Amtrak no longer has to live ‘hand to mouth’ after being starved of funding for decades, CEO says

In January 2021, lifelong Amtrak super user and evangelist Joe Biden was inaugurated as the 46th president of the United States. While any company would have been overjoyed to have an avowed and openly loyal customer as president, it was an especially salient moment for the beleaguered train system, which is heavily reliant on federal funding and had received relatively little of it throughout much of its 53-year history.

Slightly less than a year into Biden’s presidency, in December 2021, Amtrak got a transformative commitment of $66 billion, four times the amount it had gotten in the previous six years. It marked a sea change, because Amtrak can now afford to both keep its current fleet of trains running and also invest in much needed infrastructure upgrades—instead of having to choose between the two.

“We’ve always lived hand to mouth, year to year,” Amtrak CEO Stephen Gardner told Fortune in an interview. “It made it incredibly difficult to do multi-year programs, because we might have the money to start them and pay for year one, but no idea whether we’d have money in year two or four or six.”

The investments have already improved Amtrak’s commercial performance. In the last three months of 2023, Amtrak’s ridership was 15% above pre-pandemic levels, according to Gardner. The comeback was led by Northeast regional routes, which stretch from Massachusetts to Virginia, where ridership grew 26% in the first three months of 2024 compared to the same period in 2019, according to data Amtrak provided.

The funding came as part of Congress’ $1 trillion bipartisan infrastructure bill, which allocated $66 billion dollars in rail investments across the country. The bill “makes available to Amtrak over the next five years the equivalent of what the federal government has invested in Amtrak over 50,” Gardner said.

But the added funding comes with added pressure—can Amtrak, after years of being strapped for funds, pull off an infrastructure upgrade of this magnitude?

A nationwide overhaul

Allan Zarembski, director of the railway engineering program at the University of Delaware, said Amtrak does a “reasonably decent job” of relying on fares to cover its operating costs, but it doesn’t have additional money for capital upgrades and needs the government to fund its long-term projects.

And Amtrak’s infrastructure needs are immense.

Amtrak was saddled with decrepit, winding tracks that made high-speed travel impossible, locomotives that predate many of their passengers, and, in Maryland, a tunnel built during Reconstruction. Because of recurrent underinvestment, the U.S. accumulated decades of unaddressed maintenance work that it’s now finally able to complete.

Without a guaranteed source of multi-year funding, it was virtually impossible to hire construction firms and ask them to take on large-scale infrastructure projects. How could Amtrak expect a partner to commit to a years-long project if it wasn’t sure it would have the money to pay them? Even if there were a contractor willing to take such a leap of faith, federal law wouldn’t allow it. Government agencies are prohibited from contracting for work beyond what’s been allocated in a given fiscal year, according to Mike Schipper, a member of the committee on America’s infrastructure at the American Society of Civil Engineers.

Even now that it finally has its long-yearned-for federal funding, Amtrak faces challenges, not least of which is the complexity and number of the projects themselves.

“The big change for me as a leader, and for the company in general, is building up this new capacity to design and construct these assets that are enormous in and of themselves,” Gardner said. “Any one of these projects is several billion dollars, and we’re launching 10 of them at the same time.”

Amtrak has already deployed tens of billions of dollars for improvements across the country. In the Northeast Corridor—which stretches from Washington, D.C., to Boston—plans are already underway to repair several bridges and tunnels along the country’s busiest train route. There’s also the beginnings of a project that would look at replacing certain tracks to allow for faster train speeds. In December, the Cascades route between Portland and Seattle added two additional roundtrips. In the Southeast, Amtrak is undertaking a $3.7 billion project to expand rail coverage between Virginia and North Carolina.

Changing Amtrak’s DNA

Since the infrastructure bill sent Amtrak billions in funding and a mandate to fix up many of the country’s railroads, it had to develop new capabilities. Amtrak went from becoming a train operator to now also a “huge capital program management entity” and “a construction company,” according to Gardner. Changing so much of its DNA has come with some growing pains.

“It’s really been about accomplishing two things at once: run the thing you have and build for the next generation,” Gardner said. “Those two activities are often complementary; sometimes [they] conflict.”

To enable its transformation from a train operator to a builder of the nation’s infrastructure, Amtrak hired 8,500 employees from 2022 through 2023.

In order to access Federal Railroad Administration funds earmarked in the infrastructure bill, Amtrak often has to collaborate with a web of federal, state, and local government agencies. States often clamor for rail upgrades but are reluctant to pony up the money needed to make it happen. In the past, states like Florida, Ohio, and Wisconsin have even outright rejected billions in federal rail funding, scuttling many of the plans Amtrak had for repairs.

To try to solve those problems, the federal government offered states a sweetheart financing deal for certain projects in the latest funding bill. In addition to covering a significant portion of construction, the federal government would also pay for 90% of the operating costs in year one, then 80% the following year, and 70% in the third year, sharing the expenses for a total of six years. Despite that, some states still need to be cajoled into committing to rail investments.

“Since we’re at the beginning here, we need some successes under our belts, and then people will follow,” Gardner said.

The nature of these projects means that some of these successes could take years to come to fruition. But for perhaps the first time in its history Amtrak has, if not a bright future, a future it can plan for at all.

All of that isn’t lost on Gardner.

“It’s the kind of time every Amtrak CEO before me has wished for, frankly,” he said. “So I’ll never complain about it. I’m the luckiest CEO in the company’s history.”

This story was originally featured on Fortune.com