Amtrak, government regulators on different tracks regarding recovery

WASHINGTON -- Thanksgiving week, the busiest of the year for rail travel in America, finds Amtrak and its government monitors on different tracks regarding whether the national railway is chugging along to a remarkable recovery or fast approaching extinction.

Amtrak's supporters say the railway is becoming a financially viable, fast and reliable alternative to air travel. Government watchdogs say Amtrak faces numerous obstacles to reaching self- sufficiency in time to avoid possible liquidation and a restructuring of rail service.

Intercity rail connections undoubtedly would survive in some form even if Amtrak failed to show it could operate without government help by 2003, as federal law requires. But an Amtrak failure could lead to tough questions about the continued prospects of a nationwide rail system that includes many money-losing routes.

The disagreements are wide:

* Amtrak predicts its cash losses will total $1.6 billion from 1999 through 2002. The Transportation Department's inspector general, citing Amtrak projections that "are at risk of not being achieved," predicted in July that the losses will reach $2.3 billion.

* Amtrak said it was $484 million shy of breaking free of government subsidies in 1999. The General Accounting Office, the investigative arm of Congress, put Amtrak's 1999 operating loss at $907 million.

* On Oct. 28, Amtrak Chairman Tommy Thompson, the governor of Wisconsin, said the railway has brought "the goal of operational self- sufficiency well within our sights." That same day, Phyllis Scheinberg, the GAO's associate director for transportation, reported to Congress that "it will be difficult for Amtrak to successfully carry out its plan."

The GAO applied a standard corporate measurement -- overall revenue minus overall expenses -- to come up with a $907 million operating loss in 1999 for Amtrak.

Amtrak officials do not dispute that assessment. But they say self- sufficiency is not the same as breaking even. Using a different standard -- the "cash position" of operations, which excludes the cost of equipment depreciation -- Amtrak concluded that it was $484 million short of self-sufficiency in 1999.

The GAO also says Amtrak makes its budget gap appear smaller by counting "progressive overhauls," or gradual improvements to equipment, as capital rather than operating expenses. Amtrak says it does so because progressive overhauls are financed through capital funds.

Amtrak has to wean itself from federal subsidies for daily operations but can continue relying on help from Washington for capital improvements such as better tracks and new train cars.

"Obviously we're not a typical private corporation," explained Arlene Friner, Amtrak's chief financial officer.

Ultimately, Amtrak's fate may rest with politicians rather than accountants.

The 1997 Amtrak Reform and Accountability Act provided billions of dollars to support a financially ailing Amtrak over five years. It authorized Amtrak to act more like a business, responding to consumer demand and competition rather than to congressional directives.

But Amtrak, which has relied on more than $22 billion in government subsidies since its creation in 1971, had five years to prove it could operate without federal support.

An 11-member Amtrak Reform Council is monitoring the railway's performance. If it determines Amtrak will need government money to operate after 2003, the council must notify the White House and Congress.

Within 90 days, the council would submit a plan "for a restructured and rationalized national intercity rail passenger system," while Amtrak would offer a plan for its own "complete liquidation."

The council's chairman, Gilbert Carmichael, said he has noticed the discrepancy between Amtrak's self-reporting and the judgments of government watchdogs but is more interested in Amtrak's current and future performance.

"We're not too concerned about those old numbers," said Carmichael, who was federal railroad administrator under President Bush and now is chairman of the University of Denver's Intermodal Transportation Institute.

But council member Joseph Vranich, a former Amtrak spokesman who wrote a book urging Amtrak's gradual liquidation, said the company's "numbers are so vague and confusing at this point, it's impossible to make sound business recommendations."

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