cost + capital

Avoidable cost - no capital

Other NEC commuter

Fully allocated cost - no capital

No reimbursement - no capital

MBTAowned

CDOTowned

LIRR

MBTA

MTAowned

DelDOT

MARC

SEPTA

NJT

MNCR

SLE

MBTA

TRACK OWNERSHIP

COST AGREEMENTS
Page 95 GAO-07-15 Intercity Passenger Rail

Commuter Railroads and Transit Agencies

Long Island Rail Road (LIRR)

Maryland Rail Commuter Service (MARC) 

Massachusetts Bay Transportation Authority (MBTA)

Metro North Commuter Railroad (MNCR)

State of New York Metropolitan Transit Authority (MTA)

New Jersey Transit (NJT)

Connecticut Department of Transportation’s Shore Line East service (SLE)

Southeastern Pennsylvania Transportation Authority (SEPTA)

Departments of Transportation

Delaware Department of Transportation (DelDOT)

Connecticut Department of Transportation (CDOT)

Continue Existing Funding Federal funding to support Amtrak’s operations and capital expenditures 

would continue at current levels (between $1.25 billion and $1.5 billion per 

year) under this option. Although a small portion of the overall federal 

transportation budget, this level of expenditure could maintain Amtrak’s 

current operations and level of capital investment in the short term. 

However, the longer this level of expenditure continues without any other 

changes in Amtrak’s route structure or expenditures, the less likely that 

Amtrak will be able to cover any losses from extended operational 

difficulties (such as the Acela brake issue in April 2005 or the loss of 

electrical power on the NEC in June 2006), or be able to start improving the 

condition of its core asset, the NEC.

Second Option: Incremental 

Change within Existing 

Intercity Passenger Rail 

Structure

Federal policy makers could determine that the current level of federal 

involvement in, and funding of, intercity passenger rail is generally 

adequate and appropriate, as in the first option. Under this second option, 

however, federal policy makers could introduce incentives for incremental 

improved operational and financial performance and accountability within 

the current intercity passenger rail structure, such as financial, accounting, 

or operational improvements. These incremental improvements could 

come from federal policymakers or Amtrak’s management. The aim of this 

option would be to make some positive financial and operational 

improvements without substantially changing Amtrak’s financial situation 

or the current structure of intercity passenger rail in the national 

transportation system.

Establish Goals to Improve 

Performance within Existing 

Structure

Under this option, the goal of federal involvement could be defined as 

continuing to support the current intercity passenger rail structure while 

incrementally improving its performance. This goal would be achievable 

within the current system and funding structure and would focus on 

incremental operational and financial improvements. For example, 
Page 96 GAO-07-15 Intercity Passenger Rail

provisions in Amtrak’s fiscal year 2006 appropriations legislation specify 

that Amtrak must show savings from operational reforms or federal funds 

could not be used to cover losses from sleeper or food and beverage 

services. 

Another improvement federal policy makers could consider is making 

Amtrak subject to basic requirements that are consistent with either 

federal-entity or public-company financial reporting and accountability 

requirements. Many of the basic accountability practices and requirements 

of federal entities or public companies would improve Amtrak’s 

accountability and transparency to Congress, the public, and key 

stakeholders; and could be implemented while streamlining current 

practices. An integral step in this process would be to first evaluate 

Amtrak’s current practices and requirements in comparison with those of 

federal entities and public companies and use the evaluation as the basis 

for a plan to move forward.

Currently, Amtrak is not subject to many of the basic accountability 

requirements of either federal entities or public companies due to its status 

as a government-established private corporation. However, the current 

financial reporting and accountability requirements specific to Amtrak 

require it to submit annual audited financial statements and an operations 

report to Congress.136 Amtrak is also subject to additional reporting 

requirements as a result of its current funding structure, where annual 

grant agreements for operating and capital expenses are established and a 

prior loan agreement remains in effect. The monthly performance report—

an extensive report containing financial results, route performance, 

workforce statistics, and performance indicators—is one of the various 

daily, monthly, and annual reports that Amtrak is required to provide under 

these agreements. In our October 2005 report on Amtrak’s management 

and performance, we noted that certain relevant information was not 

included in monthly performance reports and the information in the 

monthly performance reports was of questionable reliability.137 We also 

noted in our October 2005 report that Amtrak had made improvements in 

its financial information, and we recommended including relevant 

information and increasing the reliability of the information in the monthly 

13649 U.S.C. § 24315.

137GAO-06-145.
Page 97 GAO-07-15 Intercity Passenger Rail

performance report, as well as preparing an action plan to put certain 

financial management and reporting mechanisms in place.

Although financial reporting requirements of federal entities vary 

somewhat, most federal entities are required to issue annual performance 

and accountability reports (PAR). These PARs contain audited financial 

statements; management’s discussion and analysis of the current year in 

comparison to the prior year; an analysis of the agency’s overall financial 

position, the results of its operations, and a discussion of key financial 

related measures; and management's assurance statement on the 

effectiveness of internal control, including a report on identified material 

weaknesses and corrective actions. OMB, which oversees the financial 

reporting of federal entities, reviews the PARs submitted by agencies.138 In 

addition, agency Inspectors General report semi-annually on their 

assessments of the agencies’ most serious management and performance 

challenges. 

Public companies, in addition to annual reports, are required to (1) provide, 

with their annual financial statements (management’s discussion and 

analysis), information relevant to an assessment of financial condition and 

the results of operations; (2) issue quarterly financial statements that are 

reviewed by external auditors; (3) have the chief executive officer and 

chief financial officer certify that the financial statements do not contain 

any untrue statements; and (4) have management assess and report on the 

effectiveness of internal controls over financial reporting. Independent 

audit committees provide oversight of public companies' financial 

reporting, internal control, and the audit process. The Securities and 

Exchange Commission oversees accountability at public companies 

through reviewing the financial reports and other filings of public 

companies. (See app. VII for a more detailed discussion of financial 

accountability standards and oversight that could be applied to Amtrak.)

Define the Federal Role within 

the Current Structure

As this option would not represent a dramatic shift in the current intercity 

passenger rail structure, a clear definition of roles may not occur. The 

current roles for states, local governments, Amtrak, freight railroads, and 

commuter railroads, would stay the same. As in the first option, this option 

would perpetuate Amtrak’s current service structure that provides more 

138These requirements are found in OMB Circular No. A-136, Financial Reporting 

Requirements (rev. July 24, 2006), which implements 31 U.S.C. 3515(d) requiring OMB to 

prescribe the form and content of financial-entity financial statements.
Page 98 GAO-07-15 Intercity Passenger Rail

basic intercity service between some city pairs than others. It would also 

perpetuate its current relationship with commuter rail agencies on the 

NEC. 

Determine the Appropriate 

Federal Funding Mechanisms to 

Improve Performance

One approach would be to reach an agreement among key legislative and 

executive branch decision makers on a multiyear funding level for federal 

operating of subsidies for intercity passenger rail service. Such a multiyear 

agreement was successful in Canada when VIA Rail used the imposition of 

a cap on its operating subsidies from the Canadian government to reduce 

its operating costs. Although the spending cap was originally intended to 

save the Canadian government money during a time of high fiscal deficits, 

VIA Rail used its imposition to increase its emphasis on internal cost 

control by reducing its labor costs for managers by 50 percent and its 

equipment maintenance costs by 65 percent. The operating funds are 

planned for over 10 years, giving VIA Rail the stability to plan its 

operational expenditures over that time. While the funds are not adjusted 

for inflation, VIA Rail is allowed to retain any amount of its operating 

subsidy it does not use from year to year to save for capital improvement 

projects or other needs.

While the funding approach could take several forms, federal support 

under this option would likely not rise substantially, as the goal of the 

option is to make incremental improvements without substantially 

changing the federal commitment. While some savings could result from 

incremental reforms, it is likely that, as with the first option, Amtrak would 

remain unable to cover any losses from extended operational difficulties or 

to start improving the condition of the NEC. 

Third Option: Discontinue 

Federal Role in Intercity 

Passenger Rail

Under this option, the federal government would end its financial support 

of the intercity passenger rail system. This would shift responsibility for all 

intercity passenger rail service and federally owned rail infrastructure in 

the Northeast to state and local governments and other stakeholders. While 

this option could ultimately reduce federal expenditures by eliminating 

operating and capital funds for Amtrak, according to CBO, discontinuing 

federal support for intercity passenger rail could also force a liquidation of 

Amtrak.139 Consequently, federal funds could be needed in the immediate 

139Congressional Budget Office, The Past and Future of U.S. Passenger Rail Service 

(Washington D.C.: Sept. 2003).
Page 99 GAO-07-15 Intercity Passenger Rail

and long terms to cover implementation costs of Amtrak liquidation, 

including labor protection payments and the disposition of Amtrak’s 

assets.140 Also, although this option could create opportunities for states to 

contract for intercity passenger rail service from other operators,141 many 

states may not be able or willing to fund existing intercity passenger rail 

service with state transportation funds without access to federal capital 

matching funds. Any federal exit strategy and transition plan would also 

need to be comprehensive and detailed. 

Establish Goals that Discontinue 

the Federal Role

Under this option, federal policy makers would determine that there is no 

federal role in the support of intercity passenger rail service. A goal of 

successfully implementing this option could be an orderly withdrawal of 

federal support and involvement from long distance and corridor intercity 

passenger rail service. The federal government would create an exit 

strategy that would enact this goal, in part by creating a detailed and 

comprehensive transition plan that would address several important issues 

resulting from federal withdrawal of support. One of these issues is the 

disposal of the federal interest in Amtrak and in Amtrak owned portions of 

the NEC.142 The NEC is the busiest rail corridor in the United States, with 

over 1,800 intercity passenger, commuter, and freight trains using its tracks 

per day. Amtrak owns a substantial portion of the NEC, including portions 

over which several commuter rail agencies and freight railroads operate. 

Amtrak operates trains, controls the movement of train traffic over the 

NEC, and maintains most of the NEC. 

One example of how to handle the NEC under this option could be similar 

to how the Mexican government sold franchise agreements for different 

segments of its freight rail network.143 Following privatization efforts in 

Argentina and Brazil, the Mexican government, between 1996 and 2000, 

140As we reported in September 2002, we concluded that the United States would not be 

legally liable for either secured or unsecured creditors’ claims in the event of an Amtrak 

liquidation. Nevertheless, we recognize that creditors may attempt to recover losses from 

the U.S. government. See GAO, Intercity Passenger Rail: Potential Financial Issues in the 

Event That Amtrak Undergoes Liquidation, GAO-02-871 (Washington D.C.: Sept. 20, 2002).

141This would be similar to the relatively competitive current marketplace for commuter rail 

service in some states.

142While Amtrak owns portions of the NEC, the federal government owns a promissory note 

issued by Amtrak representing a secured interest in those portions. 

143The World Bank, Results of Railway Privatization in Latin America (Washington D.C.: 

Sept. 2005).
Page 100 GAO-07-15 Intercity Passenger Rail

sold nine different 50-year franchises (each with a 50-year renewal option) 

to private bidders to operate freight rail service.144 According to the World 

Bank, considerable care was taken by the Mexican government when 

creating the franchises to preserve competition and avoid cross-holding 

and cross-subsidization between the bidders and eventual franchise 

operators. Since privatization, freight traffic has grown and substantial 

investments in the rail infrastructure have been made by the private 

operators.

As we pointed out in our April 2006 report on Amtrak and commuter rail 

issues,145 access to Amtrak’s skilled labor and its infrastructure are two 

critical issues to commuter railroads—especially to those railroads that 

operate over the NEC. Some commuter rail agencies could not continue to 

fully operate service—or would cease service altogether—without access 

to Amtrak’s skilled labor and infrastructure. Any transition plan would also 

need to include, among other things, strategies for addressing the 

challenges identified earlier in this report (e.g., federal–state partnerships, 

and infrastructure access and capacity), the financial viability of Amtrak, 

and concerns of freight railroads and others about the viability of the 

railroad retirement system. 

Define the Appropriate 

Stakeholder Roles

The heart of any federal exit strategy and transition plan would be to define 

the appropriate role for freight and commuter railroads, Amtrak, and any 

new owner or manager of the NEC in relation to any continued intercity 

passenger rail service. Since following this option would involve a major 

shift in national transportation policy, the federal exit strategy and 

transition plan would need to clearly define the roles of stakeholders in the 

new intercity passenger rail structure in the United States. The federal role 

would be discontinued and responsibility for any continued intercity 

passenger rail service could be transferred to states (either to individual 

states or to groups), local governments, or the private sector. Amtrak, as a 

private corporation, could potentially continue as a provider of service; 

other private transportation companies could also compete for subsidies to 

provide service on current or new routes sponsored by the states. However, 

many states may choose not to invest their scarce transportation funds in a 

144While the Mexican government retained its ownership of its railroad infrastructure, the 

length of franchise agreements and the minimization of government involvement could 

serve as an example for the federal government to franchise the NEC. 

145GAO-06-470.
Page 101 GAO-07-15 Intercity Passenger Rail

transportation mode for which there are no federal capital matching 

funds—especially considering passenger rail’s capital costs. For example, 

two state transportation officials said their states would be willing to 

consider taking over operational responsibility for corridor Amtrak service 

in their states, but only if the federal government would match state capital 

funds at an 80-percent to 20-percent rate, similar to highway and airport 

expenditures. 

The financial incentive for private transportation companies to continue or 

start any intercity passenger rail service would be reduced, or may not 

exist at all, without federal subsidies for either operations or capital 

projects. For example, officials from one private transportation company 

with whom we spoke stated that virtually every intercity passenger route 

would require public subsidies. However, according to the official, if 

competition for intercity passenger rail service were introduced, it could 

motivate private transportation companies to reduce their costs. While 

probably not enough to eliminate the public subsidy, competition could 

lead to lower overall costs. 

If states did want to continue intercity passenger rail service (especially 

across state borders) without direct federal involvement, different 

intergovernmental structures could be adopted. One structure could be 

interstate compacts, under which a group of states can work together to 

achieve a common regional goal or provide a regional service without 

direct federal involvement. An example is the Washington, D.C., 

Metropolitan Area Transit Authority (WMATA). WMATA is an agency 

created by an interstate compact (although the federal government is also a 

signatory to the compact) that provides bus and rail transit service in 

Virginia, Maryland, and Washington, D.C. WMATA operations are funded by 

fare and non-fare revenue and contributions from local governments, the 

two states and Washington, D.C. Capital projects are funded by these states 

and Washington, D.C., and are matched by the federal government. 

Determine Funding Level for 

Federal Exit Strategy

While the federal government could eventually save the amount of 

Amtrak’s annual capital and operating subsidy if it decided not to support 

intercity passenger rail service, this option could have substantial 

immediate and long-term costs to the federal government, especially if 
Page 102 GAO-07-15 Intercity Passenger Rail

Amtrak were liquidated as a result of withdrawal of federal support.146 In 

our 2002 report on potential issues associated with an Amtrak 

liquidation,147 we identified $44 billion in total claims against Amtrak’s 

estate—including $3.2 billion for potential payments Amtrak would owe its 

terminated employees (if Amtrak had been liquidated on December 31, 

2001). Payments to the railroad retirement system could be as high as $400 

million annually if former Amtrak employees were not reemployed in the 

railroad industry. In addition, currently, Amtrak has about $3.5 billion in 

long-term debt and capital lease obligations that could be unfunded in an 

Amtrak liquidation. The federal government may also decide to fund 

Amtrak’s other liabilities as a last resort if the sale of Amtrak assets does 

not cover them.148 In addition, as we found in 2002, the market value of 

Amtrak’s most valuable asset, its portion of the NEC, has not been tested. 

The corridor clearly has substantial value and some consideration could be 

given to a long-term lease to a private operator. However, the railroad is 

subject to numerous easements and has, as of our October 2005 report, 

over $3.8 billion of deferred capital maintenance that any future owner or 

operator would need to address for continued safe, reliable operations.

Fourth Option: Restructure 

Intercity Passenger Rail 

Service 

Substantial restructuring of intercity passenger rail service could take 

many different forms. However, the core challenge of this approach is that 

critical decisions would have to be made with all stakeholders about what 

goals the restructured intercity passenger rail system should try to meet, 

what roles the various stakeholders should play, and what federal funding 

sources and mechanisms would be available to operate and maintain the 

restructured system while maximizing cost sharing by all who benefit from 

intercity passenger rail. Some examples of ways that substantial 

restructuring could be implemented could include the following: 

• continuing corridor intercity routes where the benefits of intercity 

passenger rail are higher while discontinuing long distance routes where 

the benefits are lower;

146Amtrak officials and the Congressional Budget Office have stated that withdrawal of 

federal capital and operating support would force Amtrak into bankruptcy, which may lead 

to its liquidation.

147See GAO-02-871.

148Again, as we concluded in GAO-02-871, the United States would not be legally liable for 

either secured or unsecured creditors’ claims in the event of an Amtrak liquidation.
Page 103 GAO-07-15 Intercity Passenger Rail

• restructuring Amtrak into separate companies;

• transferring Amtrak-owned infrastructure to a compact or commission 

of states to oversee its operations and improvements;

• creating competition for federal- and state-subsidized routes between 

private operators and Amtrak; 

• providing a one-time endowment to Amtrak as an incentive for it to run 

as a more market-oriented business without continued federal 

involvement and support; or 

• providing states flexible capital matching grants to create their own 

solutions to transportation needs, including intercity passenger rail 

service. 

Establish Goals for Restructured 

Intercity Passenger Rail Service 

Under this option, policy makers would determine that there are sufficient 

public benefits at a national level to justify subsidies for an intercity 

passenger rail service that is different from the current structure. The 

primary goal for the federal government, under this option, would focus on 

increasing the national transportation benefits and public benefits of 

intercity passenger rail service relative to the federal expenditure. For 

example, furthering this goal could include using federal subsidies for 

intercity passenger rail to: reduce highway congestion, increase intermodal 

connectivity, provide environmental benefits, or increase redundancy in 

regional or urban transportation. Specifically, one of the goals under this 

option could be to increase the use of intercity passenger rail service 

between major cities with trip times under 3 hours. Two examples of how 

this goal could be achieved include the U.K. model of intercity passenger 

rail service or the German model for regional rail service. 149 In both 

models, passenger rail operating companies openly bid for the lowest 

amount of government subsidy to operate a specific route. These franchise 

agreements are multiyear contracts backed by either national or regional 

government subsidies. The operator would collect ticket revenues and the 

agreed-upon government subsidy to operate a specific level of service over 

the route. This approach makes the government an explicit buyer of 

149Although DB is the largest regional passenger rail operator in Germany with 84 percent of 

the market, it runs all of its regional routes under contract and must meet specified 

performance criteria; bonuses and penalties depend upon performance. DB is also one of 

over 20 different passenger rail operating companies in Germany.
Page 104 GAO-07-15 Intercity Passenger Rail

intercity passenger rail services from a private operator and increases the 

transparency of costs for a given level of service. Contracts for service 

could include operational and capital expenditures and specify such things 

as service frequency, trip length, stops, a payment schedule, and 

performance metrics.

Importantly, spending federal funds for intercity passenger rail service to 

increase public benefits will not necessarily lower the cost of providing 

intercity passenger rail service. As discussed earlier in this report, in many 

of the countries we visited the level of federal expenditures on passenger 

rail after reform remained high or increased.

Define the Federal and Other 

Stakeholder Roles in a New 

Intercity Passenger Rail 

Structure

There are many different ways that the federal government and other 

stakeholders could define their respective roles within a new intercity 

passenger rail structure. The federal government could narrow or expand 

its role in the new structure. However, the key opportunity of a 

restructuring effort is in defining the roles of all stakeholders to create 

incentives and promote equity across all beneficiaries, both public and 

private, in the new structure. For example, the federal government could 

determine—in partnership with states, local governments, Amtrak, and 

various transportation providers (including freight and commuter 

railroads)—the route structure, service frequency, and infrastructure 

access arrangements for all intercity passenger rail routes. In order to 

ensure that intercity passenger rail service does not significantly interfere 

with freight rail service, any restructuring approach should also take into 

consideration the national freight transportation policy currently being 

developed by DOT. 

One of the more challenging areas to define roles is the NEC, where 

Amtrak is the owner of most of the infrastructure while many other 

railroads are the main users. As discussed above, participation is uneven 

and the vital infrastructure is not being maintained effectively. One 

structure that could facilitate a federal–state partnership to manage the 

NEC could resemble the Delta Regional Commission or the Appalachian 

Regional Commission. These commissions consist of a group of states and 

a federal representative to foster partnerships between state and federal 

government entities and distribute economic development funds 

throughout a specified economically distressed region. For example, the 

federal government and thirteen states make up the Appalachian Regional 

Commission to distribute economic development and highway 

construction funds throughout the 410-county Appalachian region. Federal 

economic development grant funds are distributed to member states 
Page 105 GAO-07-15 Intercity Passenger Rail

according to criteria based on such factors as population, land area, and 

economic need. 

Recognizing its fiscal constraints, the federal government could provide 

matching funds (either for operating or capital expenditures, or both) for 

routes that meet certain goal-related criteria (such as reducing highway 

congestion or increasing intermodal connectivity) and that are partially 

funded and proposed by states or groups of states under a process similar 

to the New Starts program for federal transit funding. However, regardless 

of the eventual structure or tools used to implement the structure, federal 

leadership would be needed to reach a consensus on goals, structure, and 

funding with all stakeholders. 

Determine the Appropriate 

Federal Funding Sources

Given the long term federal fiscal imbalance, finding federal funds 

necessary to fund a substantial restructuring of intercity passenger rail 

could be a significant challenge. In four out of the five countries we visited, 

the national government currently provides a substantial amount of 

funding for intercity passenger rail service.150 Finding sufficient funding 

could be crucial in order to restructure current service, attract increased 

capital investment from nonfederal sources and give other transportation 

providers the incentive to provide intercity passenger rail service by 

significantly increasing the incentives for non-federal partners. However, 

the scarcity of federal funds puts a premium on sharing costs of equipment, 

infrastructure, and service. State and local governments may be willing to 

invest to support continued, expanded or new intercity passenger rail 

service. Moreover, increased state participation would more effectively 

integrate decision making on intercity passenger rail priorities with 

investments in competing and complementary modes including highways, 

airports and mass transit. 

An example of how costs could be shared across stakeholders could be 

seen in the Federal Highway Administration’s Innovative Financing 

150Japan is the one country that is an exception. In Japan, the major intercity passenger rail 

providers are privatized and do not receive any direct government subsidy; most of Japan’s 

population is concentrated in 20 percent of its land area in densely populated major cities. 

This geographical situation is ideally suited for intercity passenger rail service. For example, 

intercity passenger trains have an 80-percent market share of all intercity passenger trips 

about 200-400 miles in length. The Japanese government still subsidizes new high speed and 

other rail line construction, however.
Page 106 GAO-07-15 Intercity Passenger Rail

Program. This program includes several different forms of highway 

financing, which are designed to stimulate additional investment and 

private participation. Different financing approaches in the program 

include the use of state infrastructure banks and credit assistance under 

the Transportation Infrastructure Finance and Innovation Act. These 

financing approaches could be adapted to allow states to leverage federal 

funds for investment in intercity passenger rail projects. 

Funding for intercity passenger rail could come from a number of sources. 

For example, some funding to subsidize federal and state intercity 

passenger rail service could be provided through taxes paid by, or franchise 

payments received from, private operators on those routes that may be 

profitable and not require a subsidy (as is the case for some railroads in 

Japan). Capital funds used to increase capacity, reduce bottlenecks, and 

increase train speeds (especially on freight railroad owned track) could 

come from existing federal taxes, including taxes on railroads or fuel taxes. 

For example, regional governments in Germany are allocated funds from a 

federal automobile fuel tax to support regional (i.e., short-distance, 

intraregion) passenger rail service. This is not necessarily a new tax—

rather, it is a change in how these funds are allocated by the German 

federal government. Another funding option would be for the federal 

government to create an endowment or “business stabilization fund,” such 

as was used in Japan, to stabilize its smaller privatized railroads. This 

endowment would help Amtrak transition from being dependent on federal 

support to being a more market-based company. Any funding for a 

stabilization fund would need to recognize the fiscal constraints on the 

federal government and competing priorities. During the privatization of its 

national railroad system, the Japanese national government identified the 

railroads that were least likely to be profitable and provided them with a 

one-time set-aside of government funds to provide continuous interest 

income for those railroads. While the companies were prohibited from 

using the invested capital to cover expenses, the earned interest could be 

used to stabilize the business and provide long-term funds not subject to 

annual government appropriations. 
Page 107 GAO-07-15 Intercity Passenger Rail

Each Option Carries 

Advantages, Disadvantages, 

and Challenges, However 

Restructuring Presents 

Substantial Opportunity for 

Improving the Intercity 

Passenger Rail System 

All four options for the future of intercity passenger rail present challenges 

that could impede both their selection and their effectiveness once chosen. 

Of the four options, however, restructuring presents the opportunity to 

substantially improve the intercity passenger rail system. This option 

allows all stakeholders to establish intercity passenger rail’s goals, the roles 

of stakeholders and the funding mechanisms that provide performance and 

accountability for intercity passenger rail expenditures. Consensus on any 

change to the current intercity passenger rail structure has been difficult to 

achieve in the past. As a result, if a decision is made to proceed with 

restructuring, a commission may be a useful mechanism for reaching 

consensus on a method of restructuring among stakeholders and for 

recommending a restructuring approach. 

Keeping the Status Quo Forgoes 

Benefits that May Accrue from 

Improving the System 

While keeping intercity passenger rail’s current structure and federal 

funding levels would preserve a federal role in intercity passenger rail, it 

would also preserve all of the current problems and limitations. States and 

commuter rail agencies would continue to have unequal relationships with 

Amtrak. The current route structure would continue to dilute the public 

benefits of federal intercity passenger rail expenditures. Investment in and 

the quality of commuter and intercity service on the NEC would likely 

continue to decline and in states where intercity passenger rail could 

provide the most public benefits states’ transportation funds would 

continue to be spent on other modes without considering public benefits 

from spending on intercity passenger rail. Any extended operational 

difficulties may leave Amtrak without significant cash reserves to cover 

lost revenues and may result in more financial difficulty. 

With the current general level of federal funding, Amtrak will continue to 

be faced with a deteriorating infrastructure and aging equipment that will 

increase its operating costs and limit its ability to provide its current levels 

of service. Without a significant capital infusion, the capital maintenance 

backlog on the Amtrak-owned portion of the NEC will continue to increase, 

negatively affecting Amtrak’s performance on its key route and diminishing 

the benefits of intercity passenger rail in the most densely populated area 

of the country. In addition, any new equipment (or a refurbishment of old 

equipment) would have to be financed either with Amtrak’s limited capital 

funds or with commercial debt, which would increase Amtrak’s operating 

expenses. With current levels of funding and the lack of a clear definition of 

roles for intercity passenger rail service, significant opportunities—for 

instance, cost sharing for service in corridors where the public benefits of 

such service may be high—could go unrealized. Amtrak will also face the 
Page 108 GAO-07-15 Intercity Passenger Rail

continued annual uncertainty about its financial situation, which will 

damage its relationship with its creditors, suppliers, freight railroads and 

its riders. Freight railroads will receive the same compensation from 

Amtrak for the use of increasingly scarce capacity on their major rail lines 

in addition to not benefiting from increased public investment to increase 

capacity for passenger and freight traffic where they co-exist on their rail 

lines. 

Intercity passenger rail riders could also face disadvantages under this 

option. A deterioration in service and equipment could force Amtrak to 

raise ticket prices for a lower quality service (which may also be affected 

by increased freight rail traffic). In addition to the uncertainty surrounding 

federal and state investment in intercity passenger rail service, this 

deterioration of service may drive away current and future riders and 

increase highway and airway congestion in areas where intercity passenger 

rail has made progress in increasing ridership, such as on the NEC and in 

California. Finally, the federal government would receive no increased 

benefits, and may receive less benefit due to declining capital investment, 

for its expenditures and would have no accountability or performance 

measures in place to gauge the effectiveness of those expenditures. In 

addition, no performance or outcome based goals would be established for 

intercity passenger rail service, clear stakeholder roles would not be 

defined, and there would be no opportunity to restructure funding 

mechanisms to include share costs across all stakeholders. 

Incremental Change Does Not 

Address Fundamental Flaws in 

the Current System

Though there may be some increase in public benefits, incremental change 

within the existing intercity passenger rail structure retains many of the 

same problems that would be retained under the first option. States and 

commuter rail agencies may still have unequal roles and face declining 

investment in Amtrak’s infrastructure. While some savings could result 

from incremental reforms, the need for federal subsidies would remain, 

continuing the uncertainty of Amtrak’s financial future. Freight railroads 

would continue to receive the same level of compensation for increasingly 

constrained rail capacity and may not see more investment where public 

demand for intercity passenger rail service on their railroads increases. 

Riders could also face reductions in amenities due to cost cutting measures 

in addition to the same or decreased service levels due to, among other 

things, increased freight traffic and deteriorating equipment that could 

reduce ridership on some routes.

With current levels of funding and the lack of a clear definition of roles for 

intercity passenger rail service, significant opportunities—for instance, to 
Page 109 GAO-07-15 Intercity Passenger Rail

share the costs of intercity passenger rail service in corridors where the 

public benefits of such service may be high—could go unrealized. While the 

federal government or Amtrak may impose new accountability and 

performance measures, the route structure may stay generally the same, 

still diluting the impact of federal expenditures. Also, no overall goals will 

be established for federal expenditures, roles will not be clarified and costs 

of intercity passenger rail service will not be equally shared across all 

beneficiaries. 

Discontinuing Federal 

Involvement May Reduce 

Services and Would Require 

Detailed Planning and 

Substantial Federal 

Expenditures 

Discontinuing the federal role presents strong challenges to all intercity 

passenger rail stakeholders. The federal government will need to create a 

comprehensive transition plan and exit strategy, especially in disposing of 

the NEC. The federal government could also face pressure from states, 

commuter rail agencies, and Amtrak’s creditors and workforce to continue 

infrastructure investment in the NEC, and to cover Amtrak’s outstanding 

debts and labor protection payments, respectively. Amtrak would face 

bankruptcy and a possible shutdown of all services without federal 

financial support. States will likely need to take on the responsibility to 

continue intercity passenger rail service, which may result in some routes 

being discontinued if they are not financially viable and states or others are 

not willing or able to subsidize service. In addition, an Amtrak bankruptcy 

may take away its equipment and its right of access to freight rail 

infrastructure. Without a comprehensive federal transition plan, commuter 

rail agencies that rely on Amtrak for services or infrastructure would face 

service disruptions and financial difficulties. This would be especially 

acute in the NEC, where most commuter railroads rely on Amtrak 

infrastructure or services. Freight railroads may gain increased capacity on 

some of their network, but would have to separately negotiate with 

individual or groups of states that wished to continue intercity passenger 

rail service on their railroads and deal with any new intercity passenger rail 

operators as well. Finally, riders could be forced to other modes of intercity 

and commuter transportation as a result of the federal exit from intercity 

passenger rail, either temporarily or permanently, increasing congestion on 

those modes. Under the discontinuation option there could be gaps in the 

national transportation system to the extent there are areas where the 

public relies solely on intercity passenger rail for mobility or travel 

between regions if states or groups of states choose not to retain the 

service. 
Page 110 GAO-07-15 Intercity Passenger Rail

Restructuring Provides Path to 

Increased Transportation and 

Public Benefits from National 

Intercity Passenger Rail Network

The restructuring option provides the opportunity to address the key 

reform elements necessary for a sustainable, equitable, intercity passenger 

rail system that delivers increased public benefits for federal and 

nonfederal expenditure where the other options do not. The status quo and 

incremental change options do not allow for a reexamination by all 

stakeholders of the goals, roles and funding mechanisms of the system and 

would not significantly increase the potential benefits of the system 

relative to the expenditures required. Discontinuing federal support would 

transfer responsibility for the system to other stakeholders, possibly 

creating disruption and loss of benefits for a possible decrease in federal 

expenditures. Although specific approaches may vary as to the goals, roles, 

funding and challenges faced by different stakeholders, restructuring the 

intercity passenger rail system potentially allows each stakeholder to more 

fully participate and build consensus toward addressing these key reform 

elements and to move toward a more equitable sharing of costs between 

the federal government and other beneficiaries of intercity passenger rail 

service.

Several challenges would need to be addressed before a restructured 

intercity passenger rail system could provide increased public benefits and 

accountability for federal expenditures. Federal policymakers will need to 

determine the goals of the restructured system, the roles of all the 

stakeholders, how federal expenditures will support the new system and 

mechanisms for its implementation. Increased funding for private 

operators may be needed to create a competitive marketplace for intercity 

passenger rail, as well as increased funding or financial backing for capital 

improvements in the NEC to ensure higher quality service. Federal 

policymakers could also face pressure to compensate those who might lose 

intercity passenger rail service or jobs due to the restructuring. States and 

commuter rail agencies may have to shoulder more of the financial, 

maintenance, and management burden in a restructured intercity 

passenger rail system, especially in the NEC, but may receive other benefits 

(such as improved service) in return. Amtrak would need to adjust to the 

new intercity passenger rail structure or face bankruptcy. Freight railroads 

may face increased public pressure for the use of their infrastructure for 

intercity passenger rail service and may need to accommodate non-Amtrak 

intercity passenger rail operators on their railroads. Riders may experience 

some disruption as routes are re-routed or discontinued.

Due to the complex nature of intercity passenger rail issues and the wide 

diversity of views about the future of intercity passenger rail service, an 

independent and properly designed commission may be an effective 
Page 111 GAO-07-15 Intercity Passenger Rail

mechanism for building a consensus that helps determine a restructuring 

approach. For example, a commission might be able to facilitate public 

dialogue around a variety of options. While it may be difficult for citizens to 

discuss the federal role in the abstract, preferences about that role can be 

inferred from their reactions to and comments on the various restructuring 

approaches. By facilitating public dialogue focused on feasible alternatives, 

the commission could help the President and the Congress as they define 

the role for the federal government in providing or subsidizing such service 

and specifying how the service could fit into our national transportation 

system. As discussed above, reaching consensus about federal policy 

toward intercity passenger rail has been difficult. While the stalemate in 

part reflects widely divergent views of the appropriate federal role, the 

debate has been stymied by the lack of objective, rigorous exploration of 

the operating challenges, costs, and distributional impacts of alternative 

strategies. 

Prior commissions151 and initiatives have recommended options for 

restructuring intercity passenger rail service; however, their 

recommendations have not been implemented. This inaction is due, in part, 

to the challenges facing Amtrak as stated earlier in this report and, in part, 

to a failure to reach public consensus on the recommended restructuring 

approaches, which more fundamentally, requires a consensus on the future 

role of intercity rail in the nation’s transportation system. Although 

motivated to define the federal role in intercity passenger rail, these prior 

commissions and current strategic initiatives have assumed a federal role 

in intercity passenger rail service without explicitly stating what that role 

is, what other stakeholders’ roles are, and how that federal role will be 

funded. 

Conclusions If the role of intercity passenger rail is to be effectively integrated into the 

national transportation system and federal support is to be targeted to 

assure its performance, results and accountability, we believe that there is 

a clear need to change the current structure of and the federal role in 

intercity passenger rail in the United States. This change would be 

consistent with GAO’s position that all federal activities should be 

151Committee on Transportation and Infrastructure, Working Group on Intercity Passenger 

Rail, A New Vision for America’s Passenger Rail, (Washington D.C.: June 23,1997); and the 

Amtrak Reform Council, An Action Plan for the Restructuring and Rationalization of the 

National Intercity Rail Passenger System, (Washington D.C.: February 7, 2002).
Page 112 GAO-07-15 Intercity Passenger Rail

reexamined with an eye to whether they fit in the changing world of the 21st

century. The current and future fiscal imbalance underscores the 

importance of assuring that all federal programs and policies, including 

those for intercity passenger rail service, are subject to reexamination, 

review and possible change. The extended stalemate in developing a clear 

vision for how intercity passenger rail can be a part of the national 

transportation system has reflected the significant challenge in achieving 

consensus. As recently reported by the CBO, in the absence of any 

consensus on intercity passenger rail issues, Amtrak is likely to continue 

“limping along” as it has since its inception. We agree that without any 

changes to its current structure, roles, and funding, the current intercity 

passenger rail structure will continue to underserve, underinvest, and 

underachieve.

Consensus will be needed, in addition to legislative action—both in the 

short and long term—to improve the focus, performance, and sustainability 

of federal support for intercity passenger rail. Development of a national 

passenger rail policy to guide investments of federal funds should have: a 

clearly defined federal role, outcome-based policy goals, an approach to 

financing that stimulates investment by others commensurate with their 

benefits, and appropriate accountability mechanisms. The current U.S. 

intercity passenger rail structure meets none of these criteria—it does not 

have clear transportation related goals, the roles of stakeholders have 

grown haphazardly over time, federal funding is not based on cost sharing 

and not focused on maximizing public benefits, and its results are not 

outcome-based. With regard to its accountability and financial reporting, 

Amtrak is not subject to the same basic requirements for financial 

reporting, internal control and governance that are typically required of 

federal entities or public companies. 

Recommendations for 

Executive Action

To improve Amtrak’s financial and internal control reporting and overall 

accountability, we recommend that the president of Amtrak: 

Immediately take steps to evaluate Amtrak's accountability—particularly 

its financial reporting, internal control, and governance practices—and 

formulate a plan to bring the financial reporting, internal control, and 

governance practices in-line with the basic requirements that federal 

entities or public companies practice, while also identifying opportunities 

to improve and streamline current reporting practices. The evaluation 

should include a comparison of Amtrak’s current accountability 

requirements and practices to those of federal entities as well as public 
Page 113 GAO-07-15 Intercity Passenger Rail

companies. This evaluation should serve as the basis for the formulation of 

Amtrak’s plan to bring Amtrak’s financial reporting, internal control, and 

governance practices in-line with the basic requirements that federal 

entities and public companies practice, based on a determination of which 

practices are most appropriate given Amtrak’s overall mission, funding 

sources, and current situation. The plan should include developing 

management discussion and analysis as part of its annual financial 

reporting and developing management's assessment of internal control 

over financial reporting, while identifying opportunities to streamline other 

reporting practices. The plan should be submitted to Amtrak’s 

Congressional oversight committees.

Matter for 

Congressional 

Consideration

In order to address longer term needs to maximize the transportation 

benefits and public benefits of intercity passenger rail service and any 

federal funds expended on this service, we recommend that Congress 

consider restructuring the approach for the provision of intercity passenger 

rail service in the United States. Only Congress can provide the national 

vision and has the authority to put in place a wide-ranging restructuring 

effort. This restructuring should include establishing clear goals for the 

system, defining the roles for states and the federal government, if any, 

commuter rail agencies, freight railroads and other stakeholders, focusing 

expenditures where they will achieve the most public benefits, and 

developing funding mechanisms that include cost sharing between the 

government and beneficiaries. 

In undertaking this restructuring, it will be important to solicit input from 

all stakeholders, particularly DOT and FRA given their responsibility for 

transportation and rail matters. Evaluation of restructuring approaches 

should also consider the relationship between passenger and freight 

railroads and give due consideration to the national freight transportation 

policy being developed by DOT. Due to the complex nature of intercity 

passenger rail issues and the wide diversity of views about the future of 

intercity passenger rail service, an independent and properly designed 

commission may be an effective mechanism for developing a consensus 

over the future of intercity passenger rail service and helping determine a 

restructuring approach. 

By addressing the key reform elements, Congress can create a structure 

that not only efficiently and effectively serves travelers but also promotes 

performance and accountability and the chance for increased 
Page 114 GAO-07-15 Intercity Passenger Rail

transportation and public benefits from federal expenditures for intercity 

passenger rail.

Agency Comments and 

Our Evaluation

We provided copies of the draft report to Amtrak and DOT for comment 

prior to finalizing the report. Amtrak provided its comments in a letter from 

its president and chief executive officer (see app. VIII). In general, Amtrak 

did not take an overall position on the report or the Matter for 

Congressional Consideration. However, Amtrak agreed that intercity 

passenger rail in the United States has come to a critical juncture and that a 

national dialogue about the future direction of rail service is needed. 

Amtrak also said that the three key elements to comprehensive reform of 

intercity passenger rail are establishing clearly defined national policy 

goals, clearly defining government and stakeholder roles, and establishing 

committed funding. Finally, Amtrak commented that a more efficient, 

improved, and expanded intercity passenger rail service can play an 

important role in relieving congestion, both in the air and on the highways, 

and that rail has unique advantages compared to other transport modes. We 

agree and our report discusses the importance of the three key elements of 

reform and the role they have played in reform efforts in foreign countries. 

We also agree that intercity passenger rail can play an important role in the 

nation’s transportation system. For this reason, as well as the fact that 

intercity passenger rail service does not currently provide the most 

transportation benefits and public benefits that it can and the growing 

federal fiscal challenges, it is more important than ever for serious efforts 

to begin on identifying how intercity passenger rail service can be 

restructured to focus on its comparative advantages. We believe that 

success of this restructuring effort can best be achieved in the context of 

national policies and goals for intercity passenger rail—goals that are 

performance and outcome based. In addition, all relevant stakeholders 

need to participate and realistic assessments need to be made of potentially 

available funds for sustaining the restructured system. It will be very 

difficult to maximize the transportation benefits and public benefits of 

intercity passenger rail service without these foundations.

In response to our recommendation that Amtrak evaluate its 

accountability—particularly its financial reporting, internal control, and 

governance practices—Amtrak offered comments about specific steps that 

could be taken in that regard. For instance, Amtrak agreed that creating a 

Management Discussion & Analysis with its annual audited financials is 

reasonable and could help the uninformed readers understand the results 

and trends. Amtrak took exception with other examples of oversight such 
Page 115 GAO-07-15 Intercity Passenger Rail

as the CEO and CFO certifying Amtrak’s financial statements similar to 

those done under Section 302 of Sarbanes-Oxley Act. However, our 

recommendation notes some general steps that Amtrak needs to take in 

order to evaluate Amtrak’s current accountability practices in order to 

formulate a plan to bring Amtrak’s practices in-line with the basic practices 

of federal entities or public companies, while identifying opportunities to 

streamline Amtrak’s current reporting practices. In its response, Amtrak 

did not specifically address our recommendation to conduct such an 

evaluation for purposes of formulating a plan. Therefore, we have included 

additional information to our recommendation further elaborating on the 

objectives of the evaluation and the formulation of a plan to bring Amtrak’s 

practices in-line with the basic practices of federal entities and public 

companies. 

In its comments, Amtrak also pointed out that among the Federal Railroad 

Administration, the Department of Transportation Inspector General’s 

office and the independent Amtrak Inspector General’s office they have 

three existing oversight agencies that oversee Amtrak on a monthly, 

quarterly and annual basis and increasing oversight by adding the 

Securities and Exchange Commission seems an unnecessary use of federal 

funds with little real benefit for stakeholders. While we recognize that 

Amtrak is subject to oversight already, we believe there are opportunities 

to improve reporting practices, while identifying opportunities for potential 

streamlining of Amtrak’s current reporting and related oversight. These 

opportunities should be considered as part of the evaluation of Amtrak’s 

current accountability requirements and practices.

Amtrak also commented on a number of other issues. These included (1) 

the Amtrak deficit, (2) passenger revenues, (3) public benefits of Amtrak 

services, (4) state corridors, and (5) freight railroad impacts. These 

comments and our evaluation can be found in appendix VIII. Finally, 

Amtrak offered technical comments that we incorporated where 

appropriate.

DOT provided its comments in an e-mail message on October 12, 2006. The 

department did not indicate agreement or disagreement with the report or 

its recommendations but primarily provided technical comments that we 

incorporated where appropriate. However, the department did observe that 

effectively targeting federal funds where they may achieve the greatest 

level of public benefits is not one of the existing goals for Amtrak. The 

department also commented that it has never been FRA’s role to “establish 

a vision for intercity passenger rail” regardless of resources that might be 
Page 116 GAO-07-15 Intercity Passenger Rail

available to the agency. While we recognize that FRA’s involvement with 

and oversight of Amtrak has increased in recent years, our report makes it 

clear that, as currently structured, intercity passenger rail does not 

maximize either transportation benefits or public benefits for federal funds 

expended. Although Congress will play the key role in establishing a 

national vision for intercity passenger rail service and putting in place a 

structure for maximizing the benefits from this service, we believe 

executive branch leadership, particularly from DOT as being responsible 

for transportation issues and FRA for rail matters, would be helpful in 

establishing this vision. DOT and FRA leadership will also be essential for 

identifying the optimum structure for meeting this vision and the role 

stakeholders will be expected to play within this structure, as well as in 

identifying potential funding sources to ensure sustainability of the system. 

Such leadership and participation by these agencies will be even more 

important in light of the growing fiscal challenges faced by the federal 

government and the resulting constraints these challenges will place on 

resources provided to all modes of transportation.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 14 days from the 

report date. We will then send copies to other appropriate congressional 

committees, the President of Amtrak, the Secretary of Transportation, the 

Administrator of the Federal Railroad Administration, and the Director, 

Office of Management and Budget. We will also make copies available to 

others upon request. In addition, the report will be available at no charge 

on the GAO Web site at www.gao.gov.
Page 117 GAO-07-15 Intercity Passenger Rail

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-2834 or heckerj@gao.gov. Contact points for our 

Office of Congressional Relations and Public Affairs Office may be found 

on the last page of this report. GAO staff that made major contributions to 

this report are listed in appendix IX.

Sincerely yours,

JayEtta Z. Hecker

Director

Physical Infrastructure Issues
Page 118 GAO-07-15 Intercity Passenger Rail

Appendix I

Scope and Methodology AAppenednxidexiIs

Our work was focused on identifying the critical issues and options that 

Congress could consider in providing more cost-effective intercity 

passenger rail. In particular, we focused on: (1) the characteristics of the 

U.S. intercity passenger rail system and the value and benefits provided by 

this system, (2) foreign experiences with passenger rail reform and lessons 

learned for the United States, (3) how well the United States is positioned 

to reform intercity passenger rail, (4) challenges that must be addressed in 

any reform efforts, and (5) potential options for the federal role in intercity 

passenger rail. Our scope was primarily limited to identifying the financial 

characteristics and other characteristics of the U.S. intercity passenger rail 

system from fiscal years 2001 to 2005. In reviewing route-related 

information, it was not the intent of our work to suggest that any particular 

routes or services be retained or eliminated. Similarly, in reviewing 

potential options for the federal role in intercity passenger rail it was not 

our intent to suggest that any particular option should be selected over any 

other option. Rather, the scope of our work was intended to identify a 

series of options that might exist for addressing the future federal role in 

intercity passenger rail service.

To determine the characteristics of the current U.S. intercity passenger rail 

system we collected information on all of the National Railroad Passenger 

Corporation’s (Amtrak) routes, including ridership, revenues and costs, 

federal grants and state payments to Amtrak, and on-time performance for 

fiscal years 2000 through 2005. We also gathered and analyzed data 

provided by Amtrak to determine passenger demographics, connectivity 

between routes, and the potential transportation benefits and public 

benefits provided by Amtrak’s different route types. We utilized route 

ridership data provided by Amtrak from their “data warehouse” database. 

To assess the reliability of this data and address discrepancies from figures 

reported in Amtrak’s Route Profitability System (RPS), we conducted 

interviews with Amtrak officials and assessed the methodology used to 

develop this database. Based on this assessment, we determined that the 

data were sufficiently reliable for our purposes. To evaluate the financial 

performance of Amtrak’s routes, we utilized information from the RPS 

database. Due to previously identified concerns regarding the reliability of 

this database, we conducted an interview with Amtrak’s Chief Financial 

Officer, reviewed documentation of RPS’s sources and methodology, and 

compared route-related financial information to Amtrak’s “data 

warehouse” database to determine any major discrepancies. While these 

databases exhibit some variation due to the reporting format and source 

information, we determined that the financial information provided by the 

RPS database was sufficiently reliable to illustrate aggregate route-related 
Appendix I

Scope and Methodology

Page 119 GAO-07-15 Intercity Passenger Rail

costs, and general trends between Amtrak’s different route types, for the 

purposes of this report. For the purposes of reporting on-time performance 

we utilized data provided by Amtrak. We compared these figures to other 

reports issued by Amtrak and the Department of Transportation (DOT) and 

determined that the data were sufficiently reliable for our purposes. To 

determine passenger demographic information, we utilized survey data for 

all long-distance routes and select corridor routes in the Northeast and 

California in 2004 and 2005; these data were provided by Amtrak and 

collected by a third party contractor to Amtrak. We did not independently 

determine the accuracy or precision of Amtrak's survey estimates, 

however, based on our understanding of the overall survey methodology, 

we determined that the estimates were sufficiently reliable for our 

purposes in illustrating general demographic differences in riders across 

route types. Finally, to identify potential transportation benefits and public 

benefits provided by intercity passenger rail, we spoke with officials in five 

states;1

 private transportation companies; and transportation officials in 

several foreign countries. We also reviewed our previous work and reports 

issued by the Congressional Budget Office (CBO), Congressional Research 

Service, the Bureau of Transportation Statistics, the American Association 

of State Highway and Transportation Officials, and statements by officials 

at DOT.

To learn about foreign experiences with passenger rail restructuring and 

lessons learned for the United States, we collected data on several foreign 

countries that have reformed their intercity passenger rail system. This 

data included reports from the World Bank, the European Commission, the 

Congressional Research Service, as well as reports drafted by several 

private consulting firms at the request of the European Union. We 

conducted interviews with World Bank and European Commission 

officials, and using these reports and interviews, we developed criteria for 

selecting countries for site visits. These criteria included: the extent of rail 

privatization or competition introduced, geographic characteristics, market 

characteristics, national funding levels and sources, and the legislative 

regulatory environment. We reviewed data for Australia, Canada, France, 

Germany, Japan, Sweden, and the United Kingdom (U.K.). Five countries—

Canada, France, Germany, Japan, and the U.K.—were all selected because 

1

We spoke with officials in New York, Virginia, California, Washington, and Wisconsin. These 

states were chosen based on their diverse geographic location and the unique passenger 

travel markets in their respective regions. In addition, the type and extent of intercity 

passenger rail services vary considerably in these states, as well as the level of investment 

that each state has historically provided to support Amtrak operations.
Appendix I

Scope and Methodology

Page 120 GAO-07-15 Intercity Passenger Rail

they represented a wide range of reform experiences, and implemented a 

variety of approaches in reforming their systems. We conducted site visits 

to these countries, which included interviews with the Ministries of 

Transport for each of these countries. We also interviewed the primary rail 

operators in Canada, France, Germany, and Japan. In the U.K. we 

conducted interviews with one train operator, as well as the Association of 

Train Operating Companies. In France, Germany, the U.K., and Japan we 

also met with the infrastructure managers. Additionally, we met with other 

rail industry groups, such as Angel Trains and HSBC (rolling stock leasing 

companies) in the U.K., and the Paris Ile de France Public Transport 

Authority.

To determine the extent to which the United States is positioned to reform 

intercity passenger rail we analyzed the information we learned from the 

experiences of the five countries described above, and reviewed statutes 

related to intercity passenger rail, historical information on federal grants 

requested by and provided to Amtrak, government and association reports 

on Amtrak, and our past reports on various issues (including reports on 

Amtrak’s management, commuter rail issues, and funding for other modes 

of transportation). We used the three key lessons learned from the five 

countries as our criteria for assessing how well the United States is 

positioned to reform intercity passenger rail; these criteria were (1) clearly 

defining national policy goals; (2) clearly defining the various roles and 

responsibilities of all government entities involved; and (3) establishing 

consistent committed funding for intercity passenger rail. For example, we 

compared the current U.S. intercity passenger rail policy to policies formed 

in other countries during the process of reform. A limitation of our 

assessment is that we only focused on comparing the United States to five 

countries with relatively different compositions in railroad infrastructure 

ownership, freight and passenger railroad markets, geography, and 

demographics. To determine the extent to which Amtrak’s efforts address 

the three criteria, we obtained and analyzed a list of planned and under-way 

initiatives from Amtrak. We also reviewed Amtrak’s April 2005 Strategic 

Reform Initiatives, congressional hearings on intercity passenger rail, and 

DOT’s financial study on Amtrak’s initiatives. In addition, we interviewed 

Amtrak officials about the status of reform initiatives and intercity 

passenger rail reform in general. 

To address the challenges associated with addressing reform elements we 

reviewed pertinent legislation related to federal involvement with Amtrak 

and intercity passenger rail issues. We also reviewed various legislative 

proposals that have been introduced in recent years addressing intercity 
Appendix I

Scope and Methodology

Page 121 GAO-07-15 Intercity Passenger Rail

passenger rail issues and reviewed Amtrak’s April 2005 Strategic Reform 

Initiatives to identify the wide diversity of views on what intercity 

passenger rail service can and should be. We also obtained data from 

Amtrak showing state payments in fiscal year 2005 for additional passenger 

rail service and state contributions for capital improvement projects. We 

reviewed our previous reports addressing, among other things, 

infrastructure access and workforce issues, as well as Amtrak management 

and performance issues. We also reviewed reports from the CBO and the 

Department of Energy, and testimony from the Association of American 

Railroads on infrastructure capacity issues. As part of our work we 

solicited information from both Amtrak and selected commuter railroads 

about infrastructure access and liability costs.2

 We used the types and 

amounts of costs incurred by Amtrak and the commuter railroads to 

develop a comparison that highlights the differences between Amtrak’s 

access agreements and access agreements negotiated under commercial 

arrangements. We did not perform a quantitative analysis of the differences 

in access charges between Amtrak and commuter railroads. Rather, our 

focus was limited to a qualitative description of the types and ranges of 

costs. Finally, we interviewed officials from Amtrak, the Federal Railroad 

Administration (FRA), state departments of transportation, rail labor 

unions, and freight railroads about issues they see in addressing the 

potential reform of intercity passenger rail. We also interviewed officials 

from the Appalachian Regional Commission about the structure of the 

organization, how it is governed, and the potential application of this 

federal–state governance structure to intercity passenger rail service.

To address future intercity passenger rail options, we reviewed pertinent 

legislation and our past reports, along with reports from the World Bank, 

the DOT Inspector General, the CBO, and the Congressional Research 

Service. We also interviewed railroad and government officials in the 

United States and the countries we visited. We reviewed the reports of 

various commissions including: the House Committee on Transportation 

and Infrastructure's Working Group on Intercity Passenger Rail, the 

Amtrak Reform Council, the President's Commission on the United States 

Postal Service, and the National Commission of Social Security Reform. 

The criteria for a fundamental reexamination of the federal role were 

developed in our report on 21st Century Challenges, and the framework to 

2

The commuter railroads included in our review were Altamont Commuter Express 

(California), Metrolink (California), Sound Transit (Washington), and Virginia Railway 

Express (Virginia and Washington, D.C.).
Appendix I

Scope and Methodology

Page 122 GAO-07-15 Intercity Passenger Rail

guide the implementation of the options was reported in several of our 

previous reports and testimonies. 

Our work was conducted from January 2006 to October 2006 in accordance 

with generally accepted government auditing standards.
Page 123 GAO-07-15 Intercity Passenger Rail

Appendix II

Selected Performance Characteristics of 

Amtrak Long-Distance and Corridor Routes ApendxiI

The following are selected performance characteristics of Amtrak’s long 

distance and corridor routes. 

Table 6: Coach Class versus Sleeper Class: Net Loss per Passenger, Fiscal Year 

2004

Source: DOT OIG analysis of Amtrak Fiscal Year 2004 data.

a

 “Fully-allocated” loss includes capital depreciation and interest expenses.

Operating basis Fully-allocated basisa

Coach Sleepers Coach Sleepers

Sunset Limited 286 366 416 627

Crescent 114 330 194 552

Southwest Chief 198 307 279 484

Silver Service 99 244 168 439

Cardinal 129 238 175 420

California Zephyr 140 234 202 416

Lake Shore Limited 106 225 195 379

City of New Orleans 88 217 165 352

Capitol Limited 112 208 159 321

Texas Eagle 111 198 132 311

Coast Starlight 81 157 139 290

Empire Builder 94 154 126 283

Auto Train 26 124 117 269

Average loss per passenger 121.8 230.9 189.8 395.6
Appendix II

Selected Performance Characteristics of 

Amtrak Long-Distance and Corridor Routes

Page 124 GAO-07-15 Intercity Passenger Rail

Table 7: On-Time Performance of Long-Distance Trains, Fiscal Year 2005

Source: GAO analysis of Amtrak data.

Routes Percent on-time Average minutes late

Auto Train 37.7% 80

California Zephyr 24.4 158

Capitol Limited 26.4 90

Cardinal 38.0 89

City of New Orleans 83.0 21

Coast Starlight 23.3 173

Crescent 57.3 48

Empire Builder 68.3 39

Lake Shore Ltd. 20.3 99

Silver Service 25.9 120

Southwest Chief 71.6 37

Sunset Limited 7.1 300

Texas Eagle 53.1 60

Three Rivers 58.6% 54
Appendix II

Selected Performance Characteristics of 

Amtrak Long-Distance and Corridor Routes

Page 125 GAO-07-15 Intercity Passenger Rail

Table 8: List of States with Corridor Services, Fiscal Year 2005

Source: Amtrak.

Note: The Hoosier State service between Indianapolis and Chicago is currently classified by Amtrak as 

a corridor route but was not included in the original DOT analysis. Does not include Regional and 

Keystone service on Boston-Washington NEC Spine. Illinois listing does not include routes that serve 

only Chicago. Texas has recently indicated that it will begin funding Heartland Flyer service.

California

Pacific Surfliner

Capitols

San Joaquins

Connecticut

New Haven-Springfield

Indiana

Hoosier State

Wolverine

Illinois

Chicago-St. Louis

Illini

Illinois Zephyr

Hiawatha (with Wisconsin)

Maine

The Downeaster

Massachusetts

The Downeaster

New Haven-Springfield

Michigan

Wolverine

Blue Water

Pere Marquette

Missouri

Kansas City–St. Louis

Chicago-St. Louis

New Hampshire

The Downeaster

Vermonter

New York

Empire 

Adirondack

Ethan Allen

North Carolina

Carolinian

Piedmont

Oklahoma

Heartland Flyer

Oregon

Cascades (with Washington)

Pennsylvania

Keystone

Pennsylvanian

Texas

Heartland Flyer

Washington

Cascades (with Oregon)

Wisconsin

Hiawatha (with Illinois)

Vermont

Ethan Allen

Vermonter

Virginia

Carolinian

Washington-Newport News
Appendix II

Selected Performance Characteristics of 

Amtrak Long-Distance and Corridor Routes

Page 126 GAO-07-15 Intercity Passenger Rail

Figure 15: Amtrak’s Market Share Compared to Air Services for Selected Origins and Destinations 

0 1 2 3 4 5 6 7 8 9 10 17 19 

New York-Philadelphia

Percentage

Rail travel time in hours

Philadelphia-Washington

New York-Baltimore

New York-Washington

Seattle-Portland

Boston-New York

Boston-Philadelphia

Seattle-Vancouver

Fort Worth-Oklahoma City Chicago-St. Louis

Boston-Washington Washington-Chicago

New York-Chicago

100

90

80

70

60

50

40

30

20

10

0

Source: McKinsey & Company.
Appendix II

Selected Performance Characteristics of 

Amtrak Long-Distance and Corridor Routes

Page 127 GAO-07-15 Intercity Passenger Rail

Figure 16: Amtrak’s Route System—1971

Seattle

Tacoma

Portland

Salem

Eugene

Klamath Falls

Oakland

San Jose

San Luis Obispo

Santa Barbara

Los Angeles

San Diego Yuma

Phoenix

Tucson

Barstow Flagstaff

El Paso

Gallup

Albuquerque

Sacramento

Elko Ogden

Salt Lake

City

Rawlins

Cheyenne

Pasco

Spokane

Whitefish Havre

Denver

Williston

Trinidad

La Junta

Minot Grand

Forks

Fargo

Del Rio

Hutchinson

Oklahoma

City

Fort Worth

San

Antonio

Minneapolis

Topeka

Lincoln

La Crosse Milwaukee

Galesburg

Chicago

Omaha

Ottumwa

Kansas City

St. Louis

Houston

Lake Charles

Jackson

Memphis

Carbondale

New Orleans

Indianapolis

Ft. Wayne

Meridian

Birmingham

Detroit

Cinicinatti

Louisville

Nashville

Atlanta

Montgomery

Charleston

Jacksonville

Miami

Orlando

Columbia

Charlotte

Tampa

Columbus

Greensboro

Pittsburgh

Harrisburg

Buffalo

Syracuse

Albany

Boston Springfield

Providence

New Haven

New York

Philadelphia

Washington, DC

Richmond

Newport News

Raleigh

Fayatteville

Florence

Charleston

Savannah

Non-Amtrak service

Amtrak service

Sources: National Association of Rail Passengers, GAO, Corel (map).

Glenwood

Springs
Page 128 GAO-07-15 Intercity Passenger Rail

Appendix III

Reform Overviews in Five Site Visit Countries ApendxiI

The following is an overview of the five countries we visited as part of this 

review.

Canada

Background Reformation of Canada’s intercity passenger rail system initially took place 

in 1978 with the creation of VIA Rail, a state-owned corporation. Prior to 

this, both the passenger and freight rail systems were integrated and 

service was provided by two companies, Canadian National Railway and 

Canadian Pacific Railway. While there has been no major organizational 

changes since its creation, VIA Rail was subject to several national policy 

actions throughout the 1990s leading to significant changes in how the rail 

operator conducted its business, in addition to the changes in the amount 

of funding it receives. 

Operations The primary provider of intercity passenger rail operations in Canada is 

VIA Rail, a government-owned corporation with shares held solely by the 

Canadian government. However, the government agency, Transport 

Canada, is responsible for overseeing VIA Rail. VIA Rail operates almost all 

of the intercity corridor and long-distance routes throughout Canada, and 

has some flexibility in setting its routes and services: however, all route and 

service changes must be approved by Transport Canada, the Canadian 

Minister of Transport, and the Canadian government. The majority of VIA 

Rail’s usage occurs on a corridor that runs between Québec City, Québec, 

and Windsor, Ontario. (This corridor is in the southeast part of the country, 

and shares similarities with the Amtrak’s Northeast Corridor, but with a 

lower population density.) Similar to the United States, Canada’s longdistance routes operated with higher losses than the corridor service, and 

Snapshot of the Canadian Rail System

• Monopoly state owned operator, VIA Rail.

• Almost all infrastructure is owned by two freight rail companies.

• Operating subsidies are consistent from year to year in order to force efficiencies and 

enable better planning for VIA Rail’s management.

• VIA’s corporate plan is approved annually by the federal cabinet.
Appendix III

Reform Overviews in Five Site Visit 

Countries

Page 129 GAO-07-15 Intercity Passenger Rail

because of this in 1992 a reevaluation of the Canadian (a long-distance 

train which runs across the country from Toronto, Ontario, to Vancouver, 

British Columbia) was conducted. Analysis of this route revealed that it 

was primarily serving a leisure/tourist market, and a decision was made to 

transition service on the Canadian to a luxury train offering “premium 

service at a premium price” along with its coach service. In addition, 

cutbacks in all cost categories and labor renegotiations, combined with 

substantial revenue growth, allowed VIA Rail to operate more efficiently 

within its budget.

Infrastructure VIA Rail does not own most of the tracks on which it operates, and similar 

to Amtrak, operates on private tracks owned by freight rail.1

 VIA Rail does 

not have any statutory guarantee of access to tracks, and must negotiate 

access agreements with the freight operators. Current access agreements 

with freight railroads are 10-year agreements and are set to expire in 2008. 

VIA Rail owns and maintain most of its stations.

Funding and Debt VIA Rail receives an annual subsidy from the Canadian Parliament. 

Currently VIA Rail receives about $170 million (CAD) annually to support 

its rail operations.2

 In 1991, the Canadian government began informally 

capping the subsidy received by VIA Rail. The subsidy at the time was $350 

million (CAD)3

 and, due to governmentwide cost cutting, was gradually 

reduced to its current level. Despite the decrease in its subsidy, VIA Rail did 

not make any reductions in its service offerings—it concentrated on 

improving customer service while reducing costs through more efficient 

management, instead. This operating subsidy does not include funds for 

capital improvements. VIA Rail does not receive a capital subsidy each 

year, but instead must request special capital subsidies from Parliament. 

1

VIA Rail does own some track between Montreal, Québec, Ottawa, Ontario, and Kingston, 

Ontario.

2

As of September 2006, the dollar equivalent is approximately $152 million (USD). All dollar 

value equivalents in this report are as of September 2006 unless otherwise noted. 

3

Approximately $313 million (USD). 
Appendix III

Reform Overviews in Five Site Visit 

Countries

Page 130 GAO-07-15 Intercity Passenger Rail

The last funding it received for capital improvements was in 2000 for $400 

million (CAD) 4

 to replace locomotives and rolling stock, and to perform 

work on its Montreal, Québec–Ottawa, Ontario, line. VIA Rail has no 

authority to issue debt instruments, or to go into the debt market to fund 

rail operations. Any attempt to do this would require permission from 

Transport Canada, the Minister of Transport, and the Minister of Finance. 

At the time of its creation, VIA Rail did not have any debt, and currently has 

no authority to issue debt instruments or to go into the debt market to raise 

funds.

France

Background The French intercity passenger rail system was reformed in 1997 in order to 

create an infrastructure manager distinct from the national operator and 

address the financial crisis that had been created by the fully integrated 

intercity passenger rail system. The monopoly intercity passenger rail 

operator in France is Société Nationale des Chemins de Fer Français 

(SNCF), a public company with 100 percent of its assets owned by the 

state. Until the 1997 reform, SNCF was responsible for both intercity 

passenger rail operations, as well as for managing the country’s rail 

infrastructure. During the reform, Réseau Ferré de France (RFF) was 

created to take over management of the infrastructure. RFF is also a public 

company with 100 percent of its assets owned by the state.

4

Approximately $358 million (USD).

Snapshot of the French Rail System

• Monopoly operator and infrastructure manager; both are state-owned public 

companies.

• National subsidies for intercity passenger rail operations are provided to the regions, 

and not directly to the operator.

• System comprises the largest use of high-speed trains in the world (6,000 miles 

operated by Train a Grande Vitesse trains).

• Will be required by the European Union to begin to open its passenger rail market to 

competition by 2010-2012 (freight market already open to competion).
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Operations SNCF is the monopoly intercity passenger rail operator in France. SNCF 

primarily provides intercity rail service through contracts with 20 

geographical regions of France. At the time of the 1997 reform, the French 

government began experimenting with regionalization of its intercity 

passenger rail system. Through this experiment six geographic regions 

were provided with subsidies so that intercity passenger rail needs could 

be purchased from SNCF. This was successful, and, as of 2002, 20 regions in 

France are given direct subsidies to purchase intercity passenger rail 

service. This allows the regions to enter into contracts with SNCF for the 

appropriate quantity and frequency of service needed to meet the unique 

characteristics of the region’s passengers. In addition to operating 

passenger rail services, SNCF provides infrastructure management 

services under contract with RFF. SNCF performs traffic management on 

the national network, and operates and maintains the national safety 

system. 

Infrastructure RFF was created through the reform in order to establish an infrastructure 

manager separate from the national operator. This was intended to clarify 

the responsibilities and costs for rail infrastructure in France. All rail 

infrastructure is owned by RFF, and it was given the mission of ensuring 

coherence of the French rail network through improving existing lines, 

developing the network through building new lines, and enhancing the 

network by selling land property and lines not in use. RFF’s main sources 

of income are access charges for use of the rail network, income relative to 

land properties included in the network, and a state subsidy. As part of the 

creation of RFF, two-thirds of the former SNCF’s debt was transferred to 

RFF in exchange for SNCF’s infrastructure assets (31,000 km of track).5

Funding and Debt Funding for both RFF and SNCF is provided by the French Ministry for 

Transport. The state provides about 7.5€ billion6

 to subsidize the rail 

system each year including 2€ billion7 to France’s 21 geographic regions so 

5

A national commission was set up to allocate assets between RFF and SNCF and offer 

solutions in case of litigation on assets allocation. RFF was granted tracks, marshalling 

yards, and signals. SNCF received stations, storage sidings, and workshops.

6

Approximately $9.6 billion.

7

Approximately $2.5 billion.
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that intercity passenger rail service can be purchased from SNCF. The state 

provides RFF about 800€ million8

 annually to pay off the debt it inherited 

during the reform, and about 900€ million9 each year to perform 

infrastructure renewal. The cost of track maintenance is supported through 

infrastructure access fees. RFF contracts with SNCF to perform some 

infrastructure management, and in 2004 RFF paid SNCF 2.6€ billion 

(approximately $3.2 billion (USD))10 for its services. SNCF pays RFF access 

fees in order to operate its trains on RFF tracks, and in 2004 it paid 2.16€

billion (approximately $2.6 billion (USD))11 in access fees. Since the 

reform, these access fees have continued to increase, and the public 

subsidy for infrastructure is decreasing proportionally. At the time of the 

reform, SNCF was carrying about 30€ billion in debt (approximately $25 

billion (USD)), and was operating with a 2€ billion (approximately $2.4 

billion (USD)) deficit. 20€ billion (approximately $18 billion) of this debt 

was transferred to RFF in exchange for infrastructure, and the remainder 

stayed with SNCF. RFF’s debt has stabilized since the 1997 reform, and a 

public financial agency for funding transportation infrastructure was 

recently formed to provide infrastructure subsidies and zero-percent 

interest loans for new projects. RFF receives on average 2€ billion annually 

for capital investments for new lines and anticipates 7.5€ billion from this 

agency for 2005 through 2012 (currently this is approximately $9.6 billion).

Germany

Background In 1994, Germany implemented its first rail reform initiative.12 Germany 

began by separating its governmental and commercial rail-related tasks and 

by opening its markets to competition. This was done by merging the two 

8

Approximately $1.0 billion.

9

Approximately $1.1 billion.

10Based on June 30, 2004 exchange rate.

11Based on June 30, 2004 exchange rate.

12According to a German official, Germany makes a distinction between regional/commuter 

and intercity/long-distance transport. However, for purposes of this report, we included 

regional/commuter service as “intercity” since transport on regional (short-distance) trains 

can be between cities.
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preexisting national railway properties, Deutsche Bundesbahn (West 

Germany) and Deutsche Reichsbahn (East Germany) into the Federal 

Railway Property Agency (BEV).13 The commercial section of BEV was 

then separated and transformed into DB, a state-owned joint-stock 

company that acts independently in the transport market, and includes 

separate business units for both long and short distance passenger rail 

operations and infrastructure management. Although DB owns the entire 

rail infrastructure network in Germany, all shares of the DB infrastructure 

company are held by the state. The German intercity passenger rail system 

is also open to competition. Any rail operator who wants to enter the 

market is free to bid on contracts to provide service, and while this has 

yielded a large number of intercity passenger rail operators in Germany, DB 

remains the primary operator in most markets.

Operations The German passenger rail market is open to competition, and currently 

there are over 300 different operators providing rail service in Germany. 

Despite this, most rail service in Germany is operated by DB. National 

funding for short-distance passenger rail service is provided directly to the 

Länder by the national government and the Länder then receive bids for 

service from operators based on the specific needs they outline in a request 

for proposal. Länder are not required to tender the service to multiple 

operators, and can provide payment directly to DB for it to continue 

operating preexisting service. The contracts established with operators are 

generally for about 10–15 years. If the Länder want to purchase service that 

exceeds the amount of the subsidy available to them, they are welcome to 

do so, and can spend their own funds to do this. In some cases, the Länder 

have further delegated the authority to decide rail services to the local 

level. In addition to winning contracts to provide regional service, 

passenger operators can provide long-distance service at their own risk. 

13Bundeseisenbahnvermögen.

Snapshot of the German Rail System

• Multiple operators, market open to competition (over 300 competing operators).

• Single infrastructure manager; private company that is part of a state owned holding 

company.

• National subsidies for regional passenger rail operations are provided to the Länder 

(the German federal states), and not directly to the operators.
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However, long-distance rail operators are required to pay infrastructure 

access fees. After reform, several of the money-losing long-distance routes 

that were in existence were shut down by DB, in compliance with public 

law.

Infrastructure Most of the infrastructure in Germany is owned by DB Netz, one of DB’s 

corporate business units. Currently DB Netz is part of a state owned 

holding company. All operators that use infrastructure in Germany pay 

access fees to DB Netz, including other DB business units (freight, 

commuter rail and intercity passenger rail). Currently there is ongoing 

debate about transforming DB’s status as a state-owned private-stock 

company to a publicly traded company. The largest issue at hand is 

whether or not to include DB Netz as part of the initial public offering. 

According to DB officials, the company sees an advantage to including the 

infrastructure in an initial public offering. Based on several reports, 

government representatives also expect significant public financial 

benefits from an integrated initial public offering, but some fear this model 

will lessen their ability to influence infrastructure decisions.

Funding and Debt The national government provides about 7€ billion annually14 to the Länder 

to operate regional passenger rail. The source of this federal subsidy is a 

transportation fund, which is supported by an automobile fuel tax. DB Netz 

receives about 4€ billion15 each year in federal subsidies in order to renew 

and develop new infrastructure (including stations). About 2.5€ billion of 

this goes towards maintaining the current infrastructure, and about 1.5€

billion goes towards renewal and new infrastructure.16 By establishing DB, 

the German government relieved it of approximately 35€ billion debt 

(approximately $38 billion at the time of reform in 1994) and transferred 

the responsibility for paying and managing this debt to BEV. About 10€

billion per year17 is paid to BEV for debt relief and other administrative 

responsibilities (e.g., pensions).

14Approximately $8.9 billion.

15Approximately $5.1 billion.

16Currently $1.9 billion and $3.2 billion respectively. 

17Due to fluctuations in exchange rate, the subsidy varied from approximately $8.5 to $12.7 

billion between 1999-2006.
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Japan

Background Reform of the Japanese rail system through privatization was initiated in 

1987. Before reform, the Japanese railway was a fully integrated stateowned monolithic railway entity, Japan National Railways, which operated 

at considerable cost to the government and carried extensive debt. After 

reform, Japan kept its intercity passenger rail system vertically integrated, 

that is, it did not separate out operations from infrastructure, but instead it 

divided the system geographically, and created separate private intercity 

passenger railways for the country based on six distinct geographic regions 

(and a separate company for freight rail). The government also assumed 

the majority of the debt for the preexisting state-owned system, which at 

about $300 billion was a substantial sum.

Operations After the reform, the fully integrated state owned operator, Japan National 

Rail, was broken up into six passenger rail entities based on six geographic 

regions. Three of these regions are on the mainland (JR East, JR Central, 

and JR West) and the other three are each on an island (JR Hokkaido, JR 

Shikoku, and JR Kyushu). A freight company was also created to serve the 

entire country. Each of these six passenger rail operations are vertically 

integrated, that is within each rail company infrastructure and operations 

are both managed by the same company. The three companies on the 

mainland are fully privatized, and do not receive any financial assistance 

from the government. The other three passenger companies have not yet 

reached a point where they are financially independent from the state. 

Snapshot of Japanese Rail System

• Vertically integrated operations and infrastructure; market split into six geographic 

regions. 

• Each region has its own rail company.

• Debt of pre-existing state owned railway divided among three largest passenger rail 

companies, JR Freight, Shinkansen Holding Corporation, and JNR Settlement 

Corporation. 

• Three largest intercity passenger rail companies are fully private, while government 

supports the other three.
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Infrastructure The six passenger railway companies own their own tracks and JR Freight 

has legal access to the JR’s tracks at marginal or incremental cost. In 1991, 

JR West, East and Central purchased their tracks from the Shinkansen 

Holding Company and the proceeds went toward paying down the 

company’s portion of Japan National Railway’s long term debt. The Japan 

National Railway developed an implementation plan for its division that 

included how much land was needed for each railroad, which was 

approved by the Ministry of Land, Infrastructure and Transport. The 

companies were then given existing stations and offices from the old Japan 

National Railway. Some of the non-railroad-oriented land was retained by 

the Japan National Railway Settlement Corporation because it was not 

needed by the new railroads for operations. JR Freight pays a relatively low 

state-determined access fee for using the tracks of the other passenger 

railroads. Japan also has Shinkansen (high-speed) lines that connect most 

of the highly populated cities. The Japan Railway Construction, 

Transportation, and Technology Agency builds new Shinkansen lines; it 

also holds title to some existing Shinkansen lines and leases them to the 

passenger railroads for high-speed train operations.

Funding and Debt When reform occurred in 1987, the Japanese government provided a onetime Business Stabilization Fund, which provided funding for three 

passenger railroads that were not yet privatized and needed subsidies to 

survive. JR Hokkaido was given ¥682 billion, 18 JR Shikoku was given ¥208 

billion,19 and JR Kyushu was given about ¥388 billion.20 These three 

railroads were allowed to invest these funds and use any money made from 

them for operations and capital improvements. However, they were not 

allowed to draw down any principal—only the profits or interest from 

investments. Therefore, currently the three companies have maintained the 

original amounts given to them by the state in 1987. However, the 

performance of the fund has been declining as Japanese interest rates have 

declined since the establishment of the fund. It is not clear what will 

happen to these amounts if any of these three companies are fully 

18In 1987, this amount was approximately equal to $4.7 billion. All subsequent currency 

conversion amounts reported for Japan in this appendix use the average exchange rate 

during 1987, the year the railway was reformed.

19Approximately $1.4 billion.

20Approximately $2.7 billion.
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privatized at a later date. However, Japanese Board of Audit officials feel 

that it will be a long time, if ever, before the three companies are financially 

able to achieve privatization. Of these three passenger railroads, only JR 

Kyushu is given a reasonable chance of achieving the financial stability 

necessary to privatize.

There are two other forms of assistance to JR Hokkaido, JR Shikoku, and 

JR Kyushu. A guaranteed interest rate was offered for the stabilization fund 

that was higher than the market rate available to the three mainland JR’s. 

The government reduced the tax rate on fixed railroad assets as well. In 

addition, at the time of reform, the Japan National Railways had 

accumulated about ¥37 trillion21 of long-term debt. About ¥25.5 trillion22

was placed with a newly created entity, called the Japan National Railways 

Settlement Corporation, and the remaining debt was distributed among the 

three mainland railroads, JR Freight, and the Shinkansen Holding 

Company. The state government determined the debt allocation, apparently 

on the basis of expected future profits of each entity. The Hokkaido, 

Shikoku, and Kyushu railroads were not allocated any of this debt because 

of their more precarious financial positions.

The United Kingdom

Background The U.K. began its major reform in 1993 in an effort to privatize its rail 

system, and then undertook another significant restructuring effort in its 

2004. The 1993 reform took place over 5 years and involved radical 

restructuring. The preexisting monolith, British Railways, was broken up 

into many pieces, including a private infrastructure company, Railtrack, 

which was replaced in 2002 with Network Rail, over 20 train operating 

companies, three rolling stock ownership and leasing companies, and three 

government regulators (currently there is only one entity, the Office of Rail 

Regulations). In 2004, the U.K. restructured again to restore the long-term 

efficiency and keep the affordability of rail within the level of public 

expenditures defined by the British government, as well as to recover 

21Approximately $255.8 billion.

22Approimately $176.3 billion.
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performance levels, maintain high standards of safety, and enable the 

industry to meet its customers’ needs.

Operations After the initial reform effort, intercity passenger rail operations were no 

longer conducted by British Railways but were instead turned over to the 

private sector. The rail network was broken up into different franchises, 

and private operators were permitted to bid on franchises for the provision 

of services. These operators are essentially private companies that enter 

into franchise agreements with the government, where the government will 

subsidize unprofitable service or receive a premium for services that see 

excess profits. In addition, these operators pay access fees to the 

infrastructure manager in order to access the tracks, and the U.K. 

government adjusts subsides paid to, or premium received from, operators 

to compensate for any change to the fixed access charge made by the 

independent regulator.

Infrastructure Rail infrastructure in the U.K. is currently all managed by Network Rail. 

Network Rail is a private corporation, run by a board of directors, and 

overseen by more than 100 members of the railroad industry and some 

members of the general public. The members do not have day-to-day 

responsibilities for making management decisions, but they do elect and 

dismiss the board of directors, approve the long-term remuneration of 

board members, approve Networks Rail’s annual report, and approve 

specific resolutions put forth before the membership. Network Rail was 

not the first infrastructure company formed after the U.K.’s reform. At the 

time of reform, a private for-profit corporation, Railtrack, was established 

to own and manage all of the U.K.’s infrastructure. In 2001, Railtrack went 

bankrupt, and Network Rail’s bid to take over Railtrack was accepted; it 

Snapshot of the U.K. Rail System

• Multiple operators; market split into franchises which are open to competition.

• Single infrastructure manager; owned “members” consisting of representatives from 

a range of industry interests.

• British Rail’s rolling stock was divided between the three rolling stock ownership and 

leasing companies and is available for lease to interested operators.

• The national government was unable to completely exit the industry, and mainly 

plays a role in setting the strategic direction for the railways.
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then assumed control over the infrastructure in 2002. Currently, Network 

Rail earns income from three sources—network access fees paid by the 

operators (and which are set by the Office of Rail Regulation), direct 

government grants, and other income such as commercial property. 

Funding and Debt Although privatized, the intercity passenger rail system in the U.K. receives 

operating subsidies from the government. Generally about 50 percent of all 

costs are covered through public subsidies, but U.K. government officials 

expect this percentage to fall in the future. Total debt for Network Rail is 

currently at £18 billion and is projected to peak at £21 billion between 

2008–2009.23 This debt did not exist at the time of reform, and was incurred 

through paying for enhancements to its regulatory asset base. Network Rail 

also assumed £8 billion24 of this debt from Railtrack.

23£18 billion in debt is approximately $34 billion, and the value of the £21 billion in debt (in 

2009) is approximately $37 billion.

24Approximately $1.5 billion in 2006.
Page 140 GAO-07-15 Intercity Passenger Rail

Appendix IV

Current Amtrak Reform Efforts ApendxiIV

In April 2005, Amtrak’s board of directors and management proposed a set 

of broad strategic reform initiatives. Since the release of these initiatives, 

Amtrak formed a new planning and analysis department to manage the 

strategic reform initiative plan and implementation, among other duties 

(such as developing a capital and asset plan). Thus far, 15 operational 

initiatives have been developed, which are described as either corporate or 

business-line initiatives (see table 9). Recently, to further develop these 

initiatives, Amtrak has begun to refine the structure of these initiatives into 

five issue areas: (1) business efficiencies, (2) service levels, (3) cost 

recovery, (4) labor, and (5) legislative. According to Amtrak, most of the 15 

initiatives will fall into the business efficiency category, which the company 

views as having greater control over. The labor, long-distance, corridor, and 

infrastructure initiatives will fall within more than one of the categories, 

and full implementation of these initiatives would require legislative action. 

In addition, initiatives associated with each of the train operations business 

lines (long distance, NEC, and state corridor) will fall under all five 

categories. 

Amtrak’s 15 initiatives are largely designed to reduce costs, increase 

revenue, and improve its financial reporting. Among the initiatives Amtrak 

has planned or undertaken to reduce costs is the overhead function 

initiative, which it estimates will save $5.1 million in fiscal year 2006 

through reductions in outside legal fees, software, and communications 

costs. The NEC operations initiative is designed to increase revenue, partly 

through the implementation of revenue management on NEC’s Regional

Service, by charging variable rates.1

 The management information 

initiative calls for reforming how Amtrak currently reports financial and 

operating information. Amtrak’s Chief Financial Officer told us that reports 

to management will focus more on performance outcomes, such as 

performance per passenger mile. In addition, Amtrak is in the process of 

developing a new cost-accounting system as directed through fiscal year 

2006 appropriations to improve accountability. As of May 2006, the 

operational initiatives have resulted in annual savings of $46 million for 

fiscal year 2006, but are expected to save $190 million a year when fully 

implemented.

1

The NEC’s Regional Service is Amtrak’s service that primarily operates between 

Washington, D.C., and Boston, Massachusetts. This service includes 22 state-corridor trains 

through Massachusetts, New York, and Virginia.
Appendix IV

Current Amtrak Reform Efforts

Page 141 GAO-07-15 Intercity Passenger Rail

Table 9: Objectives and Status of Amtrak’s 15 Reform Initiatives 

Type of initiative and 

description Objective Status

Corporate

Food and beverage Enhance service flexibility, redesign 

equipment, and outsource certain 

service

• The contract for Gate Gourmet, Amtrak’s food vendor, is being 

renegotiated. Amtrak expects savings of close to $1 million in fiscal 

year 2006.

• The Simplified Dining program has been implemented, which, 

through June 2006, resulted in savings of $3.7 million.a

• Amtrak is redesigning cars to offer continuous, restaurant-style 

dining service and enhanced customer service. 

• Amtrak will continue to monitor and evaluate service levels, staffing 

models, and savings, against goals for food and beverage services.

Mechanical Adopt reliability-centered 

maintenance, consolidate facilities, 

and outsource selected activities

• Amtrak plans to evaluate its facility locations for cost savings. 

• A review of maintenance requirements is under way to minimize 

costs and maximize reliability. 

• As of July 2006, one maintenance service has been identified for 

outsourcing, but a request for proposal has not been posted.

Customer service Modernize ticket issuance, 

collection, and reporting processes; 

and improve service quality 

measurement and delivery

• On July 5, 2006, Amtrak completed training and deployment of 

service managers on long-distance trains to create consistency in 

supervision of customer service delivery.

• Amtrak is developing an e-ticketing system to replace the paper 

ticket system and a customer service quality measurement system, 

and has begun planning for route/product-level management 

oversight.

Management information Develop more accurate and timely

information on costs of routes, 

individual activities, and functions

• Amtrak is in the process of evaluating its current financial 

information system as the initial step to replacing it with an 

integrated financial system. 

• A report on the activity-based management system project is being 

finalized.

• The Route Profitability System (RPS) is being updated to ensure 

its reliability. Changes to the RPS system are expected to be 

completed by the end of FY 2007.

Improve and update stations Address Americans with Disabilities 

Act (ADA) compliance, state-ofgood-repair, and reduce station 

operating costs

• The analysis of stations is under way to reduce operating cost. 

• Amtrak is currently monitoring the impact of staffing changes on 

ADA service to customers and plans to continue this process.

Call centers Reduce ticketing costs by reducing 

staffing, increasing utilization of 

lower cost distribution channels, and 

outsourcing

• Amtrak plans to solicit vendors for proposal to outsource call center 

positions.

Overhead functions Reduce unit costs of corporate 

support functions through selective 

outsourcing, staffing reductions, 

skills development, and greater use 

of technology

• Amtrak has planned and implemented some savings through 

technology- and energy-management efficiencies.
Appendix IV

Current Amtrak Reform Efforts

Page 142 GAO-07-15 Intercity Passenger Rail

Service reliability Improve on-time performance of 

Acela and NEC trains through 

operational modifications and 

targeted investments

• Amtrak officials discussed on-time performance improvements to 

Acela trains with FRA for plan approval.

Labor contracts Reduce unit costs and increase 

flexibility by negotiating new labor 

agreements that eliminate certain 

work-rule and outsourcing 

restrictions, and base wages on 

market levels

• Amtrak has been advocating legislative changes to amend the 

railroad retirement-system to make Amtrak competitive with other 

operators, but as of August 2006 no legislative action has taken 

place.

Ongoing efficiencies Enhance financial performance of 

other activities and functions 

through continued business 

improvements (e.g., operating crew 

optimization, maintenance-of-way 

productivity)

• Amtrak has focused on improving efficiencies in four areas to 

reduce cost— safety, engineering productivity, fuel conservation, 

and labor.

Business line

Long distance Improve performance of all routes 

by redefining sub-brands, 

restructuring services/routes, 

selected luxury outsourcing,

and corporate initiatives

• Amtrak completed an analysis of the overall performance of longdistance routes to identify poorly performing routes.

• Amtrak developed a plan to restructure the sleeper service offered 

on long-distance trains to reduce cost. This plan includes 

evaluating new sleeper products and reconfiguring the number of 

cars.

• Amtrak developed a plan to evaluate Amtrak’s entire route network, 

which will establish network goals, match structure to national 

trends, and provide network options. 

NEC operations Boost financial contribution through 

improved load factors, adjusted 

service patterns, re-launching subbrands, trip time investments, and 

corporate initiatives

• Short-, mid-, and long-term plans have been developed to improve 

Acela service to increase customer satisfaction, ridership, revenue, 

and market share. 

Corridors Improve competitiveness of state 

services, establish a pilot 

competition project, and

transition states to full cost recovery 

for all corridor routes

• Amtrak launched a state competition pilot project with support from 

FRA to promote competition. As of July 2006, four proposals have 

been evaluated for implementation.

• Amtrak developed a plan to transition states to full operating cost 

recovery, but the plan hinges on legislative changes to funding 

structure.

Fleet utilization Optimize use of fleet, maximize load 

factors, and increase revenues by 

making train configurations more 

efficient and retiring or redeploying 

excess equipment

• Amtrak is developing a multiyear fleet plan for fleet optimization.

(Continued From Previous Page)

Type of initiative and 

description Objective Status
Appendix IV

Current Amtrak Reform Efforts

Page 143 GAO-07-15 Intercity Passenger Rail

Source: GAO analysis of DOT OIG and Amtrak data.

a

The Simplified Dining program provides pre-plated meals that utilize less labor.

Infrastructure Develop a long-term capital master 

plan and operate NEC efficiently on 

behalf of all users, while 

establishing a fair sharing of 

operating and capital costs among 

all users

• Amtrak is developing a long-range plan to bring the corridor into a 

state of good repair over 20 years, which includes a long-term 

capital plan.

• Amtrak has met with stakeholders regarding an advisory 

committee for the NEC.

(Continued From Previous Page)

Type of initiative and 

description Objective Status
Page 144 GAO-07-15 Intercity Passenger Rail

Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues ApendxiV

Any effort to reform the United States’ intercity passenger rail system must 

recognize that there are access, capacity, liability, and workforce issues. 

For instance, Amtrak benefits from a number of statutory access rights that 

mask the potential capacity impacts of passenger rail service on freight 

traffic. In addition, the potential liability associated with operating 

passenger rail must be accounted for, as must statutory and contractual 

workforce requirements. Currently, the liability framework surrounding 

intercity passenger rail is complex, with statutory exceptions and 

negotiated indemnification agreements altering default negligence rules. 

Infrastructure Access and 

Capacity Issues

Amtrak’s statutory access and priority rights for intercity passenger 

service—and the subsequent impact on freight capacity—is a source of 

contention in the rail industry. Amtrak owns very little of the infrastructure 

that it uses, and, in fact, most of the 22,000 miles of rail lines that Amtrak 

uses are owned by four private, U.S.-based Class I freight companies—CSX, 

Union Pacific, BNSF, and Norfolk Southern. Amtrak has three statutory 

rights to privately owned rail infrastructure that no other operator has: (1) 

access to tracks and facilities of railroads and regional transportation 

authorities; (2) access charges at incremental cost; and (3) priority over 

freight trains.

No other passenger rail service receives the benefit of statutory rights. For 

instance, commuter rail agencies must negotiate with host railroads for 

infrastructure access.1

 Similarly, any private operator of intercity passenger 

rail in the United States would have to negotiate for access to host-railroad 

infrastructure without the benefit of these statutory rights. Because other 

operators do not have these statutory rights, one state official said that his 

state feels “stuck” with Amtrak. This state official said his state is 

frustrated because there is no real alternative to Amtrak as long as these 

rights belong solely to Amtrak. The freight railroad industry is adamantly 

opposed to permitting a transfer of Amtrak access and incremental charge 

rights to non-Amtrak operators, which was confirmed by officials from 

freight railroads with whom we spoke.

1

The statutory right to priority over freight trains does extend to commuter rail services 

operated by Amtrak.
Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues

Page 145 GAO-07-15 Intercity Passenger Rail

One state official told us that, without Amtrak’s access rights, passenger 

rail access fees are a “seller’s market”—that is, freight railroads can charge 

whatever they want. State officials with whom we spoke generally estimate 

that Amtrak’s per train-mile costs are approximately one quarter to one half 

of what the freight railroads would charge another operator. Similarly, an 

official from one freight railroad estimated that infrastructure access costs 

for an intercity passenger rail operator negotiating “at arm’s length” would 

be three to four times Amtrak’s current costs, and possibly as high as ten 

times as much as current rates. According to this official, even these rates 

would not capture the full impact of passenger trains on freight line 

capacity.

While Amtrak’s access costs cannot be directly compared with a competing 

intercity passenger rail operator, a comparison with commuter rail access 

costs is informative. According to information provided by Amtrak, on 

average, Amtrak paid $1.16 per train-mile for access to freight-owned 

infrastructure in fiscal year 2005.2

 In contrast, commuter rail agencies with 

whom we spoke that operate primarily on freight railroad infrastructure 

identified three types of access charges: per train-mile fees, fixed-access 

fees, and capital contributions.3

 All of these commuter agencies reported 

paying per train-mile access fees for each line, with a range from $3.38 to 

$40 per train-mile. These agencies reported paying either a one-time up 

front access fee or an annual access fee for most lines as well (see table 

10). In addition, all four commuter rail agencies with whom we spoke made 

capital contributions to freight infrastructure for each line, either to gain 

initial access to the freight infrastructure or to expand established 

commuter rail operations.4

 According to Amtrak, commuter rail trains—

which are concentrated in the morning and evening weekday peak periods 

and have long track occupancy due to frequent stops—require greater rail 

line capacity, and therefore, impose much higher costs on the track owner 

than a comparable number of intercity passenger rail trains that are spread 

throughout the day or week.

2

Amtrak provided this figure as a nationwide average. We were unable to determine how 

Amtrak’s infrastructure access charges varied by railroad or by line. The average does not 

include on-time performance incentives.

3

The commuter rail agencies we contacted were Altamont Commuter Express (California), 

Metrolink (California), Sound Transit (Washington), and Virginia Railway Express (Virginia–

Washington, D.C.).

4

In some instances, these capital contributions were made by state governments on behalf 

of the commuter rail agency.
Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues

Page 146 GAO-07-15 Intercity Passenger Rail

Table 10: Examples of Costs Paid by Commuter Rail Agencies to Gain Infrastructure 

Access 

Source: GAO analysis of commuter rail data.

a

Most commuter rail agencies we contacted paid a one-time up front fixed-access fee or an annual fee 

as part of their access agreement for each line on which they provided service.

b

All commuter rail agencies with whom we spoke made capital contributions, either to gain access to 

freight infrastructure or to add train frequencies.

According to several state officials, increases in intercity passenger rail 

service, particularly corridor services, could conflict with freight rail traffic 

for line capacity. For example, one state official stated that the rail lines 

between New York City and Albany, New York, are heavily used by freight 

railroads, commuter rail service, and Amtrak. Even today this line has 

congestion problems, leading to delays for both passenger and freight 

traffic. Desired improvements to address capacity restrictions will cost 

about $700 million in capital improvements. An official with another state, 

talking about the line between Washington, D.C., and Richmond, Virginia, 

said that—between freight, Amtrak, and commuter service—the amount of 

traffic on the corridor is increasing and delays are becoming more 

common. Further, capacity constraints are causing delays that cause 

dissatisfaction among riders.

Freight railroad officials have emphasized the growing challenge 

associated with infrastructure capacity issues. An official at one railroad 

said that, while freight traffic on his railroad had grown and decreased 

capacity, nothing in the Amtrak model had changed, which he described as 

increasing his railroad’s subsidy to Amtrak. An official of another railroad 

stated that under the current Amtrak model—with guaranteed access to 

track at incremental cost—freight railroads do not recover the lost value 

created when freight trains are delayed because of passenger train priority. 

He also stated that the current Amtrak model skews the incremental value 

of freight and passenger train slots on a line in such a way that freight 

Description

Range of cost reported by 

commuter rail agencies

Fixed-access feea

One-time, up front fee $4,000,000 to $23,700,000

Annual fee 80,000 to 1,800,000 

Capital contributionb

Annual capital contribution 400,000 to 3,000,000 

Up front fee (for additional train frequencies) 60,000 to 350,000,000 
Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues

Page 147 GAO-07-15 Intercity Passenger Rail

railroads cannot capture the difference in value between low value 

passenger train slots and higher value freight train slots. This official went 

on to say that, without new capacity, there would be ripple effects 

throughout the entire freight railroad industry as both freight and 

passenger railroads try to accommodate ever-increasing traffic on a fixedinfrastructure network. He also stated that for intercity passenger rail to be 

successful it must be attractive, efficient, and reliable. 

In addressing capacity issues associated with passenger rail reform it will 

be important to recognize balancing public and private investment with 

public and private benefits. An official with the Washington State 

Department of Transportation said his state is willing to pay for capital 

projects that benefit passenger rail, and that freight railroads should pay 

for projects, or parts of projects, that benefit their operations. This official 

said most states use the “but for” argument in determining public rail 

infrastructure investments—that is, would there be a need for investment 

but for the passenger rail service? Similarly, the state of Virginia works with 

host railroads to fund rail projects that increase both the freight and 

passenger rail capacity of privately owned rail infrastructure in the state to 

achieve public benefits. As we testified in June 2006, federal involvement 

with rail infrastructure should depend on identifying wide-ranging public 

benefits from potential projects and appropriately allocate the cost of 

financing these benefits between public and private sectors, and, to the 

extent possible, focus investments that yield national rather than just local 

benefits.5

Liability against Accident 

Risks

In addition to the access-to-infrastructure issues, there are also challenges 

associated with liability against accident and other train-related risks. If a 

passenger rail accident should occur, injured passengers may sue the 

transportation provider for their damages. As our January 2004 report on 

commuter rail noted, freight railroads have been traditionally sheltered 

from this exposure when they haul freight.6

 However, when a freight 

railroad allows a commuter rail service (or intercity passenger rail service) 

to operate over its rights-of-way, the freight railroad becomes exposed to 

these risks—as passengers may sue the commuter rail’s (or intercity 

5

GAO, Freight Railroads: Preliminary Observations on Rates, Competition, and Capacity 

Issues, GAO-06-898T (Washington, D.C.: June 21, 2006).

6

GAO-04-240, p. 17.
Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues

Page 148 GAO-07-15 Intercity Passenger Rail

passenger rail’s) provider and owner of the tracks. Consequently, freight 

railroads do not want to allow such service on their rights-of-way unless 

they are protected from liability. Freight railroads often use the “but for” 

argument for requiring passenger rail operators to assume all risks 

associated with their presence—that is, but for the presence of the service, 

the freight railroad would not be exposed to certain risks and therefore 

should be held harmless. Freight railroad officials have stated that they 

must take this position to protect their businesses and shareholders from 

lawsuits. As a result, passenger rail operators must contractually indemnify 

freight railroads against all liability and obtain insurance as a guarantee 

that payments will be made for any damages.

Amtrak currently has no fault liability agreements with most freight 

railroads to cover risks associated with its operations. Under these 

agreements, Amtrak indemnifies the host railroads against liability 

resulting from any damages that occur to Amtrak passengers, equipment, 

or employees regardless of fault if an Amtrak train is involved. Similarly, 

the host railroads indemnify Amtrak against any liability resulting from 

damages to host railroad employees and property regardless of fault.7

 At 

one time, Amtrak compensated the host railroads for the risk that they bear 

by paying a negotiated risk charge of 7.34 cents per train-mile to the host 

railroad. Amtrak has subsequently negotiated away this charge for all but 

one line. In contrast, commuter rail operators with whom we spoke 

manage liability with the freight railroads their own way. In the view of one 

commuter rail official, the host railroads charge his company more per 

train-mile for infrastructure access that Amtrak to compensate for the 

liability costs associated with commuter rail operations. Another 

commuter rail official stated that in addition to the per train-mile fees, his 

agency purchases an insurance policy that indemnifies the host railroads 

against all liability, including gross negligence and willful misconduct.

Both railroad and state officials with whom we spoke believe liability will 

be a major issue should competition for intercity passenger rail service be 

introduced. Officials from all 5 states cited concerns about liability issues, 

particularly the potential cost of liability coverage. An official from one 

state, Washington, told us that his state would not be able to pay for the 

liability coverage freight railroads would require if Amtrak ceased 

operating intercity passenger rail service and this service was taken over by 

7

According to Amtrak, these agreements typically contain no explicit exception for 

aggravated conduct (i.e., something exceeding ordinary negligence).
Appendix V

Operational Challenges Associated with 

Access, Capacity, and Liability Issues

Page 149 GAO-07-15 Intercity Passenger Rail

the state—the cost would be too prohibitive. An official from California 

also said that liability would be a significant issue associated with 

competition. Besides cost, this official said California is prohibited by law 

from providing full indemnification to third parties. Consequently, any nonAmtrak passenger rail operators would have to provide their own liability 

coverage that would indemnify not only the state, but also any freight 

railroads they operated over. Freight railroad operators also expressed 

concern about liability issues. An official from one freight railroad said his 

company would not “bet the company” on the liability risk that could exist 

with multiple passenger rail operators, and that his company would expect 

full indemnity against liability risks created by passenger rail operators. It 

would also be expected that this indemnity be backed up with sufficient 

insurance coverage similar to the arrangement this company currently has 

with Amtrak. Similar sentiments were expressed by another freight 

railroad official.

Recognizing the freight railroads’ exposure to liability when hosting 

passenger rail trains, Congress established liability provisions in the 

Amtrak Reform and Accountability Act of 1997. Specifically, the act limits 

the aggregate overall damages that may be awarded to all passengers for all 

claims (including punitive damages) from a particular rail accident to $200 

million. The act also permits Amtrak and other providers of rail 

transportation to enter into indemnification agreements allocating financial 

responsibility for passenger claims arising from accidents involving 

passenger rail. As we reported in January 2004, our review of this 

legislation concluded that the liability cap applies to commuter rail 

operations on the basis of the plain language of the statute and our review 

of pertinent legislative history. Our review of the statute and legislative 

history also indicates this cap would apply to non-Amtrak providers of 

intercity passenger rail service. However, our report goes on to note that 

there are limitations to the protections provided by the legislation, such as 

the fact that the legislation does not limit damages for claims brought by 

nonpassengers; in addition, the application of the liability cap has not been 

tested in federal court. As a result of these limitations many carriers are 

being “super cautious” in requiring high levels of insurance.
Page 150 GAO-07-15 Intercity Passenger Rail

Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform ApendxiVI

Efforts to reform or restructure intercity passenger rail require 

consideration of workforce issues that is, having enough people with the 

requisite knowledge and skills to provide the amount and type of service 

called for in a restructured system. This may not be as easy as it seems.

Amtrak employees currently provide a number of services that are integral 

to operation of intercity passenger rail. This includes train and engine 

crews that operate trains, on-board staff such as conductors and attendants 

that take tickets and arrange for sleeping accommodations, and 

maintenance staff that repair equipment and maintain the rights-of-way 

over which trains operate. In addition, Amtrak employees dispatch trains 

and maintain communication and signal systems, among other things. Over 

the last several years Amtrak has reduced its employment levels as it has 

tried to control costs (see fig. 17). In fiscal year 2005, 87 percent of 

Amtrak’s workforce was unionized (14 unions and two councils covering a 

variety of crafts and skills) and covered by collective bargaining 

agreements. These employees are referred to as agreement employees. The 

collective bargaining agreements specify not only wage and benefit rates 

but also specific duties (defined in work rules) that employees can 

perform. Between fiscal years 2001 and 2005 the number of unionized 

employees decreased from 22,163 to 16,687 (a 25 percent decrease).1

 There 

has also been an overall 7 percent decrease in non-union employees over 

this time period, with a slight increase in the number of non-union 

employees between fiscal years 2003 and 2005. While these decreases 

might have benefits in terms of cost reduction, they might also limit the 

pool of qualified people available to operate intercity passenger rail under a 

restructuring scenario.

1

Thirteen hundred of these employees (5 percent) were transferred to Massachusetts Bay 

Commuter Rail (MBCR) when Amtrak lost the contract for operating the Massachusetts Bay 

Transportation Authority (MBTA) service.
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 151 GAO-07-15 Intercity Passenger Rail

Figure 17: Changes in Amtrak’s Union and Nonunion Workforce, Fiscal Years 2001 

through 2005

Note: Amtrak labor-relations officials estimate that one-half to two-thirds of Amtrak’s total employment 

is dedicated to directly or indirectly supporting long-distance services.

There are several workforce issues that will likely present challenges in 

efforts to reform or restructure intercity passenger rail. These include:

• Availability of a qualified labor pool. Reform of intercity passenger rail 

that results in new services or operators will require that there be 

sufficient staff to provide service, conduct maintenance, and perform 

other duties related to running passenger railroads. In the short term, 

obtaining sufficient staff could be a challenge. As we reported in April 

2006, in the context of commuter railroad service, if Amtrak were to 

abruptly cease to provide service, some commuter railroad agencies 

might be able to replace Amtrak employees dedicated to their particular 

Number of employees

Fiscal year

0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005

Non-union

Union

Source: GAO analysis of Amtrak data.
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 152 GAO-07-15 Intercity Passenger Rail

commuter rail service with employees from another railroad.2 However, 

according to agency officials, a number of agencies would not be able to 

quickly replace current Amtrak employees because of workforce 

limitations, such as the availability of a qualified labor pool. In part, this 

is because of strains on the current workforce due to growth in the 

demand for freight rail transportation.3

 In addition, it was estimated that 

it could take months to train replacements if Amtrak train crews were 

unavailable. Over the short term it is feasible that a restructuring that 

resulted in new intercity passenger rail services could face a shortage of 

qualified employees if (1) Amtrak employees did not transfer to the new 

services or operators, (2) they retire or leave the railroad industry, or (3) 

there are insufficient applicants with necessarily skills to provide the 

employees needed.

• Workforce flexibility and productivity. Reform of intercity passenger 

rail resulting in new services or operators will also require consideration 

of workforce flexibility and the extent labor productivity can be 

increased. One key to providing cost-effective service is to have high 

levels of labor productivity. Collective bargaining agreements and their 

related work rules specify the work that employees are expected to do 

and the amount of compensation they will receive for performing this 

work. Although such agreements can and do include changes designed 

to increase employee productivity by increasing or broadening the types 

of tasks that employees can perform, such agreements can also affect 

productivity by limiting the amount or type of work that employees can 

perform. Foreign passenger rail reform efforts have included actions to 

increase workforce flexibility and productivity. For example, from 1993 

to 1998, as a result of revenue growth and an increased focus on cost 

control, VIA Rail entered into negotiations with rail labor in order to 

obtain more flexibility in its workforce.4

 Among other things, these 

negotiations resulted in a significant consolidation of jobs. According to 

VIA Rail, union members got enhanced pension benefits in return for 

reduced employment levels and increased job responsibility. The latter 

2

GAO, Commuter Rail: Commuter Rail Issues Should Be Considered in Debate over 

Amtrak, GAO-06-470 (Washington, D.C.: Apr. 21, 2006).

3

According to AAR, over the past 2 years Class I freight-railroad employment has risen after 

60 years of general decline. This was especially true for train and engine employees, where 

increases went from about 61,100 employees in December 2003 to about 69,700 employees 

in December 2005. Total Class I employment increased 8 percent over this same period.

4

VIA Rail is the intercity passenger rail provider in Canada.
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 153 GAO-07-15 Intercity Passenger Rail

included consolidating a number of on-board service and conductor 

positions into one customer-service manager who has the flexibility to 

interchange positions for on-board service staff and is responsible for 

everything that goes on inside a train. 

• Potential labor protection payments. If, as the result of reforming 

intercity passenger rail, Amtrak employees lose their jobs, there could 

be liability for labor protection payments. In general, labor protection 

payments are made to employees who lose their jobs as a result of a 

discontinuation of service. The Amtrak Reform and Accountability Act 

of 1997 made a number of changes to labor protection, including 

eliminating existing rights to such protection—again subjecting labor 

protection to collective bargaining, and requiring Amtrak to negotiate 

new labor protection arrangements with its employees. As we have 

previously reported, after Amtrak and its employees could not reach 

agreement, an October 1999 arbitration decision (1) capped labor 

protection payments at a 5-year maximum (rather than 6 years under the 

statutory arrangement), (2) made employees with less than 2 years of 

service ineligible for payments, and (3) based payments on a sliding 

scale that provided less payout for each year worked than did the 

previous system.5

 Even with these changes, in September 2002, we 

reported that Amtrak would have had unsecured labor protection claims 

of about $3.2 billion had Amtrak been liquidated on December 31, 2001.6

 

Although a reform of intercity passenger rail may or may not involve a 

liquidation of Amtrak, it is clear that should Amtrak employees lose 

their jobs as the result of a discontinuation of service there could be 

substantial financial obligations as a result. To the extent that Amtrak 

employees can and do accept jobs elsewhere (whether in the railroad 

industry or not) this obligation could be reduced. In general, should this 

be the case, then labor protection payments would be limited to the 

differences, if any, between what the employees were previously making 

at Amtrak and their wages at the new jobs.

Amtrak labor-relations officials state that a significant barrier to any 

attempts to reform—or to negotiating their collective bargaining 

agreements even in the absence of broader corporate restructuring—is the 

5

GAO-02-871, p. 17.

6

GAO, Intercity Passenger Rail: Potential Financial Issues in the Event That Amtrak 

Undergoes Liquidation, GAO-02-871 (Washington, D.C.: Sept. 20, 2002).
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 154 GAO-07-15 Intercity Passenger Rail

lack of flexibility in the current labor agreements. First, the provision of the 

Amtrak Reform and Accountability Act of 1997 that altered rail labor 

protection—eliminating the statutory labor protection provision and 

allowing Amtrak and the affected labor unions to negotiate contractual 

labor protection arrangements in their place—did not give Amtrak as much 

flexibility as it had hoped. Although significant changes resulted from 

negotiations about new labor protection arrangements (such as limiting the 

maximum number of years’ wages that could be received in the event of job 

loss to 5 years instead of 6), Amtrak is still bound by expensive labor 

protection obligations if jobs are lost because of route cancellations or 

service reductions.7

 Amtrak officials referred to rail labor protection as the 

“last of the last” of the old type of unemployment benefits. As such, labor 

protection continues to be a stumbling block in Amtrak’s internal 

restructuring efforts, as well as collective bargaining. In addition, Amtrak 

officials stated that Amtrak would like additional flexibility in the work 

rules that define the tasks that employees can perform to improve 

productivity. The current work rules allow most employees to perform 

tasks outside their enumerated work duties only 2 hours per day. 

According to Amtrak labor relations officials, current work rules allow 

Acela employees 4 hours of flexibility per day. Amtrak would like to extend 

this to all labor contracts. Amtrak officials stated that Amtrak wants the 

increase to 4 hours of flexibility to gain desired improvements in efficiency 

of operations. Without the work rule change, these improvements will be 

difficult to achieve.

Workforce challenges also include determining how a potentially reformed 

intercity passenger rail system fits into the current scheme of railroadspecific labor-management, retirement, and injury compensation systems. 

Amtrak is currently subject to, among other things, the Railway Labor Act, 

the Railroad Retirement Tax Act, and the Federal Employers’ Liability Act, 

which govern labor-management relations, retirement, and injury 

compensation, respectively, in the railroad industry. Amtrak’s collective 

bargaining agreements generally do not expire and are subject to 

requirements designed to reduce labor strikes; Amtrak participates in, and 

provides financial contributions to, the railroad retirement-system8

7

Only service reductions to less than three trains per week will trigger labor protection.

8

The railroad retirement-system is administered by a federal agency, the Railroad 

Retirement Board, and includes both passenger and freight railroads. Amtrak participates in 

the railroad retirement-system, under which each participating railroad pays a portion of the 

total railroad retirement benefit costs for industry employees.
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 155 GAO-07-15 Intercity Passenger Rail

(approximately $400 million annually); and Amtrak and its employees are 

subject to a tort-based injury compensation system under the Federal 

Employers’ Liability Act.9

 We have reported that these legal requirements 

raise railroad costs compared to nonrailroad industries. Amtrak’s April 

2005 Strategic Reform Initiatives also suggested that meaningful reform of 

intercity passenger rail will require changing how these apply to passenger 

rail. On the other hand, rail labor has argued for the importance of these 

laws in protecting employee rights, ensuring a sustainable retirement 

system, and adequately compensating employees injured on the job.

State officials we interviewed expressed more general concern about the 

potential impact of Amtrak’s labor agreements and obligations on the 

future of passenger rail. Some state officials viewed Amtrak’s labor 

agreements as a significant barrier to reform. One official stated that 

serious labor reform is needed for intercity passenger rail reform to 

succeed. Some state officials with whom we spoke also questioned 

whether alternative operators would be bound by Amtrak’s labor 

agreements and thought that it was unlikely another operator could 

provide significant improvements in cost savings or quality of service if 

they were. Another official stated that Amtrak’s labor agreements would 

put Amtrak at a considerable disadvantage over alternative operators in a 

competitive market if the alternative operators were not bound by the same 

agreements.

Rail labor union officials with whom we spoke expressed several concerns 

about the effects any potential reform of intercity passenger rail might have 

on their members. Foremost, union officials expressed concern about the 

history of Amtrak’s successive “reforms” and the detrimental effects on 

labor–management relations and employee morale. In their view, past 

Amtrak reforms have brought fewer union jobs and the loss of health and 

safety programs with no improvement in Amtrak’s service to the public, 

while it continues to flounder with funding uncertainty. A union official 

stated that the first step should be getting Amtrak to operate like other forprofit businesses, including the freight railroads. The emphasis should be 

on applying basic business principles, including transparent accounting, 

and repairing its relationship with the unions and improving national 

railroad passenger service—rather than on reducing the federal subsidy. 

9

Under a tort-based compensation system like the Federal Employers’ Liability Act, 

employees must show negligence of the employer, its employees, or agents, in order to 

receive compensation for employment-related injuries.
Appendix VI

Workforce Issues Associated with Intercity 

Passenger Rail Reform

Page 156 GAO-07-15 Intercity Passenger Rail

This should be addressed before moving on to something other than the 

current system and route structure. In addition, union officials emphasized 

that some union members are highly skilled and highly specialized and 

cannot be easily replaced. Any restructuring of intercity passenger rail 

would still require any operator—Amtrak, alternative operators, or a 

successor to Amtrak—to work through the unions to maintain a labor force 

or to train additional workers. Total compensation for employees moving 

forward is another concern; however, union officials told us, where 

alternative operators have succeeded Amtrak in operating commuter 

railroads, unionized employees have been offered more compensation than 

they received from Amtrak with no accompanying change in work rules.
Page 157 GAO-07-15 Intercity Passenger Rail

Appendix VII

Financial Reporting, Internal Control, and 

Governance Requirements and Practices for 

Federal Entities and Public Companies ApendxiVI

Current Accountability 

Requirements and 

Practices

The Amtrak Reform and Accountability Act of 19971 removed Amtrak from 

the list of government corporations subject to the Government Corporation 

Control Act of 1945.2

 The 1997 act, however, did not change Amtrak’s 

status as a private, for-profit corporation established to provide intercity 

and commuter rail passenger transportation in the United States and is 

neither an agency nor an instrumentality of the U.S. government, nor an 

issuer of securities to the public. Consequently, Amtrak is not subject to the 

basic accountability requirements of either federal entities or public 

companies, but has been subject to specific reporting requirements 

contained in its grant and loan agreements and Amtrak-specific statutory 

provisions in Title 49 of the U.S. Code. Following are the basic 

accountability requirements that encompass financial reporting, internal 

controls, and governance at these organizations.

Federal Entities

Financial Reporting The Chief Financial Officers Act of 1990 (CFO Act), as amended by the 

Government Management Reform Act of 1994 (GMRA), requires the major 

24 agencies3

 of the federal government to submit annual audited financial 

1

Pub. L. No. 105-134, § 415, 111 Stat. 2570, 2590 (1997).

2

Codified at 31 U.S.C. §§ 9101-9110.

3

The current 24 CFO Act Agencies are: the Department of Agriculture, the Department of 

Commerce, the Department of Defense, the Department of Education, the Department of 

Energy, the Department of Health and Human Services, the Department of Homeland 

Security, the Department of Housing and Urban Development, the Department of the 

Interior, the Department of Justice, the Department of Labor, the Department of State, the 

Department of Transportation, the Department of the Treasury, the Department of Veterans 

Affairs, the Environmental Protection Agency, the National Aeronautics and Space 

Administration, the Agency for International Development, the General Services 

Administration, the National Science Foundation, the Nuclear Regulatory Commission, the 

Office of Personnel Management, the Small Business Administration and the Social Security 

Administration. 31 U.S.C. § 901(b).
Appendix VII

Financial Reporting, Internal Control, and 

Governance Requirements and Practices for 

Federal Entities and Public Companies

Page 158 GAO-07-15 Intercity Passenger Rail

statements to the Office of Management and Budget (OMB). 4 The 

Accountability of Tax Dollars Act of 2002 (ATDA) expanded this 

requirement5

 to include most other executive agencies.6 Federal 

government corporations had been subject to financial reporting 

requirements for many years under the Government Corporation Control 

Act.7

 Quarterly, the executive agencies required to submit annual financial 

statements under the CFO Act, GMRA, and ATDA (31 U.S.C. § 3515) are 

required by OMB to submit unaudited financial information to OMB. 8

 

These interim unaudited financial statements, required on a quarterly basis, 

may be submitted without footnotes and limited to a balance sheet, 

statement of net cost, and statement of budgetary resources. Management 

discussion and analysis and supplementary information are not required 

for quarterly reporting. Chapter 91 of Title 31 of the U.S. Code, commonly 

known as the Government Corporations Control Act, requires government 

corporations to submit annual management reports to Congress (with 

copies to the President, OMB, and us) no later than 180 days after the end 

of the government corporation’s fiscal year. OMB has accelerated the 

submission deadline to no later than 45 days after the end of the 

government corporation’s fiscal year.9

 Annual management reports are 

therefore required to include the following:

4

The Reports Consolidation Act of 2000, Pub. L. No. 106-531, § 4(a), 114 Stat. 2537, 2539 

(Nov. 22, 2000), added a requirement that the audited financial statements shall also be 

submitted to Congress.

5

The requirement for submitting annual audited financial statements to OMB and Congress 

under the CFO Act, GRMA, and ATDA has been codified, as amended, at 31 U.S.C. § 3515. 

6

OMB specifically identified 76 agencies to which the ATDA expanded the annual financial 

reporting requirement in Appendix A of M-04-22, a July 2004 memorandum titled 

“Amendments to OMB Bulletin No. 01-02, Audit Requirements for Federal Financial 

Statements.” This bulletin and related memoranda have been superseded by OMB Bulletin 

No. 06-03, Audit Requirements for Federal Financial Statements (Aug. 23, 2006), which in 

Appendix C identifies 75 entities to which the ATDA expanded the annual financial 

reporting requirement.

7

Requirements for annual management reports for government corporations have been 

codified, as amended, at 31 U.S.C. § 9106.

8

OMB Circular No. A-136, Financial Reporting Requirements, Part IV (rev. July 24, 2006).

9

OMB Circular No. A-136, Financial Reporting Requirements, Part I.5 (rev. July 24, 2006).
Appendix VII

Financial Reporting, Internal Control, and 

Governance Requirements and Practices for 

Federal Entities and Public Companies

Page 159 GAO-07-15 Intercity Passenger Rail

• a statement of financial position; 

• a statement of operations;

• a statement of cash flows; 

• reconciliation to the budget report of the corporation, if applicable; 

• a statement of internal accounting and administrative control systems 

by the head of corporation management, consistent with the 

requirements under amendments to the act made by 31 U.S.C. § 3512 (c), 

(d), commonly referred to as the Federal Managers’ Financial Integrity 

Act of 1982 (FMFIA); 

• a financial statement audit report; and 

• any other information necessary to inform Congress about the 

operations and financial condition of the corporation.10

Government corporations are not required by OMB to submit quarterly 

information. The federal government does not have a certification for 

government corporations or federal agencies comparable to section 302 of 

the Sarbanes–Oxley Act of 2002,11 which requires the chief executive 

officers (CEO) and chief financial officers (CFO) of public companies to 

certify their company’s financial statements.

Under OMB Circular No. A-136, Financial Reporting Requirements (rev. 

July 24, 2006), annual performance and accountability reports (PAR) issued 

by federal government agencies consist of the Annual Performance Report 

required by the Government Performance and Results Act of 1993 (GPRA)12 

with audited financial statements and other disclosures, such as agencies’ 

(1) assurances on internal control, (2) accountability reports by agency 

heads, and (3) Inspectors General’s assessments of the agencies’ most 

1031 U.S.C. § 9106(a)(2).

11Pub. L. No. 107-204, 116 Stat. 745 (July 30, 2002)(codified at 15 U.S.C. §§ 7201 – 7266). 

1231 U.S.C. § 3516. 
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serious management and performance challenges.13 OMB Circular No. A136 states that PARs are intended to provide financial and performance 

information to enable the President, Congress, and the public to assess the 

performance of an agency relative to its mission and to demonstrate the 

agency’s accountability. The PAR’s management’s discussion and analysis 

(MD&A) section, which serves as a brief overview of the entire PAR,14

should include the most important matters that could lead to significant 

actions or proposals by top management of the reporting unit; are 

significant to the managing, budgeting, and oversight functions of Congress 

and the administration; or could significantly affect the judgment of 

citizens about the efficiency and effectiveness of their federal government. 

OMB Circular No. A-136 also requires federal entities in their MD&A to 

include information to help users understand the entity’s financial results, 

position, and condition as conveyed in the principal financial statements. 

The MD&A also includes comparisons of the current year to the prior year 

and should provide an analysis of the agency’s overall financial position 

and results of operations to assist users in assessing whether that financial 

position has improved or deteriorated as a result of the year’s activities. 

The MD&A should also include a discussion of key financial measures that 

emphasize financial trends and assess financial operations.

Internal Control According to OMB, the passage of the Sarbanes–Oxley Act of 2002 served 

as an impetus for the federal government to reevaluate its current policies 

related to internal control over financial reporting and management’s 

related responsibilities. 15 While section 404 of the Sarbanes–Oxley Act 

created a new requirement for managers of publicly traded companies to 

report on the internal controls over financial reporting, federal managers 

13The Reports Consolidation Act of 2000 (Pub. L. No. 106-531, 114 Stat. 2537 (Nov. 22, 

2000)(codified at 31 U.S.C. § 3516)) permits agencies to submit combined reports in 

implementing statutory requirements for financial and performance management reporting 

to improve the efficiency of executive branch performance. These reports are combined in 

the PAR. In its guidance on financial reporting in OMB Circular No. A-136, OMB converted 

the PAR option to a mandatory requirement.

14Federal entities required to prepare audited financial statements following the guidance in 

OMB Circular No. A-136 are defined in the CFO Act, GMRA, ATDA and the Government 

Corporation Control Act, except any corporation that is required to register a class of its 

equity securities with the SEC. OMB Circular No. A-136, at ¶ I.3.

15OMB Circular No. A-123, Management’s Responsibility for Internal Control, at App. A, 

Part I (rev. Dec. 21, 2004).
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have been subject to similar internal-control reporting requirements for 

many years. 

Federal agencies are subject to many legislative and regulatory 

requirements that promote and support effective internal control:

• 31 U.S.C. § 3512(c), (d), commonly referred to as FMFIA, provides the 

statutory basis for management’s responsibility for, and assessment of, 

internal control. OMB Circular No. A-123, Management’s Responsibility 

for Internal Control (rev. Dec. 21, 2004), sets out the guidance for 

implementing the statute’s provisions.

• The CFO Act of 1990 requires agency CFOs to maintain an integrated 

accounting and financial management system that includes financial 

reporting and internal controls. 31 U.S.C. § 902(a)(3).

• The Federal Financial Management Improvement Act (FFMIA) of 1996,16

as implemented by OMB Circular No. A-127, Financial Management 

Systems (rev. Dec. 1, 2004), requires the 24 CFO Act agencies to 

implement and maintain integrated financial management systems that 

comply substantially with federal financial management system 

requirements, applicable federal accounting standards, and the U.S. 

Standard Government Ledger at the transaction level. 

• The Inspector General Act of 1978, as amended, requires Inspectors 

General to submit semiannual reports to Congress on significant abuses 

and deficiencies identified during agency reviews, and recommended 

actions to correct those deficiencies. 5 U.S.C. Appx. § 5.

• Government Auditing Standards, GAO-03-673G (rev. June 2003)

(commonly referred to as the “Yellow Book”), and OMB Bulletin No. 06-

03, Audit Requirements for Federal Financial Statements, (Aug. 23, 

2006), require auditors to report on internal control as part of a federal 

agency financial-statement audit, including a description of reportable 

conditions and material weaknesses in internal control over financial 

reporting. 

16FFMIA, Pub. L. No. 104-208, div. A., § 101(f), tit.VIII, 110 Stat. 3009, 3009-389 (Sept. 30, 

1996)(reprinted in 31 U.S.C. § 3512 note).
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Recent federal governmentwide initiatives have contributed to 

improvements in financial management and placed greater emphasis on 

implementing and maintaining effective internal control over financial 

reporting. In December 2004, OMB issued a significant update to its 

Circular No. A-123, the implementing guidance for FMFIA. The update 

requires the 24 CFO Act agencies to include the FMFIA annual report in 

their PAR, under the heading “Management Assurances.” The FMFIA 

annual report must include a separate assurance on internal control over 

financial reporting, along with a report on identified material weaknesses 

and actions taken by management to correct those weaknesses. 

FMFIA and OMB Circular No. A-123 apply to each of the three objectives of 

internal control outlined in our Standards For Internal Control in the 

Federal Government: effective and efficient operations, reliable financial 

reporting, and compliance with applicable laws and regulations. OMB 

Circular No. A-123 calls for internal control standards to be applied 

consistently toward each of the objectives. The circular’s new Appendix A, 

which applies only to the 24 CFO Act agencies, requires management to 

document the process and methodology for applying A-123 standards when 

assessing internal control over financial reporting. Appendix A also 

requires management to use a separate materiality level when assessing 

internal control over financial reporting. The agency head’s annual 

assurance statement on the effectiveness of internal control over financial 

reporting required by Appendix A is a subset of the assurance statement 

required under FMFIA on the overall internal control of the agency.

Governance (Audit Committee) Audit committees are becoming increasingly important in federal entities 

and public companies as a mechanism to improve accountability and 

enhance oversight. Overall, in the federal government, audit committees 

are intended to protect the public interest by promoting and facilitating 

effective accountability and financial management, which is accomplished 

by providing management with independent, objective, and experienced 

advice and counsel.

In 2002, the Government Finance Officers Association (GFOA)—a 

professional association of state and local finance officers—recommended 

that every government entity establish an audit committee or its 
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equivalent.17 An audit committee can facilitate communication between 

management, the auditor, and the governing board, according to GFOA, 

and is also useful in focusing on and documenting the process for managing 

the organization’s financial statement audit. GFOA’s guidelines for 

establishing an audit committee include recommendations that (1) the 

audit committee should be formally established by charter, enabling 

resolution, or other appropriate legal means; (2) the members of the audit 

committee collectively should possess the expertise and experience in 

accounting, auditing, financial reporting, and finance needed to understand 

and resolve issues raised by the independent audit of the financial 

statements; and (3) a majority of the members of the audit committee 

should be selected from outside of management. GFOA also states that the 

audit committee’s primary responsibility should be to oversee the 

independent audit of the government’s financial statements, from the 

selection of the independent auditor to the resolution of audit findings. 

GFOA further recommends that the audit committee should present 

annually to the governing board and management a written report of how it 

has discharged its duties and met its responsibilities, and that the report be 

made public. 

Public Companies The corporate failures and fraud that resulted in substantial financial losses 

to institutional and individual investors at the turn of the 21st century led to 

renewed focus on accountability and governance in public companies18 and 

culminated in the enactment of the Sarbanes-Oxley Act of 2002, which 

enhanced the disclosure and internal control requirements imposed by the 

Securities Exchange Act of 1934 as amended (Exchange Act);19 the 

Sarbanes-Oxley Act also implemented new accounting reforms for public 

companies. The Sarbanes-Oxley Act contains provisions for the 

governance, auditing, and financial reporting of public companies, 

including provisions intended to deter corporate accounting fraud and 

corruption and to punish violators. The 2002 act generally applies to 

17GFOA, GFOA Recommended Practice: Establishment of Audit Committees (1997 and 

2002) (Oct. 25, 2002), available at http://www.gfoa.org/services/rp/caafr-establishmentaudit-committee.pdf.

18Committee on Financial Services, U.S. House of Representatives, Corporate and Auditing 

Accountability, Responsibility, and Transparency Act of 2002, to accompany H.R. 3763, 

H.R. Rep. No. 107-414, at 16-19 (Apr. 22, 2002).

19The Exchange Act, which created the SEC and gave it broad powers to regulate the 

securities markets, is codified, as amended, at 15 U.S.C. §§ 78a–78nn.
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companies required to file reports with the Securities and Exchange 

Commission (SEC) under the Securities and Exchange Act of 1934. 

Financial Reporting The Exchange Act, including SEC implementing regulations, requires 

publicly traded companies to make periodic filings with the SEC that 

disclose their financial status and changes in financial condition, including 

annual and quarterly financial reports. Annually, public companies file 

reports containing audited financial statements prepared in conformity 

with generally accepted accounting principles (GAAP) and audited by 

registered accounting firms. Quarterly reports, which may be unaudited, 

contain financial statements and the MD&A. In addition to the company’s 

financial statements, annual filings contain information including (1) 

selected financial data, (2) supplementary financial information, and (3) 

the MD&A of the company’s financial condition and results of operations. 

The objective of the MD&A is to enable the reader to assess material 

changes in financial condition and the results of operations of the 

company. The MD&A is not audited; however, the auditor is required to 

consider whether the information is materially consistent with information 

appearing in the financial statements. The SEC reviews a selection of 

annual and quarterly filings for compliance with accounting and disclosure 

requirements. Generally, the MD&A is required to contain a discussion of 

material changes in liquidity, capital resources, off-balance sheet 

arrangements, aggregate contractual obligations, and results of operations; 

known material trends, events, and uncertainties that could render 

historical financial information non-indicative of future operations or 

financial condition; the cause of material changes in line items of the 

interim financial statements from prior-period amounts; and any other 

information necessary for an understanding of the company’s financial 

condition, changes in financial condition, and results of operations.20

Since the enactment in 2002 of the Sarbanes-Oxley Act, public companies 

have been required by section 404 to file annual reports with the SEC that 

include (1) management’s assessment of the effectiveness of internal 

controls over financial reporting, and (2) the auditor’s attestation and 

report on management’s assessment. 21 Public companies are also required 

2017 C.F.R. § 229.303.

21The term “internal control over financial reporting” refers to the process designed by the 

issuer to provide reasonable assurance regarding the reliability of financial reporting and 

the preparation of financial statements for external purposes in accordance with GAAP. 17 

C.F.R. § 240.13a-15(f) (2006).
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to disclose in both quarterly and annual reports filed with the SEC any 

changes in their internal control over financial reporting that occurred 

during the last fiscal quarter that has materially affected, or is reasonably 

likely to affect, the company’s internal control over financial reporting. In 

addition, most companies are required to evaluate the effectiveness, as of 

the end of each fiscal quarter, of its disclosure controls and procedures and 

disclose in its quarterly report filed with the SEC the conclusions of the 

company's CEO and CFO regarding the effectiveness of such procedures.22

Under SEC rules adopted pursuant to section 302 of the Sarbanes–Oxley 

Act, each annual and quarterly report a public company files with the SEC 

must include, as an exhibit, the certification signed by the company’s CEO 

and CFO stating in pertinent part that they each have reviewed the report 

being filed and that, based on their knowledge, it does not contain untrue 

statements or omissions of a material fact resulting in a misleading report 

and that, based on their knowledge, the financial information in the report 

is fairly presented.23 The act includes criminal penalties for certifying the 

financial statements while knowing that the financial statements do not 

fairly present the financial condition and results of the public company.24 

The certification requirement motivated corporate executives and 

managers to increase their scrutiny of the company financial statements 

and, in many cases, put specific accountability mechanisms in place in their 

companies to help assure reliable financial statements. 

The SEC’s Division of Corporate Finance reviews public company filings 

periodically to determine whether publicly held companies are meeting 

their disclosure requirements and whether improvements are needed in the 

quality of the disclosures. To meet the SEC's requirements for disclosure, a 

company issuing securities must make available all information, whether it 

22The term “disclosure controls and procedures” refers to the controls and other procedures 

of the company that are designed to ensure that information required to be disclosed in 

reports filed under the Exchange Act is recorded, processed, summarized and reported 

within the time periods specified in the SEC’s rules and forms. See 17 C.F.R. § 240.13a-15(e) 

(2006). Internal control over financial reporting is distinct, but not mutually exclusive from 

disclosure control and procedures, as some internal accounting controls may be subsumed 

in the company’s disclosure controls and vice versa.

23SEC rules prescribe the specific form and content of the required certifications. 17 C.F.R. 

§§ 228.601(31), 229.601(31) (2006). 

24This provision of the Sarbanes Oxley–Act was included in Title IX, which the act states 

may be cited as the White-Collar Crime Penalty Enhancement Act of 2002, Pub. L. No. 107-

204, § 906(a), 116 Stat. 804, 806 (July 30, 2002)(codified at 18 U.S.C. § 1350(a)).
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is positive or negative, that might be relevant to an investor's decision to 

buy, sell, or hold securities in the company. 

Internal Controls Internal control serves as a first line of defense in safeguarding assets, 

preventing and detecting errors and fraud, and in providing assurance over 

the reliability of financial reporting. Internal control is defined as a process 

that is effected by an entity’s board of directors, management, and other 

personnel, and is designed to provide reasonable assurance regarding the 

achievement of the following objectives: (1) effectiveness and efficiency of 

operations; (2) reliability of financial reporting; and (3) compliance with 

laws and regulations.25

Section 404 of the Sarbanes–Oxley Act establishes requirements on internal 

control for companies and auditors. It requires companies to publicly 

report on (1) management’s responsibility for establishing and maintaining 

an adequate internal control structure, including controls over financial 

reporting and (2) the results of management’s assessment of the 

effectiveness of internal control over financial reporting. Section 404 

requires accounting firms that serve as external auditors for public 

companies to (1) attest to the assessment made by the companies’ 

management and (2) report on the results of their attestation and whether 

they agree with management’s assessment of the company’s internal 

control over financial reporting.

Internal control over financial reporting is further defined in SEC 

regulations implementing Section 404.26 These regulations define internal 

control over financial reporting as a process providing reasonable 

assurance regarding the preparation of financial statements and the 

reliability of financial reporting, including policies and procedures that do 

the following: 

• pertain to the maintenance of records that accurately and fairly reflect 

the transactions and dispositions of company assets;

25GAO, Sarbanes-Oxley Act: Consideration of Principles Needed in Addressing 

Implementation for Smaller Public Companies, GAO-06-361 (Washington, D.C.: April 

2006).

2617 C.F.R. § 240.13a-15(f)(2006).
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• provide reasonable assurance that transactions are recorded as 

necessary to permit preparation of financial statements in conformity 

with GAAP, and that receipts and expenditures of the company are being 

made only in accordance with authorizations of management and 

directors of the company; and 

• provide reasonable assurance regarding prevention or timely detection 

of unauthorized acquisition, use, or disposition of company assets.

Governance (Audit Committees) Independent audit committees have become, within public companies, an 

integral part of governance and oversight over financial reporting, internal 

control, and the audit process. The 1987 Treadway Commission’s Report on 

Fraudulent Financial Reporting recognized as a key practice in reducing 

fraudulent financial reporting the establishment by the company’s board of 

directors of “an informed, vigilant, and effective” audit committee to 

oversee the financial reporting process. In 1998, the New York Stock 

Exchange (NYSE) and the National Association of Securities Dealers 

(NASD) formed the Blue Ribbon Committee on Improving the 

Effectiveness of Corporate Audit Committees. The committee released a 

10-point plan in 1999 toward improving audit committee effectiveness. 

NYSE-, Amex-, and NASD-listing standards—which were the primary 

guidance for audit committees of public companies—were changed to 

reflect the recommendations of the Blue Ribbon Committee. Although this 

guidance, as well as recommendations of the Treadway Commission, 

existed prior to enactment of the Sarbanes–Oxley Act of 2002, the act 

provided a statutory basis—primarily in sections 202, 204, 301, and 407—

for the composition and responsibilities of public-company audit 

committees in provisions similar to the Treadway Commission and the 

Blue Ribbon Committee recommendations.

Section 301 of the Sarbanes–Oxley Act of 2002 requires that audit 

committee members be selected from the company’s board of directors and 

that they be independent (i.e., unaffiliated with the company and receiving 

no consulting fee, advisory fee, or other compensatory fee from the 

company). The audit committee is responsible for the appointment, 

compensation, and oversight of the auditor, oversight of company 

management regarding financial reporting, and the resolution of 

disagreements between management and the auditor. Finally, Section 301 

provides that the audit committee should have the authority and funding to 

engage advisors when necessary; ensure that processes are in place for the 

receipt, retention, and treatment of any complaints from “whistle-blowers” 

about accounting, internal controls, or auditing issues; and maintain open 
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channels for employees to use in communicating knowledge of 

malfeasance or errors to the audit committee without fear of management 

retaliation.

Section 202 of the act requires the audit committee to preapprove all audit 

and nonaudit services by an auditor to guard against potential conflicts that 

could occur if services such as bookkeeping and information-system design 

and implementation are provided by the company’s auditor.

Section 204 of the act requires that the auditor report to the audit 

committee all critical accounting policies followed in the course of an 

audit, all alternative accounting treatments within GAAP related to 

material items discussed with company management, and other material 

written communications between the auditor and company management. 

Finally, Section 407 of the act and implementing SEC regulations requires 

public companies to disclose whether the audit committee has at least one 

financial expert,27 the expert’s name, and the expert’s independence from 

management. If the company does not have a financial expert on the audit 

committee, it is required to explain why. 

Amtrak

Financial Reporting Until 1997, Amtrak was classified as a mixed-ownership government 

corporation under the Government Corporation Control Act. Government 

Corporation Control Act was intended to make government corporations 

accountable to Congress for their operations while allowing them the 

flexibility and autonomy needed for their commercial activities. Generally, 

a mixed-ownership corporation can be defined as a corporation with both 

government and private equity. In the case of Amtrak, the federal 

government held its preferred stock, and there were private entities that 

held common stock (three railroads and a holding company). The Amtrak 

27Consistent with the criteria set out in section 407(b) of the Sarbanes–Oxley Act, the SEC 

issued regulations defining a financial expert as a person who has, through education and 

experience as a public accountant, auditor, or other principal financial officer, an 

understanding of GAAP and financial statements, experience in the preparation or auditing 

of financial statements, and the application of such principles in connection with the 

accounting for estimates, accruals, and reserves. The financial expert should also have 

experience with internal accounting controls and an understanding of audit committee 

functions. 17 C.F.R. § 229.407. 
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Reform and Accountability Act of 1997 changed Amtrak’s status as a mixedownership government corporation by removing Amtrak from the list of 

mixed-ownership government corporations in the context of making 

Amtrak operationally self-sufficient by 2002. As we noted in our October 

2005 report, today Amtrak is most similar to a “government-established 

private corporation.” 28

Consistent with Amtrak-specific statutory provisions in Title 49 of the U.S. 

Code,29 Amtrak’s management and Board of Directors annually shall submit 

the financial statements to Congress with its operations reports. The 

annual financial report prepared and issued by Amtrak includes the audited 

financial statements and accompanying notes. However, the report does 

not include an MD&A section. Amtrak’s annual financial statements are 

required to be submitted to Congress, but are not submitted to, or formally 

reviewed by, OMB or any regulatory agency. However, Amtrak is required 

in its grant and loan agreement to produce a variety of daily, monthly, and 

annual reports that are submitted to its board, Congress, and FRA. The 

monthly performance report is an extensive report averaging 80 to 90 pages 

that contains financial results, route performance, workforce statistics, and 

performance indicators; it is also posted to Amtrak’s Web site. 

Internal Control As a government-established private corporation, Amtrak is not subject to 

the internal control requirements that govern either federal entities or 

publicly traded companies, and thus its annual report does not include a 

management report on internal control. An annual audit is performed using 

Government Auditing Standards; therefore, Amtrak’s management and 

Board of Directors receive a report on internal controls and compliance 

with laws, regulations, contracts, and grant agreements. However, the 

internal control report is not included in Amtrak’s annual report.30 In our 

October 2005 report, we noted that DOT officials told us that they receive 

the internal control and compliance report. We also stated in our October 

2005 report that Amtrak officials were not able to provide us with a 

distribution list and they had no recollection of the report being requested 

by, or sent to, any external party.

28GAO-06-145.

2949 U.S.C. § 24315.

30The scope of the reports does not constitute an auditor’s opinion on internal control, but 

rather, contains any significant deficiencies or noncompliance noted during the audit.
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Governance (Audit Committee) In its original authorizing legislation in 1970, Amtrak’s Board of Directors 

was authorized for 15 members, but there have never been more than 13 

members serving. The current limit of 7 members was a reduction from 9 

made by the Amtrak Reform and Accountability Act of 1997. The members 

are appointed by the President with the advice and consent of the Senate. 31 

The board has operated with less than a full complement of 7 voting 

members since July 2003. Between October 2003 and June 2004, the board 

had only 2 voting members (excluding the Secretary of Transportation or 

his designee). As of September 2006, the board had 5 members (excluding 

the Secretary of Transportation or his designee and the President of 

Amtrak); however, the term of 2 members is expiring in January 2007, so 

the board will be back to 3 members. Amtrak’s bylaws also authorize the 

establishment of committees to assist the board in carrying out its 

management responsibilities. In March 2002, the board eliminated ad hoc 

committees, along with the Corporate Strategy Committee and the Safety, 

Service, and Quality Committee. At that time, committees were established 

for audits, corporate affairs, finance, compensation and personnel, and 

legal affairs. Amtrak’s bylaws permit it to conduct periodic meetings 

between the Board of Directors and the shareholders, as necessary. 

Following enactment of the Amtrak Improvement Act of 1981, which 

abolished the election of any members of the Board of Directors by the 

common or preferred shareholders,32 Amtrak has not held a shareholders’ 

meeting.

Currently the board is using the former audit committee charter in carrying 

out its responsibilities for the oversight of its accounting and financial 

reporting processes and the audits of Amtrak’s financial statements by an 

independent auditor. Since the Board of Directors includes the President 

and CEO, the audit committee would not be considered “independent” 

under the requirements and practices for public companies, as provided in 

section 301 of the Sarbanes–Oxley Act of 2002. 

In commenting on a draft of our October 2005 report, both DOT and 

Amtrak officials told us that, given the limited number of board members, 

Amtrak’s full board of directors had assumed the functions of the audit 

3149 U.S.C.§ 24302(a)(2)(A).

32Pub. L. No. 97-35, tit. XI, subtit. F, § 1174, 95 Stat. 687, 689 (Aug. 13, 1981). 
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committee.33 DOT officials said these functions included meeting with 

Amtrak’s auditor to discuss audit and internal control issues, and that some 

of these meetings were held without the presence of Amtrak management. 

Our analysis showed that the board performed some audit committee 

oversight functions. Currently, the board is using the audit committee 

charter in carrying out its responsibilities for the oversight of the 

corporation’s accounting and financial reporting processes and the audits 

of Amtrak’s financial statements by an independent auditor.

Opportunities for 

Improvement at 

Amtrak

Financial Reporting

MD&A Currently, Amtrak’s financial statements do not include an MD&A, an 

important part of financial statements that is required for federal entities 

and public companies. The MD&A provides users with information relevant 

to an assessment of the organization’s financial condition and the results of 

its operations as determined by an evaluation of the amounts and certainty 

of cash flows from operations and from outside sources. 34 For a hybrid 

organization such as Amtrak—a for-profit corporation that receives 

substantial federal subsidies35—an MD&A would seem especially important 

to understand the numbers presented in its financial statements, and for 

users of the financial statements to interpret material changes in financial 

condition and the results of operations. 

33GAO-06-145.

34For a general discussion of the purpose of the MD&A, see FASAB SFFAC (Statement of 

Federal Financial Accounting Concepts) No. 3, Management Discussion and Analysis 

(April 1999), available at http://www.fasab.gov/concepts.html

35See, e.g., Transportation, Treasury, Independent Agencies, and General Government 

Appropriations Act, 2005, Pub. L. No. 108-447, div. H, tit. I, 118 Stat. 2809, 3220 (Dec. 8, 2004); 

Department of Transportation Appropriations Act, 2006, Pub. L. No.109-115, div. A, tit. I, 119 

Stat. 2396, 2413 (Nov. 30, 2005).
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Quarterly Financial Statements Currently, Amtrak does issue a variety of reports, but does not issue 

quarterly financial statements that include footnotes. Public companies are 

required to file quarterly financial statements with footnotes and MD&A 

with the SEC. Under OMB Circular No. A-136, the executive agencies 

required to submit annual financial statements under the CFO Act, GMRA, 

and ATDA (whose requirements are now all codified at 31 U.S.C. § 3515) 

are also required to submit quarterly financial statements without 

footnotes to OMB. To issue quarterly financial statements, an organization 

must adopt a rigorous financial reporting process that, by its frequency, 

becomes more practiced and routine. Companies that are more successful 

at closing their accounting systems and issuing financial statements on a 

regular basis tend to have more automated systems and routine processes, 

which can minimize fraud and errors. We previously recommended that 

Amtrak should engage an independent public accountant to provide 

review-level attestation work on Amtrak’s quarterly financial statements in 

order to strengthen financial reporting procedures. Preparation of 

quarterly financial statements with footnotes is a basic financial reporting 

function that contributes to the overall effectiveness of financial reporting 

and the organization’s control environment.

Certification by CEO and CFO An important provision of the Sarbanes–Oxley Act, section 302, requires 

the CEO and CFO of public companies to certify that they have reviewed 

the company’s financial statements and that, based on their knowledge, the 

financial statements do not contain any untrue statements or omissions of 

material fact; also, they must certify that the financial statements are fairly 

presented. Amtrak’s executives are not required to so certify the 

organization’s financial statements. Amtrak’s CEO and CFO would need to 

implement additional internal processes and controls to allow them to 

make such a certification. Because Amtrak relies heavily on federal 

subsidies, such a certification process would be useful for those charged 

with making decisions about the level of financial subsidies that are being 

used.

Review of Financial Statements Currently, Amtrak is required to provide various financial and performance 

reports to FRA and/or DOT; however, Amtrak’s financial statements are not 

reviewed by OMB or any other regulatory agency. Requiring Amtrak’s 

financial statements to be filed with, and subject to review by, SEC or OMB 

(or both) could further strengthen accountability and assurance that 

Amtrak’s financial statements represent its true financial condition. If 

Congress were to require Amtrak to file annual reports and other periodic 

reports with the SEC, Amtrak would need to adhere to the SEC’s 

regulations and guidance, which require consistent disclosure of financial 
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Federal Entities and Public Companies

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and operations information. If Congress were to require Amtrak to submit 

its financial report to OMB, Amtrak would need to comply with appropriate 

OMB and federal financial reporting regulations and guidance, and respond 

to OMB’s inquiries about Amtrak’s reported financial information. 

Internal Control

Management’s Assessment and 

Report on Internal Controls

Currently, Amtrak does not have requirements for management to evaluate 

and report on internal control effectiveness. A management evaluation of 

the effectiveness of internal control and a management report on the 

results of the assessment holds management accountable for 

understanding the organization’s internal control, recognizing and 

correcting deficiencies, and maintaining effective internal controls. FMFIA 

and OMB Circular No. A-123 and section 404(a) of the Sarbanes–Oxley Act 

have requirements for management’s assessment of internal controls for 

federal agencies and public companies, respectively. 

Auditor’s Attestation An auditor’s opinion on the effectiveness of internal control provides an 

independent assessment of management’s assessment of its internal 

controls. Although not required for federal entities, we support internal 

control opinions as an important accountability mechanism. In addition, an 

independent auditor’s opinion on internal control was a key provision of 

the Sarbanes–Oxley Act. Under section 404(b), public companies are 

required to have an independent auditor attest to, and report on, 

management’s assessment of the effectiveness of internal control over 

financial reporting. 

Governance (Audit 

Committee)

Amtrak currently does not have an audit committee separate from its 

Board of Directors due to its current board size. A minimum of three audit 

committee members is required for NYSE-listed companies, and a 

minimum of three members was recommended by the Blue Ribbon 

Committee on Improving the Effectiveness of Corporate Audit 

Committees. Because Amtrak relies heavily on federal subsidies, an audit 

committee with duties and responsibilities that mirror those of publicly 

traded companies and meets regularly is important to oversight of Amtrak’s 

accountability for federal funds. 
Page 174 GAO-07-15 Intercity Passenger Rail

Appendix VIII

Comments from National Railroad Passenger 

Corporation ApendxiVI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 175 GAO-07-15 Intercity Passenger Rail

See comment 1.
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 176 GAO-07-15 Intercity Passenger Rail

See comment 2.

See comment 3.
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 177 GAO-07-15 Intercity Passenger Rail

See comment 4.
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 178 GAO-07-15 Intercity Passenger Rail

See comment 5.
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 179 GAO-07-15 Intercity Passenger Rail
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 180 GAO-07-15 Intercity Passenger Rail
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 181 GAO-07-15 Intercity Passenger Rail
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 182 GAO-07-15 Intercity Passenger Rail

The following are GAO’s comments on National Railroad Passenger 

Corporation’s letter dated October 23, 2006.

GAO Comments 1. Our report is not intended to imply that Amtrak’s mission is to generate 

profits rather than provide services that produce public benefits on a 

break-even basis. In fact, the first section of the report discusses the 

characteristics (both financial and non-financial) of the types of service 

provided by intercity passenger rail in the United States and the types 

of service that could increase the transportation benefits and public 

benefits of intercity passenger rail. Regarding operating losses, we 

recognize that Amtrak’s operating loss is projected to decrease in fiscal 

year 2006 and have changed the report to reflect that, instead of 

increasing, operating losses continue to remain high. Finally, we do not 

believe our report is inconsistent in how operating loss is portrayed. 

Non-cash items such as depreciation and interest expenses are 

legitimate expenses to the business and were reported based on 

Amtrak’s audited financial statements. The report also includes a figure 

excluding these items to illustrate their relative contribution over 

Amtrak’s reported cash losses. In our discussion of the financial 

performance of routes, we used the route financial data provided to us 

by Amtrak, which does not include non-cash items such as depreciation 

charges.

2. The trend in passenger rail revenue between fiscal years 2002 and 2005 

was stable. Based on data provided by Amtrak we included a footnote 

to recognize the projected increase in passenger rail revenue in fiscal 

year 2006. We have eliminated any reference to “promotional pricing” 

being the reason for revenue decreases. 

3. We recognize that a significant percentage of long distance passengers 

that are not traveling for work purposes may be traveling for family or 

personal/family business reasons. This is still a form of leisure travel 

and we have modified our definition of “leisure” to include travel for 

family or personal business reasons. Regarding long distance 

passengers traveling less than 500 miles, our report notes that many—

but certainly not all—of these passenger trips may have characteristics 

similar to those on corridor routes. The example cited in the report, on 

the Empire Builder route, is intended to illustrate the type of 

circumstances where this may apply. Regarding the financial 

performance of long distance routes, we agree that on a per passenger 

mile basis the difference between long distance service and other non-
Appendix VIII

Comments from National Railroad Passenger 

Corporation 

Page 183 GAO-07-15 Intercity Passenger Rail

NEC trains may be attributable to state subsidies. Our report notes that 

one reason for the wide variance in financial performance among 

corridor routes is the level of state support.

4. Our report also recognizes the growth in state-supported services and 

that these services are the fastest growing in terms of ridership and 

illustrate the significant potential for further growth. Finally, we agree 

that on state-supported routes, states play a much greater decision 

making role. We have changed our report to recognize this role.

5. We agree that rail network capacity is an important national policy 

issue and that freight and passenger railroads, as well as governments 

at all levels need to work together to address this issue. This will be 

particularly important in the future as rail infrastructure capacity 

continues to become constrained. Our report discusses the challenges 

associated with addressing this issue. We also address the issue of cost 

sharing between the federal and state governments and how this is 

common in some transportation modes other than intercity passenger 

rail. Moreover, we identify factors that need to be considered in making 

federal investments in private infrastructure. Finally, the report 

identifies some of the factors as to why commuter railroads pay 

amounts different from incremental cost to access freight and other 

privately owned infrastructure. It was for this reason that we made a 

qualitative, rather than a quantitative, comparison between Amtrak and 

commuter rail infrastructure access costs.
Page 184 GAO-07-15 Intercity Passenger Rail

Appendix IX

GAO Contact and Staff Acknowledgments ApendxiIX

GAO Contact JayEtta Z. Hecker, (202) 512-2834 or heckerj@gao.gov

Acknowledgments In addition to the above individual, Randy Williamson (Assistant Director), 

Tida Barakat, Jay Cherlow, Jeanette Franzel, Greg Hanna, Bert Japikse, 

Richard Jorgenson, Ryan Lambert, Kimberly McGatlin, John Saylor, Stan 

Stenersen, Lacy Vong, and Diana Zinkl made key contributions to this 

report.

(544117)
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