Amtrak was established by the Rail Passenger Service Act of 1970. Amtrak operates a 22,000-mile network, primarily over freight railroad tracks, providing service to 46 states and the District of Columbia. (See fig. 2.) In fiscal year 2001, Amtrak served about 23.5 million intercity rail passengers over 43 routes. In addition, Amtrak is the contract operator of seven commuter rail systems. These commuter rail systems served about 63.4 million passengers in fiscal year 2001. Amtrak owns a variety of assets, most notably about 650 miles of track, primarily along the Northeast Corridor. The corridor is used by eight commuter railroads (operated by state and local governments) that serve about 1.2 million passengers each workday, and six freight railroads operating 38 trains per day. Amtrak also owns passenger stations, rail shops, and rail equipment, including passenger cars and locomotives. From fiscal year 1971 through fiscal year 2002, the federal government has provided Amtrak with over $25 billion in operating and capital subsidies. In July 2002, Amtrak employment was about 23,000 people. The railroad retirement system provides retirement and disability benefits to the nation’s retired railroad workers and their survivors (including those of Amtrak), while the railroad unemployment system pays a portion of lost wages to railroad employees who lose their jobs or are sick. In fiscal year 2001, the Railroad Retirement Board paid about $8.4 billion (net of recoveries) in retirement and survivors’ benefits to about 700,000 beneficiaries, and about $95 million in unemployment and sickness benefits to about 40,000 railroad workers. Railroad retirement payroll taxes are made up of tier I and tier II taxes, and are used to pay tier I, tier II, and supplemental annuity benefits. Employers and employees pay tier I taxes at the same rate as social security taxes, and benefits are based on combined railroad and nonrailroad service. Tier I benefit amounts are generally the same as those paid under the Social Security Act. Tier II taxes are used to finance railroad retirement pension benefits over and above social security levels. Under the Railroad Retirement and Survivors’ Improvement Act of 2001, employer tier II tax rates are set at 15.6 percent and 14.2 percent for 2002 and 2003, respectively. Beginning in 2004, tier II tax rates will be determined based on the calculation of an assets-to- benefits payout ratio. Employee tier II taxes are 4.9 percent for 2002 and 2003, and then capped at 4.9 percent thereafter. The act did not change tier I tax rates. Should Congress decide to liquidate Amtrak as part of a restructuring of intercity passenger rail service or should Amtrak’s financial condition force it to file for bankruptcy, Amtrak must do so under chapter 11 of the Bankruptcy Code. This chapter contains provisions regarding the management and reorganization of debtors, including railroads, and specifies the circumstances under which a railroad may be liquidated. Among other things, chapter 11 seeks to protect the public interest in maintaining continued rail service. However, a railroad may be liquidated upon the request of an interested party (such as a creditor) if the court determines liquidation to be in the public interest. A railroad must be liquidated if a plan for reorganizing it has not been confirmed within 5 years of its filing for bankruptcy. An appointed trustee plays a key role and, subject to the court’s review, directs the railroad and its affairs during bankruptcy. In liquidation, the trustee administers the distribution of the railroad’s assets in accordance with the Bankruptcy Code. (See app. I for a discussion of the significant aspects of the railroad bankruptcy process.) If Amtrak had been liquidated on December 31, 2001, secured and unsecured creditors, including the federal government and Amtrak’s employees, and stockholders (preferred and common) would have had about $44 billion in potential claims against and ownership interests in Amtrak’s estate. The federal government would have been by far the largest secured creditor (for property and equipment) and would have had the largest stockholder interest (in preferred stock), together representing about 80 percent (about $35.7 billion) of the $44 billion amount. Of the $4.4 billion in unsecured claims, Amtrak’s employees would have had potential claims for about $3.2 billion in labor protection payments (payments that Amtrak would owe to terminated employees stemming from collective bargaining agreements). Amtrak’s employees would also have had other unsecured claims for such things as vacation pay and injury claims, and retirees would have had claims for post-retirement medical benefits. It is not likely that secured and unsecured creditors’ claims and would have been fully satisfied, because Amtrak’s assets—other than the Northeast Corridor—available to satisfy these claims and interests (such as equipment and materials and supplies) are old, have little value, or might not have a value equal to the claims against them. The market value of Amtrak’s most valuable asset (the Northeast Corridor) has not been tested. While the Corridor has substantial value, it is subject to easements and has billions of dollars of deferred maintenance. Furthermore, it is not likely that the stockholders would have received any payment for their ownership interest. Amtrak’s secured creditors would have had about $22.4 billion in claims against the recorded amount of its property and equipment as of December 31, 2001. (See table 1.) In general, secured creditors are able to attach the property and equipment that were pledged as collateral to secure Amtrak’s debt to pay their claims. To the extent that individual secured creditors’ claims exceed the liquidation proceeds of specifically pledged property and equipment, the excess outstanding indebtedness would become unsecured claims. Among all of Amtrak’s secured creditors, the U.S. government would have had the largest claim to payments from the sale of Amtrak’s assets in liquidation. Federal secured claims would have been on Amtrak’s real property (up to $14.2 billion) and equipment ($4.4 billion) for a combined total of 83 percent of all secured creditor claims. These claims largely arise from two promissory notes issued by Amtrak and held by the federal government. The first note represents a secured interest on Amtrak’s real property (primarily Amtrak’s Northeast Corridor) and matures in about 970 years (December 31, 2975). In June 2001, in conjunction with Amtrak’s mortgage of a portion of Pennsylvania Station in New York City, the federal government strengthened its position regarding this note by making the principal and interest due and payable if Amtrak files for bankruptcy and is liquidated or if Amtrak defaults under the mortgage.Prior to that date, acceleration of the due date would have required enactment of a statute requiring immediate payment, and there would have been no interest payable unless the due date had been accelerated. On the basis of information provided by the Federal Railroad Administration, we calculate that if Amtrak had been liquidated on December 31, 2001, about $14.2 billion in principal and interest would have been due and payable on the note. Satisfaction of this claim from the sale of the secured assets would depend on the market value of the property—the amount due is limited to the fair market value of the property. The market value of the Northeast Corridor has not been tested; furthermore, commuter and freight railroad easements, about $4 billion in deferred maintenance, and the extent to which this property could be used for telecommunications and other utilities could affect its ultimate value. In the event of liquidation, the federal government could pursue several options, including transferring ownership of these assets to an entity or entities that would allow continued rail use. The second federal note is secured by a lien on Amtrak’s passenger cars and locomotives. This note matures on November 1, 2082, with successive 99-year renewal terms. If Amtrak had been liquidated on December 31, 2001, this note would have been accelerated, and about $4.4 billion in principal and interest would have become immediately payable. Similar to its actions regarding the first note, the federal government acted in 2001 to strengthen its claim. Federal Railroad Administration officials told us that the lien securing the original note required the government to subordinate its lien on the equipment acquired by Amtrak after 1983 (the date of the original note) in individual transactions to the security interest of Amtrak’s equipment creditors in these transactions. This was done to assist Amtrak in obtaining financing from the private sector. Amtrak’s June 2001 mortgage of Pennsylvania Station amended the original real property mortgage discussed above to provide the federal government with a security interest in all other real and personal property held by Amtrak as of June 20, 2001, that was not otherwise encumbered, and any real and personal property acquired by Amtrak after that date. Although the amendment to the mortgage strengthened the federal government’s security interest in otherwise unencumbered property, it did not change its priority with respect to other secured creditors of Amtrak’s equipment. This, in addition to the fact that the equipment is old, with limited market value in liquidation, means that the federal government would probably not have realized much, if anything, from the second federal note had Amtrak been liquidated on December 31, 2001. The majority of the non-U.S. government lenders’ secured property claims would have been associated with passenger cars and equipment ($1.5 billion), locomotives ($941 million), and Northeast Corridor property ($673 million).