Amtrak nears rescue deal

The deal should keep the trains moving

Amtrak, the state-owned US rail network, has reached a tentative deal with the Department of Transportation which should avert the threat of an immediate suspension of services.

Mineta: Time for short-term solutions

Arrangements for meeting a $200m budget shortfall are expected to be put in place on Thursday, with a deal to allow Amtrak to borrow $100m from the US Government immediately to keep the trains running until August.

Subject to a financial audit and other conditions, the government will then help Amtrak obtain an additional $100m.

That money would see the company through to the end of September, at which point Congress should agree its normal annual funding.

But if Amtrak does not get the money, the company says it could shut down services in early July.

Transportation Secretary Norman Mineta and Amtrak chairman John Robert Smith that the two sides made "excellent progress" in talks on Wednesday.

No profit

Amtrak was set up as a non-profit corporation in 1971, and its services are used mostly by commuters in the North-East - around New York, Pennsylvania and New England - and in Chicago and California.

It has never made a profit, and is now $4bn in debt.

That, together with the fact that it has yet to finish its audit for 2001, means banks are unwilling to stump up fresh money.

David Gunn is begging for money

But Amtrak and Mr Mineta still do not see eye to eye on what strings should be attached to any new money.

Mr Mineta insists that aid should be tied to reforms.

Amtrak, on the other hand, says it has already cut costs to the bone, while the suggestion by the White House that it can raise new money in a hurry by mortgaging Chicago's Union Station has been rejected because it would take too long.

But Mr Mineta admits that long-term solutions will have to take a back seat for now.

"We ought not to be imposing a whole list of conditions that ought to be considered in the long term," he said.

"What we've got to deal with is more short-term."

In any case, even a shutdown could prove too expensive for Amtrak to handle.

David Gunn, the company's president since last month, said it would cost $40m and take four days just to take the trains off the track, not to mention a bankruptcy filing.

He told reporters the company would have only about $100m at the beginning of July.

"The situation then goes critical shortly after the Fourth of July," he said.