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Deal Is Engineered to Fund Amtrak

Railroad: White House agrees to an immediate $100 million to keep the trains running, for now.

June 27, 2002|RICARDO ALONSO-ZALDIVAR and KURT STREETER | TIMES STAFF WRITERS

WASHINGTON — Amtrak won a reprieve late Wednesday as the Bush administration agreed to a bailout that will keep trains rolling into the fall and allow for a fuller debate over the troubled rail system's future.

Transportation Secretary Norman Y. Mineta and Amtrak chairman John Robert Smith issued a joint statement saying they had reached an agreement in principle "aimed at resolving the short-term financial crisis facing the railroad."

David Gunn, Amtrak's new president, threatened to start shutting down the system over the July 4 holiday because it was quickly running out of cash. That would have forced thousands of people to seek alternate means of transportation, and also would have paralyzed critical commuter rail lines on both coasts that rely on Amtrak support services to operate.

"We are confident that, with congressional support, Amtrak services will not be disrupted," the joint statement read.

In California, the agreement came as a relief to officials worried about the potential closing of commuter systems, such as Los Angeles' Metrolink, as well as the loss of seven Amtrak lines that course through the state.

"Our big concern is [whether] this is going to happen again and what we can do to guard against it," Metrolink spokeswoman Sharon Gavin said. In Congress, a group of House Republicans introduced legislation Wednesday aimed at keeping commuter lines running in the event of an Amtrak shutdown.

Details were scant, with Mineta and Smith saying that no final agreement has yet been signed.

However, sources familiar with negotiations said the government would make an immediate $100-million loan to Amtrak and provide as much as $170 million more in cash or loan backing, subject to conditions that include an accounting of assets and finances, monthly financial reports and a possible wage freeze. The statement said Amtrak's financial condition and operating performance must be made "transparent to the public."

Amtrak lost more than $1 billion last year and was more than $4 billion in debt after mortgaging its most valuable assets. Achieving profitability--a goal Congress previously set--now seems out of reach.

Mineta said Wednesday his goal was to buy time for a reasoned discussion of Amtrak's prospects and that he would not seek deep cuts as part of the temporary bailout. "Amtrak must continue to search for ways to cut their own expenses," he said.

Officials said some in the administration would have been unfazed at letting Amtrak slip into bankruptcy. But the potential disruptions were politically unacceptable to President Bush. A shutdown would have snarled the Northeast Corridor between Washington and Boston, which carries more than half of Amtrak's 64,000 daily riders, and hundreds of thousands of commuter rail passengers. So Bush authorized Mineta to extend more subsidies to a rail system that Republicans have railed against for years.

The administration is proposing sweeping long-term reforms for Amtrak that would break it up into smaller units, open up choice routes to private competition and involve states in providing financing. Since its creation in 1970, Amtrak has not had a profitable year. It is saddled with unprofitable routes and a deteriorating infrastructure.

The prospect of a shutdown has galvanized Amtrak supporters in Congress. Powerful Democratic senators have proposed $205 million in emergency aid as part of a supplemental government funding bill that is pending.

The second part of the administration's bailout package--as much as $170 million in cash or financing--requires congressional approval. It was unclear Wednesday how the administration's aid would be reconciled with the proposal advanced by Senate Democrats. Aides to Mineta said they would brief key lawmakers today.

Maintaining Amtrak, even in a pared form, will almost certainly require billions of dollars in continuing government subsidies. The railroad has asked for $1.2 billion in the coming fiscal year; the Bush White House has offered half that.

"The politics relating to Amtrak have been flatly dishonest for years," said rail historian William L. Withuhn, transportation curator at the Smithsonian Institution. "No long-distance passenger rail system makes money on a fully amortized basis, including capital costs.

"The politics and the economics are so confusingly linked that no one can make any sense of either.

"We need, not the advocates," Withuhn said, "but someone to be able to say with a straight face, these are the real numbers and this is what has to be done."

Alonso-Zaldivar reported from Washington and Streeter from Los Angeles.

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