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Shutdown 2013: Amtrak At Risk of Closing, In Case of Extended Shutdown

Oct 04, 2013 3:30 am

Skift Take

A month seems like such a long time away, but the government shutdown did actually happen, and if the debt ceiling agreement doesn’t come soon, then that timeframe is not out of realm of possibility.

— Rafat Ali

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Robert Couse-Baker  / Flickr

Amtrak may be in danger of shutting down if the government closure continues for a month or more. Robert Couse-Baker / Flickr


Amtrak, the U.S. intercity passenger railroad, may have trouble staying on track, literally, if a U.S. government shutdown is prolonged for a month or more.

The Washington-based railroad, which has never made money, gets 12 percent of its operating budget and most capital and debt-service funding from U.S. appropriations funneled through the Transportation Department. Some are scheduled to be paid quarterly while others are reimbursements, all of which have been cut off for now.

“At some point, I don’t know whether it’s weeks or months, they have a real problem,” said Mortimer Downey, a former member of Amtrak’s board and a former deputy U.S. transportation secretary. “If there’s nobody at DOT, there’s nobody to pay them reimbursements.”

Ticket revenue for Amtrak may also decline, further crimping cash flow, with government workers not traveling, said Ross Capon, president of the National Association of Railroad Passengers, a Washington-based advocacy group.

Washington is Amtrak’s second-busiest market by ticket sales after New York, with 5 million passengers a year coming or going from the city’s Union Station.

“I think three or four weeks is probably a non-event, but when it starts going beyond that, it gets to be serious,” Capon said in a phone interview. “At some point, and I expect it’s well beyond four weeks, I would think there’s a question about whether the company survives.”

Steve Kulm, an Amtrak spokesman, declined to say when Amtrak may run out of cash or be unable to run all of its routes if the shutdown continues.

Cash Flow

The railroad, which carried a record 31.2 million passengers in the 2012 fiscal year, said in a Sept. 30 statement it would continue normal operations during a “short-term” government shutdown.

Lisa Jenkins, a Washington-based analyst for Standard & Poor’s, said in a report Oct. 2 that Amtrak can operate and meet its debt obligations “for at least several weeks” with cash it has on hand and generates from operations.

“We will continue to monitor the company’s liquidity in the absence of government funding,” wrote Jenkins, who said Amtrak’s credit rating is unaffected for now. “We could reevaluate our view of the government shutdown’s impact on the company’s ratings depending on the length of the shutdown.”

Jenkins rates Amtrak debt A- or “stable.” She declined to comment beyond the report.

Amtrak said in a Sept. 27 report that it had $800 million in current assets to cover about $1.1 billion in current liabilities, though that ratio has been improving along with ridership.

Cost Cutting

Amtrak has little authority to trim operations to cut costs because of contracts with states and labor unions, Capon said. On the Northeast Corridor between Washington and Boston, it wouldn’t make sense to cut service because those trains bring in enough revenue to cover operating expenses.

Amtrak’s auditor in its most recent annual report warned of the risk posed by the uncertainty of U.S. taxpayer funding, after delays in appropriations bills earlier this year and last year.

“Without the receipt of federal government funding, Amtrak will not be able to continue in its current form and significant operating changes, restructuring or bankruptcy might occur,” an auditor’s letter in the report said.

Railroad officials are used to Congress rarely completing appropriations on time, Kulm said in an e-mail.

“The juggling of short-term continuing resolutions means we often don’t get a final federal appropriation until well into the fiscal year, which makes budgeting and long-term planning challenging,” he said.

State Deadlines

Apart from the shutdown, Amtrak is dealing with uncertainty over how to keep operating routes in 19 states that carry half its annual ridership.

A 2008 law reauthorizing Amtrak gave states and the railroad five years to decide how to share costs of operating routes that are less than 750 miles and outside the Northeast Corridor. The requirement applies to 28 routes.

The deadline is Oct. 16. Three states have yet to sign agreements to keep paying the majority of the costs for operating services.

New York announced an agreement yesterday to cover about $22 million in costs this fiscal year to keep operating the Empire, Adirondack, Maple Leaf and Ethan Allen lines. It costs about Amtrak $100 million a year to operate the four routes.

–Editors: Bernard Kohn, Elizabeth Wasserman

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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