Congress says Amtrak must reduce subsidies

[OwlCaboose2853]

Congress says Amtrak must reduce subsidies

Fri Nov 18, 2005 05:01 PM ET
By John Crawley

WASHINGTON, Nov 18 (Reuters) - Amtrak would have to take steps to reduce its operating subsidy under an agreement nearing final approval in Congress that would grant the passenger railroad $1.3 billion in aid this fiscal year.

Compromise spending legislation for transportation, treasury and housing programs approved by the House of Representatives and awaiting action in the Senate includes several provisions for reforming financially troubled Amtrak.

It was unclear if the changes fine-tuned by congressional negotiators this week would satisfy the White House, which had threatened to veto the massive spending package and not fund Amtrak operations unless it overhauls its business.

President George W. Bush has yet to exercise his veto authority.

The Bush administration wants to substantially reduce federal subsidies for Amtrak operations by requiring a bigger role for states that use the service, discontinuing underperforming services, and contracting routes to private companies.

The administration has also demanded greater financial accountability from Amtrak management.

Congress has required that Amtrak reduce its operating subsidy, which was just over $1.2 billion in the fiscal year that ended Sept. 30, through savings from food and beverage service, first-class accommodations, and commuter rail fees.

Amtrak also would be barred from marketing ticket discounts of more than 50 percent during peak hours. While Amtrak has registered record ridership -- 25 million people last fiscal year -- revenues have been trimmed by fare promotions.

For the first time, Amtrak's funding includes a new discretionary account that will be controlled by the Transportation Department for priority capital improvements.

Amtrak is a for-profit federal corporation created by Congress that has never made money in its 31-year history. Its annual losses exceed $1 billion. It depends on its annual operating subsidy to survive.

A Government Accountabilty Office report this month was sharply critical of some management practices and said revenues were declining faster than costs.

Credit markets expressed renewed concern about the railroad's future after the company's board fired Amtrak's president, David Gunn, on Nov. 9. Gunn was widely credited with putting the railroad's financial priorities in order and had begun to refurbish its aging infrastructure between Boston and Washington, its primary asset.

But Gunn clashed repeatedly with the Bush administration, which he says wants to bankrupt Amtrak and then dismantle it.

http://yahoo.reuters.com/financeQuoteCo ... 657_newsml