audit by the Comptroller General.

We believe that section 805 of the current legislation provides adequate audit and reporting authority and that section 554 (c) of the proposed bill is not needed.

Finally, we would point out as a general observation that enactment of the bill would effect fundamental changes in Amtrak's structure and financing which cannot be implemented at once. We suggest, therefore, that consideration be given to including in the bill a delayed effective date and detailed transition provisions.

Enclosure

Sincerely yours,

T. 7. K+11.

Deputy Comptroller General
of the United States

On May 15, 1978, the Committee on Interstate and Foreign Commerce reported favorably upon, and recommended passage of, the Amtrak Improvement Act of 1978 (H.R. 11493). This letter is to inform you that we have serious concerns about several provisions, and because of them, would oppose the provisions as currently written.

This legislation provides for implementation of a new Amtrak route structure. The study leading to this new system was undertaken in response to the concerns of the Congress and the Administration with Amtrak's rapidly rising costs. These provisions of concern to us would all add significantly to the cost to the public of providing intercity rail passenger service without providing commensurate benefits.

1. The bill requires that before the Secretary's final
recommendation for a new Amtrak route structure shall
take effect, both Houses of the Congress must adopt a
resolution approving those recommendations. We are
concerned that such a requirement for direct Congres-
sional approval will excessively delay, if not prevent,
implementation of any new Amtrak route system. Moreover,
the requirement will unnecessarily subject the proposed
route structure to local political pressures, likely
resulting in the continued operation of routes which
have no economic or transportation policy justification.
This requirement could well result in maintenance of the
status quo, with an unsatisfactory route structure
continuing to contribute to cry serious deter foration
in Amtrak's financial picture.

2.

The bill does not contain any language designed to
clarify the nature of Amtrak's payments to the railroads
under section 402(a) of the Rail Passenger Service Act.
Unless language similar to that contained in S. 3040 is
adopted, a recent ICC ruling in the compensation case of
Amtrak and the Texas and Pacific Railway Company, if

3.

4.

5.

applied to all other railroads, could result in an unwarranted additional requirement for Federal subsidy to Amtrak of as much as $100 million per year. Most of that amount will not go to compensating the railroads for services which are directly provided to Amtrak, but will instead reimburse the railroads for costs which they would incur even if Amtrak did not exist.

Section 14 of the bill would amend section 403(b) of the
Rail Passenger Service Act to give the ICC the authority
to order Amtrak to institute 403(b) services requested
by the states which the ICC finds are consistent with
the public interest. We are concerned that this provision
would interfere both with the legitimate management
responsibilities of the Amtrak Board of Directors and
with the Congressional authorization and appropriation
process. Under this amendment, the ICC could, in effect,
require the Amtrak Board to reduce important services
elsewhere in the system to provide funds for operation
of specific 403(b) services, or alternately, to force
the Board to come to Congress for additional appropria-
tions to operate such services.

The bill, in section 3(e)(2), would freeze the existing
Amtrak system through the end of Fiscal Year 1979, with
certain exceptions. We believe that such a freeze is
unnecessary and would be unduly costly. I note that the
Senate Bill contains no such freeze and, in fact, that
the Senate Commerce Committee Report on S. 3040 indicates
a strong intent that Amtrak immediately move to apply
the route and service criteria to eliminate routes and
to operate within the $510 million authorized in the
Senate Bill. In our preliminary route study recommen-
dations, we have projected a need for an operating
subsidy of $575 million in FY 1979, and have assumed
orderly transition to the new Amtrak system, commencing
immediately after Congressional review of the Secretary's
final route structure recommendations. Such a transition
would permit routes to be dropped from the Amtrak system
beginning in mid-1979. We would support legislation
which facilitated such a transition.

Section 15 of the bill would authorize Amtrak to operate commuter services under contract with state or local governments. We have promised in our preliminary report on the Amtrak route structure to further study the commuter issue and to provide you, in our final report,

6.

with recommendations as to the proper Amtrak role in
providing commuter services. We believe that any
modification to the law regarding the provision of
commuter services by Amtrak prior to that time would be
premature.

Section 5 of the bill confers jurisdiction upon the ICC
under Part 1 of the Interstate Commerce Act to conduct
hearings upon complaint of an aggrieved motor carrier
over any rate, fare, charge, or marketing practice of
Amtrak with respect to any route or service which
operates at a loss. It is our view that this provision
would encourage hosts of complaints from "aggrieved"
motor carriers. The Interstate Commerce Commission
would probably become involved in every rate increase or
decrease planned by Amtrak, and an unnecessary and

unproductive amount of legal, procedural and bureaucratic
activity would be added to the process.

My staff and I are available for further discussion of any of these points at your convenience.

Mr. ROONEY. Also at this time, I would like to announce some schedule changes. Tomorrow's hearing will be at 2 p.m. in a room to be announced. We are unable to acquire a room at this time. We will announce it by the end of this committee hearing. If not, you will be notified sometime this afternoon.

Our first witness today is Mr. Henry Eschwege, director.

It was announced last week that we would have hearings on Wednesday, but at the request of my colleague, Mr. Madigan from Illinois, that has been changed. Wednesday's hearings will be postponed until April 5.

Mr. Eschwege, you may proceed.

STATEMENT OF HENRY ESCHWEGE, DIRECTOR, COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY HERBERT MCLURE, ASSISTANT DIRECTOR; AND CLARENCE SEIGLER, SUPERVISORY AUDITOR

Mr. ESCHWEGE. Thank you. I would like to introduce my colleagues here this morning. On my left is Mr. Herbert McLure, assistant director in charge of our work involving the railroads, and on my right is Clarence Seigler, who is supervisory auditor in charge of our work at Amtrak.

We are here today to discuss our ongoing work at Amtrak and our initial observations concerning the provisions of H.R. 11089. At your request, we have just completed a review of Amtrak's operating costs, its route profitability systems, and some aspects of its route systems. Our written report will be released shortly. We did not ask Amtrak to respond formally to the report, but have discussed our findings with Amtrak officials.

We have also completed our annual review of Amtrak's performance required by section 805 of the Rail Passenger Service Act. This year we reviewed Amtrak's long-range goals to develop high-speed corridor service outside the northeast. The resulting report should be available in the near future.

Moreover, we recently published a special analysis of Amtrak's 5year plan and copies have been provided to the subcommittee. We are also reviewing some of Amtrak's high cost routes and how the route criteria and procedure approved by the Congress in 1976 have been applied. Our report on that work should be available in June. A list of our prior reports on Amtrak is included as appendix I [see p. 42] to this statement. Appendix IV [see p. 43] explains our recommendations in those reports and Amtrak's actions in response to our recommendations.

Now, I shall talk about the background. Under the program authorized by the Rail Passenger Service Act, Amtrak is charged with developing, operating, and maintaining a safe, modern, and efficient national rail passenger system. It operates, both directly and through contracts with operating railroads, about 1,500 trains per week over about 27,000 route-miles. It also manages a capital improvement program designed to upgrade equipment and facilities.

From Amtrak's beginning in May 1971 through September 1977, it generated revenues of almost $1.5 billion, but incurred operating