INTERCITY

PASSENGER RAIL

Assessing the Benefits

of Increased Federal

Funding for Amtrak and

High-Speed Passenger

Rail Systems

Statement of Phyllis F. Scheinberg,

Director, Physical Infrastructure Issues

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Transportation, Committee

on Appropriations, House of Representatives

For Release

on Delivery

Expected at

10 a.m. EST

Wednesday

March 21, 2001

GAO-01-480T
1

Mr. Chairman and Members of the Subcommittee:

We appreciate the opportunity to testify today on issues surrounding the federal

commitment to the National Railroad Passenger Corporation (Amtrak) and

intercity passenger rail, particularly high-speed rail. This statement is based on

our recent reports on Amtrak financial and high-speed rail issues,1

 others’ reports,

and Amtrak’s recently-released finance and capital plans.

In summary:

Amtrak made minimal progress in 2000 toward achieving operational selfsufficiency. Although Amtrak is required by law to achieve operational selfsufficiency by the end of 2002, the outlook for it doing so is not bright. In

2000, it reduced its “budget gap”—the gap that Amtrak says it has to close to

become operationally self-sufficient—by only $5 million. It must achieve an

additional $281 million in savings by the end of next year. If it does not,

Amtrak must submit a plan to the Congress for its liquidation.

In addition to the uncertainty over Amtrak’s future, this is an opportune time

to begin examining the future of intercity passenger rail. Federal costs are

expected to be large. For example, Amtrak proposed last month that the

federal government provide it with $30 billion over 20 years to support an

expanded Amtrak system and to invest as seed money in helping develop highspeed rail corridors. The ultimate cost of developing these high-speed rail

corridors is unknown, but certainly in the many tens of billions of dollars.

Much of the funding could be expected to come from the federal government.

1

Performance and Accountability: Challenges Facing the Department of Transportation

(GAO-01-443T, Feb. 14, 2001), Intercity Passenger Rail: Decisions on the Future of Amtrak and

Intercity Passenger Rail Are Approaching (GAO/T-RCED-00-277, Sept. 26, 2000), Intercity

Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its Costs and Meeting Capital

Needs (GAO/RCED-00-138, May 31, 2000), Surface Infrastructure: High-Speed Rail Projects in the

United States (GAO/RCED-99-44, Jan. 14, 1999), Letter to the Chairman, Committee on the Budget,

House of Representatives (Sept. 15, 1998), and Amtrak: Issues for Reauthorization

(GAO/T-RCED-95-132, Mar. 13, 1995).
2

A number of benefits to the public and the national transportation system have

been attributed to intercity passenger rail service—such as reducing

congestion and increasing travel choice. These benefits need to be

realistically examined. For example, intercity passenger rail service can work

well in certain situations, such as service between two densely-populated

cities that are a couple hundred miles apart, but is not a realistic travel

alternative for most longer-distance travelers.

In deciding the future of intercity passenger rail, it is important for the

Congress to have realistic assessments of the benefits to the public from this

mode of transportation. These assessments would help establish the role of

intercity passenger rail service in the nation’s transportation system, if any,

and guide the Congress in its decisions over potentially large funding of such

systems.

Background

The Rail Passenger Service Act of 1970 created Amtrak to provide intercity

passenger rail service. Like other major national intercity passenger rail systems

in the world, Amtrak has received substantial government support—nearly $24

billion for capital and operating needs through fiscal year 2001. About 22 million

passengers in 45 states ride Amtrak’s trains each year (about 60,000 passengers

per day, on average).

Amtrak operates a 22,000-mile passenger rail system, primarily over tracks owned

by freight railroads. (See fig. 1.) Amtrak owns 650 miles of track, primarily in the

Northeast Corridor, which runs between Boston and Washington, D.C. About 70

percent of Amtrak’s service is provided by conventional trains; the other 30
3

percent of the service is provided by high-speed trains (up to 150 miles per hour)

operating in the Northeast Corridor.2

Figure 1: Amtrak’s Route Network

Source: Amtrak.

With the growth in the nation’s highways and aviation system in the previous

decades, intercity rail passenger service has lost its competitive edge. Highways

have enabled cars to be competitive with conventional passenger trains (those

operating up to 90 miles an hour), while airplanes can carry passengers over

longer distances at higher speeds than can trains.

High-speed rail systems (with speeds over 90 miles per hour) are intended to

make trains more competitive with these other modes.3

 The Federal Railroad

2

As measured by train-miles—the movement of a train for a distance of 1 mile. The percentage of

train miles cited as high-speed is somewhat overstated because it includes some trains that

operate at 90 miles per hour or more on the Northeast Corridor but at slower speeds off the

corridor.

3

High-speed rail systems are generally of three types: (1) incremental improvements to existing

tracks, signaling systems, and grade crossings and purchasing modern trains that permit speeds

between 90 and 150 mph on existing rights of way; (2) a completely new infrastructure to support

very-high-speed operations of 200 mph or more; or (3) magnetic levitation systems that permit
4

Administration defines high-speed rail transportation as intercity passenger

service that is time-competitive with airplanes or automobiles on a door-to-door

basis for trips ranging from about 100 to 500 miles. The agency chose a marketbased definition, rather than a speed-based definition because it recognizes that

opportunities for successful high-speed rail projects differ markedly among

different pairs of cities. High-speed trains can operate on tracks owned by freight

railroads that have been upgraded to accommodate higher speeds or on dedicated

rights of way. The greater the passenger train speed, the more likely it is to

require a dedicated right of way for both safety and operating reasons.

According to the Federal Railroad Administration, 34 states are participating in

the development of high-speed rail corridors and these states have invested more

than $1 billion for improvements of local rail lines for this purpose. Ten corridors

have been designated either through legislation or by the Department of

Transportation. (See fig. 2.)

Figure 2: Designated High-speed Rail Corridors and Amtrak’s Northeast Corridor

Empire Corridor

Northern New

England Corridor Keystone

Corridor

Northeast

Corridor

Southeast

Corridor

Florida

Corridor

Gulf Coast

Corridor

South Central

Corridor

Chicago Hub

California

Corridor

Pacific

Northwest

Corridor Montreal

Portland/Auburn

Boston Albany

New York City

Philadelphia

Washington, D.C.

Hampton Roads

Raleigh

Columbia

Jacksonville

Orlando

Miami

Tampa

Atlanta

Charlotte

Louisville

Indianapolis

Detroit

Chicago

Minneapolis/St. Paul

Kansas City

Tulsa

Oklahoma City

Dallas/Ft. Worth

Los Angeles

San Diego

Sacramento San Francisco

Bay Area

Eugene

Portland

Seattle

Vancouver

San Antonio

Houston

St. Louis

Mobile

New Orleans

Little Rock

Birmingham

Buffalo

Cleveland

Pittsburgh

Richmond

Source: Federal Railroad Administration.

speeds of around 300 mph. Typically, the cost to implement these options grows as the

sophistication of the technology and speed increase.
5

Designated corridors may be eligible for federal funds through several

Department of Transportation programs. According to the Department, the

designation also serves as a catalyst for sustained state, local, and public interest

in corridor development. The 10 designated corridors are generally in various

early stages of planning. Amtrak’s Northeast Corridor is in operation and

supports high-speed service up to 150 miles per hour.

The Congress Is Facing Critical Passenger Rail Decisions

The Congress is facing critical decisions about the future of Amtrak and of

intercity passenger rail service. These decisions stem from Amtrak’s limited

progress toward achieving operational self-sufficiency and the large amount of

funds that will be needed to maintain and expand the nation’s intercity passenger

rail network.

Achieving operational self-sufficiency is very important to Amtrak because the

Amtrak Reform and Accountability Act of 1997 prohibits Amtrak from using

federal funds for operating expenses, except for an amount equal to excess

Railroad Retirement Tax Act payments, after 2002.4

 If the Amtrak Reform Council

(an independent council established by the act) finds that Amtrak will not achieve

operational self-sufficiency, the act requires that the railroad submit to the

Congress a liquidation plan and the council submit to the Congress a plan for a

restructured national intercity passenger rail system.

Amtrak has made limited progress in reducing its budget gap in order to reach

operational self-sufficiency.5

 In fiscal year 2000, Amtrak closed its budget gap by

only $5 million, achieving very little of its planned $114 million reduction.

4

Amtrak participates in the railroad retirement system, under which each participating railroad

pays a portion of the total retirement and benefit costs for employees of the industry. According

to Amtrak, excess railroad retirement tax act payments are expected to be $196 million in 2003.

5

Amtrak defines its budget gap as the corporation’s net loss (total revenues less total expenses)

less capital-related expenses, including the depreciation of its physical plant, other noncash

expenses, and expenses from its program to progressively overhaul railcars (i.e., to conduct

limited overhauls of cars each year rather than comprehensive overhauls every several years).
6

Moreover, during fiscal years 1995 through 2000, Amtrak reduced its budget gap

by only $83 million. By the end of 2002, less than 2 years from now, Amtrak will

need to achieve about $281 million in additional savings to reach operational selfsufficiency. Although Amtrak has undertaken a number of actions to reach and

sustain operational self-sufficiency, we are not optimistic that it will be able to do

so.

The level of federal financial assistance that will be required to maintain and

expand the nation’s intercity passenger rail network far exceeds the amounts that

have been provided in recent years. Last month, Amtrak announced that it is

seeking $30 billion in federal capital support from 2001 through 2020 (an average

of $1.5 billion each year with $955 million in fiscal year 2002) to upgrade Amtrak

operations and to invest as seed money in high-speed rail corridors. The

proposed amount is nearly double the $16.8 billion in federal support that Amtrak

has received over the past 20 years (1982-01). It is also nearly three times the

annual amount that the Congress provided Amtrak in recent years (e.g., $571

million for 2000 and $521 million for 2001 that could be used for both capital and

operating expenses).

Some of this federal support is addressed in the High-Speed Rail Investment Act

of 2001 (S. 250), which was introduced last month. This bill would allow Amtrak

to issue $12 billion in tax credit bonds6

 ($1.2 billion each year over 10 years),

primarily for capital improvement projects on designated high-speed rail corridors

and on Amtrak’s Northeast Corridor.

The development of the designated high-speed rail corridors will require

substantial amounts of federal assistance. Overall cost figures are unknown

because these initiatives are in various stages of planning. However, these

corridors and the Northeast Corridor could require tens of billions in federal

6

Bondholders would receive tax credits rather than interest payments.
7

assistance. The size of these capital investments is illustrated by several

examples:

Last year, we reported that Amtrak had identified capital needs of at least $7

billion (in 1999 dollars) through 2015 on its Northeast Corridor alone and at

least an additional $2 billion is needed for the rest of its system.7

The Midwest Regional Rail Initiative, comprised of nine midwestern states,

anticipates capital costs of $4 billion (in 1998 dollars) over 10 years to develop

a 3,000-mile network (including one of the designated corridors). The rail

group expects that the federal government will fund $3.2 billion (80 percent) of

these costs.

In California, a 703-mile high-speed rail system linking Sacramento and San

Francisco in the north to Los Angeles and San Diego in the south could cost

$25 billion.

Estimates of the costs and financial viability of high-speed rail systems can be

subject to much uncertainty, especially when they are in the early stages of

planning. For example, in 1999 we found that ridership estimates for the

proposed Florida Overland Express project may have been overstated by as much

as 30 percent.8

 It was unclear whether the project could achieve its financial

objectives of paying all operating costs, repaying bondholders, and repaying

federal loans if ridership was lower than estimated by the project.

Besides financial issues, other difficult issues will need to be resolved to make

high-speed rail service a reality. These issues include (1) the capacity of privately

owned freight rail systems to handle additional and higher-speed passenger rail

7

See GAO/RCED-00-138.

8

The project proposed to establish high-speed rail service between Miami, Orlando, and Tampa.

See GAO/RCED-99-44.
8

traffic along with their own traffic, (2) the access to freight railroad tracks that

these railroads could expect to grant to operators of high-speed rail passenger

systems other than Amtrak, and (3) the ability to close thousands of grade

crossings (the intersection of railroad tracks and roads) to allow high-speed trains

to operate safely.

In part because Amtrak’s future is uncertain and because Amtrak and other rail

systems are counting on large increases in federal assistance for intercity

passenger rail, the Congress needs to decide whether the magnitude of the

benefits to the public and the nation’s transportation system from intercity

passenger rail justify such investments when compared to alternative modes of

transportation.

The Public Benefits of Intercity Passenger Rail Need to Be Examined

A number of public benefits--such as reducing congestion, improved air quality,

increased travel capacity, and greater travel choice--have been ascribed to Amtrak

and intercity passenger rail. Yet these benefits have not been thoroughly

addressed.

Reducing Congestion and Improving Air Quality

A public benefit cited for intercity passenger rail is its potential to help relieve

traffic congestion in air travel and on our nation’s highways. At a national level,

this potential is not likely to be realized because intercity passenger rail currently

represents about 3 tenths of 1 percent of intercity travel across all modes.9

 Even if

rail travel quadrupled, it would account for only about 1 percent of the nation’s

travelers.

9

Congressional Research Service, Amtrak: Overview and Options (Jan. 25, 2001). The

Congressional Research Service cites this statistic from Transportation in America, 1999 (Eno

Foundation).
9

Expanding intercity passenger rail service might have some impact on congestion

if it were targeted to areas where roads are at or near their design capacity. As

more traffic uses these roads, travel time increases sharply and the delays are felt

by all travelers. However, expectations for the extent to which intercity

passenger rail can reduce congestion must be realistic. For example, in 1995, we

reported that each passenger train along the busy Los Angeles-San Diego corridor

kept about 129 cars off the highway (about 2,240 cars each day)—a small number

relative to the total volume.10

High-speed rail could not be expected to ease congestion at airports when longerdistance travel is involved because rail travel is not time-competitive with air

travel.11 As a case in point, the scheduled travel time for the approximate 700-mile

distance between Washington, D.C., and Chicago is about 2 hours for air and

about 18 hours for Amtrak. Consistent with this, the Federal Railroad

Administration is supporting the development of high-speed rail corridors that are

competitive in travel time with air and highway travel.

Another advantage cited for intercity passenger rail is that it is energy-efficient,

thus improving air quality. For example, the Congressional Research Service

reported that Amtrak is much more energy-efficient than air travel. However,

Amtrak is much less energy-efficient than intercity bus transportation and about

equal in energy efficiency as automobiles for trips longer than 75 miles.12 Our 1995

analysis of the Los Angeles-San Diego corridor found the increase in emissions

from added automobiles, intercity buses, and aircraft would be very small if

existing diesel-powered trains were discontinued.

10See GAO/T-RCED-95-132.

11For a comparison of travel times for Amtrak, bus and air travel for several city pairs, see our

September 15, 1998, letter cited in footnote 1.

12Congressional Research Service, Amtrak and Energy Conservation (Jan., 19, 1999).
10

Increasing Transportation Capacity

Another cited advantage is that an investment in intercity passenger rail can do

more to increase transportation capacity (carry more travelers) than a similar

expenditure in another mode. For example, Amtrak recently suggested that a

dollar invested in intercity rail can increase capacity 5 to 10 times more than a

dollar invested in new highways, depending on location.13 A 1999 study of the

costs of providing high-speed rail, highway, and air service reached different

conclusions.14 This study found that the investment costs (per passengerkilometer traveled) of providing highway and high-speed rail service between San

Francisco and Los Angeles were about the same, but both were substantially

higher than the cost of providing air service for the same route.

When considering adding transportation capacity, decisionmakers will need to

understand the extent to which travelers are using existing capacity and will use

the added capacity in various modes. If the added capacity is underutilized (say,

for example, because it is not cost competitive or offers inconvenient travel), then

the foreseen benefit will not be realized.

Offering Travel Choice

Another benefit ascribed to the expansion of intercity passenger rail is the

increase in travel choice—as an alternative to air, automobile, or bus travel. For

example, the Federal Railroad Administration estimates that the development of

the designated high-speed rail corridors could ultimately give about 150 million

Americans (representing slightly over half of the nation’s current population)

access to one of these rail networks. Yet travel choice entails more than physical

access. To offer travel choice, rail must be competitive with other travel modes:

13Strategic Business Plan, February 2001.

14Included in these costs were the social costs of accidents, air pollution, noise, and congestion.

See David Levinson, Adib Kanafani, and David Gillen, Air, High-speed Rail, or Highway: A Cost

Comparison in the California Corridor; Transportation Quarterly, Vol. 53, No. 1 (Winter 1999).
11

It must take travelers where they want to go, be available at convenient times of

the day, be competitive in terms of price and travel time, and meet travelers’

expectations for safety, reliability, and comfort. For example, travelers may view

a rail system more favorably if it offers multiple trips—rather than one or two

round trips--each day and if it arrives and departs at convenient hours.

Public Benefits and Financial Goals Affect

the Scope of Intercity Passenger Rail Systems

Once determined, the public benefits of high-speed passenger rail service, as well

as of Amtrak’s conventional rail service, must be weighed against the costs of

federal financial assistance needed to support such service. For example, the

Amtrak Reform and Accountability Act of 1997 directed Amtrak to operate a

national system that ties together existing and emerging regional rail passenger

service and fosters intermodal passenger service. As we stated earlier, we believe

that it is unlikely that Amtrak will be able to operate a national system without

federal operating support after 2002. Thus, the goal of a national system much

like Amtrak’s current system and the ability to operate without federal operating

subsidies may be incompatible. In fact, Amtrak was created because other

railroads were unable to operate passenger service profitably.

High-speed rail may work best for relatively short trips (of several hundred miles

or less) where it connects densely populated cities with substantial travel

between the cities. Amtrak’s Metroliner service, which travels up to 125 miles per

hour between New York City and Washington, D.C., is an example. The

Metroliner is one of only two Amtrak trains that made an operating profit in

2000.15

15According to Amtrak, the Metroliner made a profit of $65 million based on revenues of $222

million. The other Amtrak route to make a profit was the Heartland Flyer. It made a profit of

$700,000 based on revenues of $5.3 million. Of this revenue amount, $3.9 million were payments

made by states and $1.4 million came from train operations.
12

We believe that the time is ripe for the Congress to begin considering the future of

intercity passenger rail and to bring all affected parties into the discussion. This

should start with a realistic assessment of the public benefits and costs of

investments in intercity passenger rail and other modes. Such analyses would

precede reaching agreement on the goals that will be pursued, the extent to which

Amtrak and other intercity passenger rail systems can contribute to meeting those

goals, and commitments of large amounts of federal funding.

- - - - -

Mr. Chairman, this concludes our testimony. We would be pleased to answer any

questions you or Members of the Committee may have.

Contact and Acknowledgments

For information about this testimony, please contact Phyllis F. Scheinberg at

(202) 512-3650. Individuals making key contributions to this testimony were

Angela Clowers, Helen Desaulniers, Richard Jorgenson, and James Ratzenberger.

(392002)
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