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No. 425

February 8, 2002

A Plan to Liquidate Amtrak

by Joseph Vranich, Cornelius Chapman, and Edward L. Hudgins

Executive Summary

Having found that the government-owned

Railroad liquidations through insolvency

passenger rail company, Amtrak, will not be able

proceedings were common in the 19th century

to break even by the end of 2002, the Amtrak

when railroads were the principal means of

Reform Council is required by the Amtrak Reform

transportation in America. Amtrak's passenger

and Accountability Act of 1997 to submit a reor-

rail operations constitute a very small part of

ganization plan by February 7. Amtrak itself had

transportation today; thus bankruptcy would

been required by the same law to develop a plan

produce very little disruption of travel.

for its own liquidation, but a handful of senators

If unpaid creditors forced Amtrak into bank-

blocked Amtrak from doing so. That congression-

ruptcy, a trustee would be appointed to manage

al action shortchanges the public of a much-need-

the sale of Amtrak's assets. In the liquidation

ed discussion of liquidation, considering that

process the value of assets would be determined

Amtrak's financial losses continue to mount and

through a market process. A number of parties

perpetuation of the status quo cannot be justified.

have already expressed interest in purchasing

The plan presented here is designed to contribute

Amtrak's Northeast Corridor operations, which

to the public's understanding of Amtrak liquida-

include the rolling stock, tracks, and stations.

tion issues despite the failure of Amtrak to put

This part of the system likely could be run effi-

such a document on the public record.

ciently and at a profit by private owners. Other

Liquidation would force Amtrak to lay before

parts of the system might be purchased by

the public and policymakers all the information

freight companies of other operators. Money-

about its poor financial condition and operating

losing routes no doubt would be abandoned.

record. Liquidation would be the best way to

The reforms currently being discussed by the

stop the waste of taxpayers' dollars and to give

Amtrak Reform Council are too little, too late. It

parts of Amtrak's passenger operations the best

is in the public interest to use existing bankrupt-

chance of survival.

cy laws to liquidate Amtrak.

_____________________________________________________________________________________________________

Joseph Vranich served on the Amtrak Reform Council from February 1998 to July 2000. He has also served as pres-

ident and CEO of the High Speed Rail Association and as executive director of the National Association of Railroad

Passengers. Cornelius Chapman is a member of the Boston law firm of Hutchins Wheeler and Dittmar. Edward L.

Hudgins is former director of regulatory studies at the Cato Institute.