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All Aboard Amtrak for “Fraud, Waste and Abuse”

Friday August 10th, 2012   •   Posted by K. Lloyd Billingsley at 4:05pm PDT   •  

Amtrak holds a monopoly on food and beverage sales on Amtrak trains. That has not prevented the taxpayer-funded rail system from losing nearly $1 billion—a full $834 million—on those services since 2002, about $80 million a year. In 2011 Amtrak spent $206 million on food services but collected only about $121 million. A hamburger that goes for $9.50 on Amtrak costs taxpayers $16, according to critics of Amtrak on the House Transportation and Infrastructure Committee. A $2 drink costs taxpayers about $3.40 and labor adds nearly 60 percent overall, critics said. Also in play is subtraction by Amtrak employees.

On-board food and beverage revenues and inventories are “vulnerable to fraud, waste, and abuse,” according to a June 2011 report by Amtrak Inspector General Ted Alves. Amtrak’s federal workers inflated first-class meal checks, sold non-Amtrak items, shorted cash register sales, and stole inventory. The report estimates the losses from theft from $4 to $7 million a year. “These losses,” the report says, “also damage Amtrak’s reputation as a steward of federal funds and as a provider of high-quality customer service.” What reputation Inspector General Alves had in mind remains unclear.

As the New York Times noted, Amtrak’s food and beverage service “has never broken even since it was required by Congress to do so in 1981.” An October 2005 report by the federal General Accounting Office cited poor management and lack of planning among the causes. Amtrak bosses said they were taking steps to fix the problem, which appears to getting worse. As Alves noted, in 2010 Amtrak took in $131 from food and beverage sales at a cost of $192 million, plus $93 million in indirect costs such as fuel, power and maintenance.

A decade of massive losses on food and drink service should not obscure the larger reality that Amtrak itself is unprofitable. In 2002 Amtrak CEO David Gunn told Congress that “Amtrak will never be profitable.” Analyst Anthony Hatch argues that even profitability “won’t be enough” because Amtrak cannot ever make enough to attract capital for new equipment. “So no matter what,” as one commentator put it, “government must belly up to the bar.”

Government money does not mean efficiency. In August Amtrak began cutting commuter train service in the Capitol Corridor between Sacramento and the Bay Area. 

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August 2012