- The Washington Times - Wednesday, July 3, 2002

Budget restrictions by the federal government that were intended to make Amtrak operate efficiently actually drove the railroad even closer to financial collapse, David Gunn, Amtrak's new president, said yesterday.
Congress has insisted that the railroad free itself from government subsidies.
"That created an environment where, in order to survive, Amtrak did some very unwise things," Mr. Gunn told The Washington Times.
After the railroad's managers laid off many workers and diversified its business enterprises to increase revenue, they engaged in desperate moves intended to increase cash flow, he said. In the process, they drove Amtrak deeper into debt and made it more dependent on government subsidies.
The desperate measures included skipping routine maintenance and mortgaging property. As a result, Amtrak's infrastructure deteriorated, and its debt payments continued to rise.
Last week, Mr. Gunn and the Bush administration engineered a $200 million bailout intended to keep Amtrak operating through the end of the fiscal year.
Critics of Amtrak used the latest financial crisis as another opportunity to call for a drastic restructuring of the railroad. Among them was Rep. Don Young, Alaska Republican and House Transportation and Infrastructure Committee chairman, who blames mismanagement for Amtrak's financial problems.
"You talk about pork," Mr. Young said as the bailout was negotiated last week. "This is rotten pork."
Mr. Gunn said costs could be better controlled by shifting more responsibility to states for operating passenger rail routes.
However, he said the railroad would never be able to operate without some government subsidies. The "capital costs" for locomotives, tracks, stations and other infrastructure are so high that fares cannot pay all of them, he said.
"There's no way this thing is going to make money."
Not even the administration's recommendations to concentrate passenger rail service on the most heavily traveled intercity routes would eliminate the need for government aid, he said.
"Even if you do that, you will still need federal subsidies because of the capital costs," Mr. Gunn said.
He does not blame his predecessors at Amtrak for its financial problems. The federal government made unrealistic demands but provided limited funding, he said.
"They tried to be all things to all people," Mr. Gunn said. "If you're all things to all people, nothing's going to happen. You have to focus on what's real."
Former Amtrak President George Warrington reached a similar conclusion. "This business model does not work," he said during a Feb. 1 press conference.
Congress gave Amtrak a $521 million subsidy for this fiscal year. Mr. Warrington said the railroad needs at least $1.2 billion to continue operations for another year, which does not include paying for delayed improvements to tracks and equipment. Instead, the administration is offering only $521 million for fiscal year 2003.
Mr. Warrington, who resigned April 30, mortgaged Amtrak's ownership of New York's Penn Station to pay employees and other operational expenses. Mr. Gunn took over as president on May 15.
"George came to the conclusion that the glide path to self-sufficiency was an impossible goal," Mr. Gunn said. "And I agree with him totally on that."
Some remedies being considered by the administration could lead to a repeat of England's disastrous effort to privatize passenger railroad operations, he said.
The English government has divided railroad contracts among private companies that operate trains, repair equipment, maintain tracks and signals, and perform other critical functions. Since privatization, the rail system has had more accidents and delays and has faced increased complaints.
"It has been a bloody nightmare for them," Mr. Gunn said. "They try to contract everything out, which has been a disaster."
The Amtrak Reform Council, an independent panel created by Congress to oversee the railroad's finances, has recommended that its operations and infrastructure be contracted to private companies.
Mr. Gunn said a better option is to operate passenger rail service more like an urban transit agency, in which local authorities control local operations.
Federal assistance would be used to match state funds, rather than as a primary funding source, thereby creating an incentive for cost control.
"If you're paying for it, and all I got to do is ask for it, I'm going to ask for a lot more than if I have to pay part of the costs," he said. "It works pretty good."


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