Amtrak

Amtrak’s Financial Management: Should the Government Subsidize the Railway System?

Rogelio Leal

Lindenwood University
MBA 596 – Program Implementation and Evaluation
February 21, 2010

Abstract
This essay will explain the standard of measurement in implementing and evaluating government programs that subsidize the railway system in the United States. Improving the quality of theservices and establishing efficient and effective programs is the key to maintain a well regulated public system. However, Amtrak is seen as a money losing operation; there is a situation where using a market section model may not be the right path for a successful railroad structure. Since the creation of Amtrak in the 1970s, large amounts of federal government funds have been invested in this publicinfrastructure to provide benefits to the tax payers. Members of Congress from different districts have supported the idea of eliminating train services in the country while others oppose. The Rail Passenger Service Act of 1970 created the illusion that by reviving the railway system through improving the quality of the services was going to generate capital and provide transportation to thegeneral public. Vast amounts of capital were completely lost in the next few years and government expenditures continued growing. Implemented programs have not been successful; therefore, privatization might bring about competition in the railway infrastructure generating profits as a public corporation.
 
Amtrak’s Financial Management: Should the Government Subsidize the Railway System?
Accordingto the Congressional Budget Office based on information provided by the Department of Transportation, Amtrak has received billions of dollars to operate. Since 1971, the railroad system has invested large amounts of money; Amtrak is trying to be self-sufficient, but it has not been able to do it regardless of how much money is invested. Amtrak’s CEO from 2002 to 2005 David L. Gunn, announced thatAmtrak would need up to $2 billion a year for track, bridge, and train repairs becoming nearly double the current federal subsidy. Covering operation costs have created financial issues in Amtrak leading the railway system in deep debt. In the early 2000s Amtrak’s self-sufficiency goals were not achieved since the usage of the railway services were not fulfilling the demands of the public. Theflows of capital within the implemented programs in Amtrak were not being well regulated by the government. Amtrak needs to be regarded as an artery to transportation of goods and most important to American citizens. The economic results became a waste of tax dollars devoted to the railroad system not yielding profits. The government instead decided to regulate more and utilize micromanagement tofocus on techniques to enhance public usage. Yet, globalization has a huge impact in the actual value of the railroad system since other transportation methods are more effective and even cheaper than using Amtrak.
The federal government has invested more money in the Amtrak than in highways; highways usually receive less money from the government, yet they provide more commodities to businessesand citizens. According to the Congressional Budget Office (CBO), the Federal Highway Administration and other sources spend up to ten billions of dollars per year on transportation infrastructure programs to improve the performance of the services (Issues and Options in Infrastructure Investment, 2008). Moreover, the current spending on infrastructure is trying to promote economic activities thatwill improve the transportation of goods from one place to another, electricity, telecommunications, waste disposal, etc. because these services are essential to satisfy the citizen’s best interests. Additional investment in infrastructure is becoming more complex since implementing and evaluating programs have measurement standards that need to be taken into account before making any changes....