These plans have attempted to increase revenues and control costs through such actions as expanding mail and express service and adjusting routes and service frequency. Amtrak’s Financial Condition Continues to Deteriorate

Amtrak’s financial condition has continued to deteriorate despite its efforts over the past 4 years to reduce losses. While Amtrak has reduced its net losses from about $892 million in fiscal year 1994 (in 1997 dollars)to $762 million in fiscal year 1997, it has not been able to close the gap between total revenues and expenses. 1.) Notably, the net loss for fiscal year 1997 would have been much greater if Amtrak had not earned about $63 million, primarily from the one-time sales of real estate and telecommunications rights-of-way in the Northeast Corridor. In March 1998, Amtrak projected that the net loss for this year will be about $845 million, or $56 million more than budgeted. Improving Amtrak’s Financial Health Presents Challenges

Amtrak will continue to face challenges to its financial health. Another Amtrak initiative—establishing high-speed rail service between New York City and Boston—also will not provide immediate financial benefits. Amtrak’s goals are for the high-speed rail program to begin providing positive net income in fiscal year 2000. Amtrak does not currently plan to reduce any more routes. Instead, it plans to fine-tune its route network. The decision to make route adjustments is a difficult one, even though Amtrak’s data show that only one of the railroad’s 40 routes (Metroliners between Washington, D.C., and New York City) covers all its operating costs. However, federal funding from the Taxpayer Relief Act, the fiscal year 1998 capital appropriation, and the President’s proposed fiscal year 1999 budget—along with about $800 million that Amtrak anticipates receiving from state, local, and private financing—would provide about $5.0 billion, or about $500 million short of the $5.5 billion that it states that it needs for capital funding. The use of these available federal funds for maintenance expenses could have long-term financial impacts on Amtrak. In particular, such use would reduce the amount of money available to Amtrak to acquire new equipment and/or acquire those capital improvements necessary to reduce costs and/or increase revenues. In total, Amtrak plans to use $1.8 billion (65 percent) of $2.8 billion in capital grants under the President’s budget proposal to pay maintenance expenses from fiscal years 1999 through 2003. Short-Term Financial Effects of Amtrak Reform Legislation May Be Limited

The Amtrak Reform and Accountability Act was also designed to address Amtrak’s poor financial condition by making certain reforms to Amtrak’s operations to help Amtrak better control and manage its costs.
Why GAO Did This Study

GAO discussed: (1) Amtrak's financial performance during fiscal year (FY) 1997 and during the first quarter of FY 1998; (2) challenges Amtrak will face in improving its financial health; and (3) the potential impact that recently enacted legislation may have on Amtrak's financial condition.

What GAO Found

GAO noted that: (1) Amtrak's financial condition continues to deteriorate; (2) although Amtrak has been able to reduce its net losses (total expenses less total revenues) from about $892 million in FY 1994 to about $762 million in FY 1997, the 1997 loss would have been $63 million higher were it not for one-time increases in revenue from the sales of real estate and access rights for telecommunications; (3) in March 1998, Amtrak projected that its net loss for FY 1998 could be about $845 million--about $56 million more than planned; (4) Amtrak will continue to face challenges in improving its financial health; (5) Amtrak hopes to improve its financial health by increasing revenues through such actions as expanding mail and express service (delivery of higher-value, time-sensitive goods) and instituting high-speed rail service between New York City and Boston; (6) however, Amtrak has had to substantially scale back its net revenue projections for express business, and positive net income from the high-speed rail program will not occur for another 2 years; (7) Amtrak does not currently plan to reduce routes, even though one of its routes--the Metroliner service between Washington, D.C., and New York City--makes money; (8) instead it plans to fine-tune its route network and conduct a comprehensive market analysis; (9) federal funding and recently enacted reforms will not solve Amtrak's financial problems; (10) although the Taxpayer Relief Act of 1997, FY 1998 capital appropriations, and the President's proposed FY 1999 budget, if enacted, will provide Amtrak with historic levels of capital support, this support will fall short of Amtrak's identified capital needs by about $500 million; (11) in addition, Amtrak plans to use $1.8 billion of the $2.8 billion in requested federal capital grant funds to pay maintenance expenses between FY 1999 and FY 2003; (12) the use of funds for this purpose would substantially reduce the remaining level of funds available to acquire new equipment or make the capital improvements necessary to reduce Amtrak's cost and/or increase revenues; (13) therefore, such use will have a negative impact over the long term; and (14) furthermore, the Amtrak Reform and Accountability Act of 1997 significantly changed Amtrak's operations, but these reforms will provide few, if any, immediate financial benefits.