(rshsdepot) Amtrak Wants to Mortgage Penn Station

["James Dent" <james.dent_@_itochu.com>]

=46rom the Washington (DC) Post....

Amtrak Wants to Mortgage Penn Station
N.Y. Landmark Would Back $300 Million Loan to Keep Trains Running

By Don Phillips
Washington Post Staff Writer
Wednesday, June 6, 2001; Page E01

Amtrak is facing the most serious cash crunch in its 30-year history and =
has
asked for White House permission to use a large part of Pennsylvania Stat=
ion
in New York as collateral for a $300 million loan to keep operating,
according to officials of the Transportation Department and Amtrak.

Amtrak now is more than $3 billion in debt, but this is the first time it
has sought a loan to cover operating expenses. Previous loans mostly rais=
ed
cash to fund capital projects such as buying locomotives and building new
facilities.

Amtrak received $521 million from Congress for both operations and capita=
l
expenses in this fiscal year, but it now needs the additional $300 millio=
n
to carry it to Oct. 1, when the next fiscal year begins. It is unclear wh=
en
Amtrak would run out of money without the loan or some other emergency
action.

"There's no question Amtrak is facing very, very serious financial
problems," Transportation Secretary Norman Y. Mineta said.

Mineta casually mentioned the Penn Station mortgage yesterday during a
regular session with reporters. Until then it had been a closely guarded
secret. Federal sources said that a "facilitator" -- a bank or group of
banks -- is arranging a consortium of lenders to provide the loan. After
that, the White House and the Transportation Department would have to mak=
e a
final decision on whether to release a federal lien on the property to
enable Amtrak to secure the loan.

For most of its 30 years, Amtrak has led a hand-to-mouth existence, with
Congress squeezing its budget to the minimum necessary to keep a "nationa=
l"
passenger rail system operating through as many states and congressional
districts as possible.

Federal sources said this crisis is different, and the government must
decide soon what to do about the corporation. Amtrak is now mortgaged to =
the
hilt and has cut back so much on maintenance and needed capital projects
that service and reliability are beginning to deteriorate, especially on =
the
New York-Washington portion of the Northeast Corridor.

Mineta, who will soon become the federal government's member on the Amtra=
k
board, contradicted Amtrak officials, who have consistently assured Congr=
ess
that the passenger-train corporation will meet the congressional goal of
"operational self-sufficiency" by fiscal 2003.

"It's obvious that by 2003 they are not going to be self-sufficient," Min=
eta
said.

Technically, Amtrak would have to be liquidated if it fails to meet the
requirement, although there is doubt Congress would allow passenger servi=
ce
to die. But Mineta said Amtrak and the government should take a look at
whether Amtrak should be cut back to a system that serves the East and We=
st
coasts with perhaps some lines out of Chicago.

He said Amtrak should "look at selected routes rather than blanket the
country with rail service that is not . . . really viable."

Arlene Friner, Amtrak's chief financial officer, disagreed with Mineta's
assessment, saying Amtrak is "still sticking to the glide path" toward
operational self-sufficiency. She attributed the cash crunch to the late
delivery of new Acela Express high-speed trains for the Washington-Boston
run from a consortium led by Bombardier of Montreal and Alstom of Paris.

Friner said Congress should view the Penn Station mortgage as "a positive
step" because Amtrak is trying to raise money from its current assets and
"we are not going back hat in hand to Congress."

Friner said the mortgage would be limited to concourses A and B, the Amtr=
ak
areas in the station, which is beneath Madison Square Garden on 34th Stre=
et.
Track and platform areas would not be affected, she said, nor would areas
used by the Long Island Rail Road and New Jersey Transit.

Amtrak spokesman William Schulz said the carrier does not favor cutting b=
ack
its routes as Mineta suggests. "Frankly, we are looking at strategic
expansion of the system where it makes sense, and not a reduction at this
time," Schulz said.

When it was formed, Amtrak was supposed to be "profitable" within two yea=
rs,
although key members of Congress and the Nixon administration said privat=
ely
at the time that they knew that assertion was basically a lie. Key Nixon
aides, sources said, assumed Amtrak would fail and go out of business wit=
hin
two years.

But Congress had other ideas. Amtrak has received about $23 billion in
federal capital and operating funds since it was formed on May 1, 1971. I=
n
1998, Congress ordered Amtrak to cover all of its operating costs from
revenue by Dec. 2, 2003, although the legislation allowed continued feder=
al
spending for capital projects.

Support for Amtrak in Congress remains strong. Sen. Thomas A. Daschle
(D-S.D.), the incoming majority leader, and Trent Lott (R-Miss.), the
outgoing majority leader, promised last year to pass a $12 billion capita=
l
bond bill for Amtrak early this year, but it is now delayed until at leas=
t
this fall.

The General Accounting Office says Amtrak's revenue grew 7 percent in the
first six months of this fiscal year to $1.05 billion, but that expenses
grew 8 percent to $1.32 billion. Amtrak has estimated it needs a minimum =
of
$1.5 billion a year for capital expenses alone, nearly three times its
current $521 million appropriation. Amtrak carried 22.5 million passenger=
s
in fiscal 2000 -- 8.5 million of them in the Northeast Corridor, which ru=
ns
=66rom Boston to Washington.

The Senate Committee on Commerce, Science and Transportation had planned =
a
hearing in May on Amtrak's troubles, but it was postponed. According to
testimony that would have been delivered by Kenneth M. Mead, the
Transportation Department's inspector general, Amtrak is failing to spend
even the bare minimum needed for capital projects. He said this
underspending will soon hurt reliability and service, particularly betwee=
n
New York and Washington.

Already, total delays along the Northeast Corridor have increased from ab=
out
38,000 minutes in 1998 to about 42,000 minutes in 1999 and roughly 46,000
minutes in 2000.

The 15 miles of tunnels into Penn Station in New York alone need $900
million to correct "pressing life-safety needs," he said.

"Without a significant long-term source of capital funding, failure will =
be
a certainty," Mead said.



=A9 2001 The Washington Post Company

------------------------------