Testimony

Before the Subcommittee on Railroads, Committee on

Transportation and Infrastructure, House of

Representatives

United States General Accounting Office

GAO

For Release

on Delivery

Expected at

10:00 a.m. EDT

Wednesday

July 25, 2001

INTERCITY PASSENGER

RAIL

The Congress Faces

Critical Decisions About

the Role of and Funding

for Intercity Passenger

Rail Systems

Statement of JayEtta Z. Hecker

Director, Physical Infrastructure Issues

GAO-01-820T
Page 1 GAO-01-820T Role of and Funding for Intercity Passenger Rail

Mr. Chairman and Members of the Subcommittee:

We appreciate the opportunity to testify today on issues surrounding the

future of the National Railroad Passenger Corporation (Amtrak) and

intercity passenger rail, particularly high-speed rail. Our statement will

focus on three areas: (1) the uncertain future of intercity passenger rail,

(2) the expected large federal capital costs to develop and maintain

intercity passenger rail, and (3) the need to assess whether the public

benefits that might be realized justify such investments. This statement is

based on our recent reports on Amtrak’s financial condition and highspeed rail issues,1

 others’ reports, and Amtrak’s finance and capital plans.

In summary:

• It is very unlikely that Amtrak can operate a national intercity passenger

rail system as currently structured without substantial federal operating

support. Amtrak is required by law to achieve operational self-sufficiency

by the end of 2002 or submit a plan for its own liquidation. The outlook for

it achieving operational self-sufficiency is dim. Amtrak has moved just

$83 million closer to operational self-sufficiency in the last 6 years. By

December 2002—just 17 months from now—Amtrak must make another

$281 million in financial improvements. Amtrak’s financial performance

has not improved so far this year: In the first 8 months of fiscal year 2001,

its revenues increased by $83 million over the same period last year but its

cash expenses increased by $120 million.

• The level of federal capital assistance that would be required to maintain

and expand the nation’s intercity passenger rail network far exceeds the

amounts that have been provided in recent years. Amtrak has called for

$30 billion (in constant 2000 dollars) in federal capital support from

2001 through 2020 (an average of $1.5 billion each year) to upgrade its

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

proposed amount is nearly $10 billion more than the $20.4 billion (in 2000

 1

High Speed Rail Investment Act of 2001 (GAO-01-756R, June 25, 2001), Intercity Passenger

Rail: Assessing the Benefits of Increased Federal Funding for Amtrak and High-Speed

Passenger Rail Systems (GAO-01-480T, Mar. 21, 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).
Page 2 GAO-01-820T Role of and Funding for Intercity Passenger Rail

dollars) that Amtrak has received in federal operating and capital support

over the past 20 years (1982 through 2001). In addition, costs to fully

develop the 10 federally designated high-speed rail corridors and Amtrak’s

Northeast Corridor could exceed $50 billion over 20 years, according to a

preliminary Amtrak estimate. Much of the funding could be expected to

come from the federal government.

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

have been attributed to intercity passenger rail service—such as reduced

congestion and increased travel choices. Yet, intercity passenger rail plays

a very small role in the nation’s transportation system today. If that role is

to expand, it is important for the Congress to have realistic assessments of

the expected public benefits and resulting costs, as compared to

investments in other modes of transportation. These assessments are

important because intercity passenger rail systems—like other intercity

transportation systems—are expensive.

With the growth in the nation’s highway and aviation systems in the

previous decades, intercity passenger rail service lost its competitive edge.

Highways have enabled cars to be competitive with conventional

passenger trains (those operating up to 90 miles per hour), while airplanes

can carry passengers over longer distances at higher speeds than can

trains. The Rail Passenger Service Act of 1970 created Amtrak to provide

intercity passenger rail service because existing railroads found such

service unprofitable. 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.

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 remainder is provided by high-speed trains.2

 It

offers high-speed service (up to 150 miles per hour) on the Northeast

Corridor. About 22 million passengers in 45 states rode Amtrak’s trains in

2000 (about 60,000 passengers each day), a small share of the commercial

 2

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

service 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.

Background
Page 3 GAO-01-820T Role of and Funding for Intercity Passenger Rail

intercity travel market. In comparison, in 1999, domestic airlines carried

about 1.6 million passengers per day, and intercity buses carried about

983,000 people per day (latest data available).

Figure 1: Amtrak’s Route Network

Source: Amtrak.

Proponents see high-speed rail systems (with speeds over 90 miles per

hour) as a promising means for making trains more competitive with these

other modes of transportation.3

 They see introduction of high-speed rail in

various areas of the country as a cost-effective means of increasing

transportation capacity (the ability to carry more travelers) and relieving

air and highway congestion, among other things. The Federal Railroad

Administration defines high-speed rail transportation as intercity

passenger service that is time-competitive with airplanes or automobiles

 3

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

existing tracks, signaling systems, and grade crossings and modern trains that permit

speeds between 90 and 150 mph on existing rights-of-way; (2) completely new

infrastructure to support very-high-speed operations of 200 mph or more; or (3) magnetic

levitation systems that permit speeds of around 300 mph. Typically, the cost to implement

these options grows as the sophistication of the technology and the speed increase.
Page 4 GAO-01-820T Role of and Funding for Intercity Passenger Rail

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

agency chose a market-based definition, rather than a speed-based

definition, because it recognizes that opportunities for successful highspeed 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’s speed, the more likely it is to

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

corridors (not including Amtrak’s Northeast Corridor) have been

designated as high-speed rail corridors either through legislation or by the

Department of Transportation. (See fig. 2.)

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

Source: Federal Railroad Administration.

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 federally 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.

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
Page 5 GAO-01-820T Role of and Funding for Intercity Passenger Rail

Amtrak’s future is uncertain, in part, because it has made limited progress

toward achieving operational self-sufficiency, as required by the Amtrak

Reform and Accountability Act of 1997. The act 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 little progress in reducing its need for federal operating

assistance—i.e., closing 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.

Results for the first 8 months of fiscal year 2001 (October 2000 through

May 2001) are not encouraging: Amtrak’s revenues increased by about

$83 million (6 percent) over the same period in 2000, but its cash expenses

increased by about $120 million (7 percent).6

 Overall, in the last 6 years

(fiscal years 1995 through 2000), Amtrak has reduced its budget gap by

only $83 million. By the end of 2002, about 17 months from now, Amtrak

will need to achieve about $281 million in additional financial

improvements to reach operational self-sufficiency. Although Amtrak has

undertaken a number of actions to reach and sustain operational selfsufficiency by the end of 2002, we believe that it is unlikely that it will be

able to do so.

 4

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

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

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

Results are preliminary, subject to audit. Revenues increased from about $1.32 billion to

$1.4 billion. Cash expenses (total expenses less depreciation and other noncash expenses)

increased from about $1.63 billion to $1.75 billion.

The Future of

Intercity Passenger

Rail is Uncertain
Page 6 GAO-01-820T Role of and Funding for Intercity Passenger Rail

Intercity passenger rail systems, like other intercity transportation

systems, are expensive. The level of federal financial assistance that would

be required to maintain and expand the nation’s intercity passenger rail

network far exceeds the amounts that have been provided in recent years.

In February, Amtrak’s capital and finance plans called for $30 billion (in

constant 2000 dollars) 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 its operations and to invest as seed money in high-speed rail

corridors. The proposed amount is nearly $10 billion more than the

$20.4 billion (in 2000 dollars) that Amtrak has received in federal operating

and capital support over the past 20 years (1982 through 2001).7

 The

amount 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).

Additionally, fully developing high-speed rail corridors would require

substantial amounts of federal capital assistance. Overall cost figures are

unknown because corridor initiatives are in various stages of planning.

However, the capital costs to fully develop the federally designated highspeed rail corridors and the Northeast Corridor could be $50 billion to

$70 billion over 20 years, according to a preliminary Amtrak estimate. The

federal government could be expected to provide much of these funds.

However, estimates of the costs and the financial viability of high-speed

rail systems can be subject to much uncertainty, especially when they are

in the early stages of planning.8

Some of the federal funding (as much as $12 billion) for high-speed rail

projects could be provided if the High-Speed Rail Investment Act of 2001

(H.R. 2329) is enacted. (A similar bill, S. 250, was introduced in the

Senate.) Amtrak views the bill as an important first step in providing seed

money and helping build partnerships with states, localities, and freight

 7

In nominal dollars, the Congress provided Amtrak with about $16.8 billion from

1982 through 2001.

8

For example, in 1999, we found that ridership estimates for the proposed Florida Overland

Express project—to establish high-speed rail service between Miami, Orlando, and

Tampa—may have been overstated by as much as 30 percent. 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. (See GAO/RCED-99-44.) The project was later discontinued. Subsequently, Florida

voters approved a ballot initiative ordering the state to support a new high-speed rail effort.

Intercity Passenger

Rail Systems Will

Require Substantial

Amounts of Federal

Capital Support
Page 7 GAO-01-820T Role of and Funding for Intercity Passenger Rail

railroads critical to the development of high-speed passenger rail in the

United States. According to Amtrak and Federal Railroad Administration

officials, several federally designated corridors could be ready for

infrastructure investment in the next year or so.

We agree that the bill offers the potential to facilitate the development of

high-speed rail systems outside the Northeast Corridor. However, issues

remain to be addressed if corridors are to realize the benefits that

proponents see for them, including how to complete projects where costs

grow beyond the bond funds made available for them. Further, in applying

the bill’s public benefit criteria, the Secretary and others will have to

address issues raised by a project that, by itself, is insufficient to provide

high-speed rail service on a corridor (or a portion of the corridor). In these

situations, one approach could be to require applicants for bond funding

to demonstrate that other resources could reasonably be expected to be

available to initiate such service9

 or that the project would result in a

“useful asset” even if no other funding is provided.10

There is growing interest in and enthusiasm for intercity passenger rail by

states, particularly for high-speed rail systems. Proponents see

opportunities for increasing ridership—such as a quadrupling of riders on

corridors other than the Northeast Corridor (from 10 million to 40 million

passengers annually) by 2020. Proponents see a number of public

benefits—such as reduced congestion, improved air quality, increased

travel capacity, and greater travel choices—from further developing and

expanding such systems. According to the Federal Railroad

Administration, 34 states are participating in the development of highspeed rail corridors and these states have invested more than $1 billion for

improvements of local rail lines for this purpose. As the Congress moves

forward to define the role of intercity passenger rail in our nation’s

transportation framework, it needs realistic appraisals of the level, nature,

and distribution of public benefits that can be expected to accrue.

 9

In other contexts, the Transportation Equity Act for the 21st Century requires states and

metropolitan planning organizations to prepare short- and long-range transportation plans

including, among other things, resources that can be reasonably be expected to be made

available to implement them.

10The useful asset concept is embodied in an Office of Management and Budget circular

(A-11), on the planning, budgeting, and acquisition of capital assets.

The Public Benefits of

Intercity Passenger

Rail Need to Be

Examined
Page 8 GAO-01-820T Role of and Funding for Intercity Passenger Rail

A public benefit cited to support the expansion of high-speed passenger

rail service is its potential to help relieve congestion in air travel and on

our nation’s highways. Such service might have some impact on

congestion if it were targeted to areas where roads are at or near their

design capacity, for example. As more traffic uses these roads, travel time

increases sharply and the delays are felt by all travelers. 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.11

Intercity passenger rail cannot be expected to ease congestion at airports

when long distance travel is involved because rail travel is not timecompetitive with air travel.12 For example, the scheduled travel time for

the approximately 700-mile distance between Washington, D.C., and

Chicago is about 2 hours for air and about 18 hours for conventional

Amtrak passenger trains. High-speed rail proponents believe that one

potential for high-speed rail is to replace shorter intercity air service, thus

freeing up airport capacity for longer-distance travel. 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 routes that made an operating profit

in 2000.13 Notably, 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 energyefficient, thus improving air quality. For example, the Congressional

Research Service reported that Amtrak is much more energy-efficient than

 11See GAO/T-RCED-95-132.

12For 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.

13According to Amtrak, the Metroliner’s revenues exceeded its operating expenses by

$65 million. The other Amtrak route with revenues exceeding operating expenses was the

Heartland Flyer, with service between Oklahoma City and Dallas. On this route revenues

exceeded operating expenses by $700,000. Payments by states comprised most of the

revenue ($5.3 million); the remainder ($1.4 million) came from train operations.

Reducing Congestion and

Improving Air Quality
Page 9 GAO-01-820T Role of and Funding for Intercity Passenger Rail

air travel.14 However, it also found that Amtrak is much less energyefficient than intercity bus transportation and about equal in energy

efficiency as automobiles for trips longer than 75 miles. Our 1995 analysis

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

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

if existing diesel-powered trains were discontinued.

Another cited advantage is that an investment in intercity passenger rail

can do more to increase transportation capacity 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.15 However, a 1999

study of the costs of providing high-speed rail, highway, and air service in

a particular corridor reached different conclusions.16 This study found that

the investment costs (per passenger-kilometer 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 increasing transportation capacity, federal, state, and

other decisionmakers will need to understand the extent to which

travelers are using existing capacity and are likely to use the increased

capacity in various modes. If new capacity is underutilized (e.g., because it

is not cost competitive or convenient), then the expected benefit will not

be fully realized.

Another benefit ascribed to expanding intercity passenger rail is

increasing travel choices—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

 14Congressional Research Service, Amtrak and Energy Conservation (Jan. 19, 1999). The

analysis was based on Btu per passenger mile results and took into account variations in

load factors, congested routes, and other factors that would affect the outcomes in

particular circumstances.

15Strategic Business Plan, Feb. 2001.

16Included 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).

Increasing Transportation

Capacity

Offering Travel Choice
Page 10 GAO-01-820T Role of and Funding for Intercity Passenger Rail

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: 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.

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

intercity passenger rail because operating a national intercity passenger

rail system as currently structured without substantial federal operating

support is very unlikely. Thus, the goal of a national system much like

Amtrak’s current system and the goal of operational self-sufficiency

appear to be incompatible. In fact, Amtrak was created because other

railroads were unable to profitably provide passenger service. In addition,

Amtrak needs more capital funding than has been historically provided in

order to operate a safe, reliable system that can attract and retain

customers. Developing high-speed rail systems is also costly, requiring

additional tens of billions of dollars.

If intercity passenger rail is to have a future in the nation’s transportation

system, the Congress needs to be provided with realistic assessments of

the expected public benefits and resulting costs of these investments as

compared with investments in other modes of transportation. Such

analyses would provide sound bases for congressional action in defining

the national goals that will be pursued, the extent that Amtrak and other

intercity passenger rail systems can contribute to meeting these goals,

state and federal roles, and whether federal and state funds would likely

be available to sustain such systems over the long term.

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

answer any questions you or Members of the Subcommittee might have.

Observations
Page 11 GAO-01-820T Role of and Funding for Intercity Passenger Rail

For information about this testimony, please contact JayEtta Z. Hecker at

(202) 512-2834 or at heckerj@gao.gov. Individuals making key

contributions to this testimony were Helen Desaulniers, James

Ratzenberger, and Teresa Russell.

Contact and

Acknowledgments

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