Murray Demands Answers on Bush Plan to Bankrupt Amtrak

Feb 16 2005

In letter to Mineta, Senator decries policy as “reckless and irresponsible”-- questions whether a functioning railroad could ever emerge from bankruptcy reorganization

(WASHINGTON, D.C.) – U.S. Senator Patty Murray (D-Wash), the top Democrat and past Chairman of the Senate Transportation Appropriations Subcommittee, today sent a letter to Transportation Secretary Norman Mineta demanding answers regarding the Bush Administration’s plan to push Amtrak into bankruptcy.

Citing sections of the President’s Budget calling for “the reorganization of the railroad through bankruptcy procedures,” Murray asks Mineta to explain how the needs of over 25 million Amtrak riders nationwide will be protected once the railroad is run by a bankruptcy trustee – a trustee whose statutory responsibility is to the railroad’s creditors.

“Ceding control of the national railroad to a bankruptcy trustee is both reckless and irresponsible. This plan will put at grave risk the travel options of every Amtrak rider, not just those riding the worst performing lines,” Murray writes.

Murray’s letter also notes a dramatic change in the Administration’s position on Amtrak – from one of budgeting money for a reformed Amtrak to one of cutting all funding now and into the future.

“Last year, your budget request sought $900 million for Amtrak for fiscal year 2005 and budgeted $1.4 billion for each year thereafter,” the letter states. “Your new budget request seeks no funds for direct Amtrak expenses in fiscal year 2006 and no funds in any year thereafter.”

Murray’s letter raises questions about the future viability of Amtrak under the Administration’s new plan as well as the subjects of daily commuter rails and employee contracts.

The full text of Murray’s letter follows:


February 16, 2005

Mr. Secretary:

I write to you in your capacity both as Secretary of Transportation and a Member of the Amtrak Board of Directors. I recently read with interest and concern page 243 of the President's Budget for the coming fiscal year in which the Administration states its intent to put Amtrak into bankruptcy for the purpose of reforming it. Specifically, the President’s Budget states:

“With no subsidies, Amtrak would quickly enter bankruptcy, which would likely lead to the elimination of inefficient operations and the reorganization of the railroad through bankruptcy procedures. Ultimately, a more rational passenger rail system would emerge, with service on routes where there is real ridership demand and support from local governments-such as the Northeast Corridor.”

The President’s “Major Savings and Reforms” document that was delivered to our Subcommittee just last Friday, echoes these intentions. Speaking of a potential Amtrak bankruptcy, the document states that:

“such a scenario would likely yield restructuring and efficiencies through the auspices of a bankruptcy court.”

This dramatic policy change on the part of the Administration is certainly borne out by President Bush’s formal budget request. Last year, your budget request sought $900 million for Amtrak for fiscal year 2005 and budgeted $1.4 billion for each year thereafter. Your new budget request seeks no funds for direct Amtrak expenses in fiscal year 2006 and no funds in any year thereafter.

This is an extraordinary and, in my view, dangerous turnaround in the Administration’s position regarding Amtrak. Ceding control of the national railroad to a bankruptcy trustee is both reckless and irresponsible. This plan will put at grave risk the travel options of every Amtrak rider, not just those riding the worst performing lines.

We will undoubtedly have the opportunity to pursue it in greater detail during the Subcommittee’s upcoming hearings. But, in the interest of having a fruitful and informative dialogue, I would appreciate it if you would answer several questions regarding the Administration’s new policy at your earliest possible convenience:

  1. Do you anticipate that Amtrak will be in a position to continue operating once it enters bankruptcy? Your budget seeks $360 million so that the Surface Transportation Board can direct the continuation of operations of those commuter agencies that require the use of Amtrak property or personnel. However, the 2004 law authorizing these STB payments only allows these dollars to be provided once Amtrak has ceased operations. Is it fair to assume, therefore, that you anticipate a period during which all Amtrak services, including those on the Northeast Corridor, will cease during fiscal year 2006? What planning is your department engaged in with the nation’s governors, state transportation departments, airlines and airports to mitigate the impact of the disruption and congestion that will be triggered by this termination of Amtrak service?

  2. As you know, in recent years, a number of airlines have entered bankruptcy while continuing to operate with the benefit of protection from their creditors. However, each of these carriers entered bankruptcy with vast cash reserves so that they could continue to meet payroll and other operating costs while they reorganized. If you do anticipate that Amtrak will be able to follow this model and operate while in bankruptcy, please provide me with an estimate as to how much cash you expect Amtrak to have on hand at the beginning of fiscal year 2006 if we accept the President’s Budget request and provide no subsidies to the railroad for that year? How long do you anticipate that Amtrak will be able to operate before depleting that cash balance?

  3. As you know, Amtrak currently carries long-term debt totaling more than $3.8 billion requiring annual debt service payments of more than $275 million. More than $1.5 billion of this total is associated with debt attributable to procurements over the Northeast Corridor. What do you anticipate will be the fate of these debts once Amtrak enters bankruptcy? More than $1.3 billion of Amtrak’s total debt is held by the export-import banks of the nations of Canada, Germany and Japan. In addition, a considerable amount of the debt is held by financial institutions based in France. Have you alerted these entities, or their parent governments, of the Bush Administration’s intention to put Amtrak into bankruptcy and put the full or partial repayment of these debts under the control of a bankruptcy trustee? Are you at all concerned with the potential impact of a full or partial default of these debts on the ability of other U.S. transportation enterprises – especially transit agencies -- to gain access to affordable capital?

  4. Since your Amtrak reform plan anticipates the creation of a multi-state compact of Northeastern States to address the operations and maintenance of the Northeast Corridor, do you anticipate that the Northeastern States will take on the exposure to the $1.5 billion in outstanding debt attributable to the Northeast Corridor? Similarly, your proposal to reform Amtrak would divide the railroad into three separate entities. Please identify with precision which entity would take over which portion of Amtrak’s $3.8 billion long term debt.

  5. All of Amtrak’s debt is collateralized with the lenders having the ability to repossess Amtrak’s rolling stock or take possession of other Amtrak assets in the event of default. Under your vision for an Amtrak that is placed into bankruptcy and then reformed, how will the new railroad operate if major rolling or static assets have been repossessed?

  6. You will undoubtedly recall the credit instrument that Amtrak entered into with a consortium of lenders in June of 2001. You were required to subordinate that debt early in your tenure as Transportation Secretary. Under the provisions of that instrument, the consortium of lenders led by Credit Lyonnais, their agent, took as collateral the access rights for Amtrak passengers to the platforms at Penn Station – the nation’s busiest rail station. If you are successful in putting Amtrak into bankruptcy, how will you be able to restore Northeast Corridor service at some future point if Amtrak passengers are legally barred by a creditor from the platforms?

  7. In addition to Penn Station, New York, Amtrak owns several other major downtown rail stations including Union Station in Chicago, 30th Street Station in Philadelphia, Penn Station in Baltimore as well as sizeable stations in Oakland, and Wilmington. Many commuter agencies lease space from Amtrak to operate out of these stations including METRA, SEPTA, the Long Island Railroad, New Jersey Transit and others. Once Amtrak is put into bankruptcy, what confidence do you have that the bankruptcy trustee will decide that it is in the interest of the creditors to maintain these downtown properties as rail stations? Is it not possible, if not likely, that these downtown properties would instead be put up for sale by the trustee as potential commercial property to obtain the highest price for the creditors? What impact might this have on transit service in these cities and what planning has your department engaged in to address the long term continuity of transit service in these facilities?

  8. In regard to Amtrak’s employee contracts, what is the Administration’s position regarding the ability of Amtrak to demand reduced pay and benefit levels of its employees once it enters bankruptcy? Is it your view that Amtrak will continue to have exposure to so-called C-2 payments to dismissed employees when Amtrak is placed into bankruptcy

Many thanks for your prompt reply to these questions. While I believe the Administration’s chosen plan for Amtrak is reckless and irresponsible, I remain hopeful, that, working together, we might develop a more logical and reasonable process for ensuring rail service as an affordable and available option for the American public.


Patty Murray
Ranking Member
Subcommittee on Transportation, Treasury and General Government

cc: The Honorable Kenneth Mead
The Honorable David Laney
The Honorable Wolfgang Ischinger
The Honorable Ryozo Kato
The Honorable Jean-David Levitte
The Honorable Michael F. Kergin