A Plan to Liquidate Amtrak

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Having found that the government-ownedpassenger rail company, Amtrak, will not be ableto break even by the end of 2002, the AmtrakReform Council is required by the Amtrak Reformand Accountability Act of 1997 to submit a reorganizationplan by February 7. Amtrak itself hadbeen required by the same law to develop a planfor its own liquidation, but a handful of senatorsblocked Amtrak from doing so. That congressionalaction shortchanges the public of a much-neededdiscussion of liquidation, considering thatAmtrak's financial losses continue to mount andperpetuation of the status quo cannot be justified.The plan presented here is designed to contributeto the public's understanding of Amtrak liquidationissues despite the failure of Amtrak to putsuch a document on the public record.

Liquidation would force Amtrak to lay beforethe public and policymakers all the informationabout its poor financial condition and operatingrecord. Liquidation would be the best way tostop the waste of taxpayers' dollars and to giveparts of Amtrak's passenger operations the bestchance of survival.

Railroad liquidations through insolvencyproceedings were common in the 19th centurywhen railroads were the principal means oftransportation in America. Amtrak's passengerrail operations constitute a very small part oftransportation today; thus bankruptcy wouldproduce very little disruption of travel.

If unpaid creditors forced Amtrak into bankruptcy,a trustee would be appointed to managethe sale of Amtrak's assets. In the liquidationprocess the value of assets would be determinedthrough a market process. A number of partieshave already expressed interest in purchasingAmtrak's Northeast Corridor operations, whichinclude the rolling stock, tracks, and stations.This part of the system likely could be run efficientlyand at a profit by private owners. Otherparts of the system might be purchased byfreight companies of other operators. Money-losingroutes no doubt would be abandoned.

The reforms currently being discussed by theAmtrak Reform Council are too little, too late. Itis in the public interest to use existing bankruptcylaws to liquidate Amtrak.

Joseph Vranich and Cornelius Chapman

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