Amtrak subsidies under scrutiny

Despite record ridership

Matt Dietrichson, Sep 20, 12.

Though ridership is up, members of the House Transportation and Infrastructure Committee are questioning the costs of maintaining Amtrak’s national rail network, according to Transportation Nation:

Amtrak, founded in 1971, has never made a profit. Over its four decades of operating a for-profit passenger service on 44 rail routes, Amtrak has received about $40 billion in subsidies for capital and operating expenses.

Transportation Committee Chair, John Mica (R-Fla.) says a big chunk of those subsidies are wasted. In recent months, Mica has been shining a brighter spotlight on what he sees as unnecessary spending and mismanagement at Amtrak. Today’s hearing will be the third of three discussing Amtrak operations. The head of Amtrak, Joe Boardman, (interviewed by TN here) will be on the stand along with representatives from the bus industry, a rail passenger group and the conservative Cato Institute.

Mica’s office and Amtrak have each issued statements that hint at how this hearing will play out. We’ve pasted them below. Consider it a tale of dueling press releases.

The announcement from Mica’s office states the purpose of the hearing bluntly: “to review Amtrak operations and the need for reforms to significantly cut the unnecessarily high costs of U.S. passenger rail service.”

Late yesterday afternoon, Amtrak issued a retort that touted record ridership and a consistent decline in subsidies that peaked in 2004. The proud subject-heading on Amtrak’s email blast is a direct response to Mica’s criticism: “Amtrak Covers 85 Percent of Operating Costs with Ticket Sales and Other Revenues.” That still leaves $466 million in annual subsidies. And that means each passenger trip on Amtrak costs the government $46, more than ten times what other modes receive according to figures cited in Mica’s statement, which quoted from a recent study funded by the bus industry.

Mica also offered a pair of line items he’d like to see slashed. One of the lines costs Amtrak $200 million on overtime pay annually, he says. Then there’s the hamburgers. Mica devoted a whole press conference last month to lambasting Amtrak’s $16 money-losing burgers and the $83 million the company loses from on-board food and beverage service. Mica says that’s a glaring example of mismanagement, particularly considering Amtrak’s failure to meet a Congressional mandate to break-even on food.

Congressional mandates, Amtrak has said in the past, are exactly the reason the company runs in the red, at least on certain routes. Amtrak was founded to operate a rail network as a for-profit company but also a national public good. Commercial passenger rail had all but failed by 1971. Freight companies were required to operate passenger service. Amtrak was the replacement for that unpopular system. (See these historical press releases from Amtrak’s early days for a sense of the thinking in the early 1970s).

Many routes travel through sparsely populated towns with stops chosen as much by political negotiations — or even mandate — as passenger demand. Amtrak’s long distance routes lose the most money. The worst performer of all is the Sunset Limited line from Los Angeles to New Orleans. As we reported last month, local officials are now agitating to restore that service along the Gulf Coast despite the fact that some stations had passenger numbers in the single digits.

If you want more data from the Transportation Committee, the briefing memo from Mica is here.