Amtrak makes eleventh-hour deal, averts shutdown

Posted on June 1, 2002

Amtrak and the Bush Administration reached an agreement that would provide the railway with an immediate $100 million loan, with promise of an additional $170 million to be solicited from Congress, averting a system shutdown threatened in early July. Under the two-phase agreement, an initial $100 million direct loan provided by the Railroad Rehabilitation and Improvement Financing program would go toward closing the railway's budget gap of more than $200 million and ensure uninterrupted service through the summer. A joint request from Amtrak and the Administration for Congress to provide not more than an additional $170 million in operating funds for the remainder of this fiscal year would follow. The agreement helps Amtrak avert the first system-wide shutdown in its 31-year history. The loan agreement also requires Amtrak to comply with certain conditions, including coming up with a plan to make $100 million in operating reductions. Other conditions require the railway to provide clear, timely financial information to the board of directors and the U.S. Department of Transportation as well as complete a third-party study to identify a full range of possible management efficiencies and cost reduction options. Also, an immediate freeze of all management salaries and suspension of any annual bonuses for calendar year 2002 went into effect. "It is not the sole responsibility of this administration to solve Amtrak's immediate or long-term economic situation," said U.S. Transportation Secretary Norman Mineta during a press conference announcing the agreement. "This agreement is an initial, very modest down payment on implementing the administration's first principle for passenger rail reform -- placing Amtrak's operations on sound financial footing." Repayment for the initial $100 million loan is set for Nov. 15, 2002, which would come out of Amtrak's expected federal appropriation for 2003. Although the appropriation has not been negotiated, new Amtrak President David Gunn emphasized during his testimony before the Senate Committee on Appropriations Subcommittee on Transportation the importance for Congress to fully fund the railway's $1.2 billion request. During his testimony, Gunn outlined his intentions for the restructuring of Amtrak. "It is my hope that you will see significant positive change in the months ahead -- better equipment, investment in infrastructure, a leaner organization. Our budget requests will be transparent, realistic and understandable," Gunn said.

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