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Mr. KIRK. Mr. Chairman, I best can explain it this way. This railroad cannot go on indefinitely the way it is and there must be a reorganization, or something drastic happen here.
Now, in the reorganization there will be presented claims against this property and among the claims will be the per diem claims of the foreign railroads whose cars we use and for which we are paying lesser sums than they are claiming.
Now, this amounts to a very substantial amount of money. The treatment of those claims in any plan of reorganization is something for the future to decide, but they are in the magnitude, the claims, themselves, and this is a very approximate figure, approximately $15 million.
Senator PASTORE. There was a controversy over the increase of the per diem rate and the New Haven has been paying the old rate and that suit is pending. And if the court decides against the New Haven, it would necessarily mean that you would have to come up with the difference?
Mr. KIRK. Mr. Chairman, the claims arising subsequent to the bankruptcy will occupy a different category than the claims arising prior to the bankruptcy.
Senator PASTORE. But have the trustees been paying on the old rate per diem?
Mr. KIRK. We have not been paying the full rate claimed by the foreign railroads. But our income accounting is charged with the full per diem charges. This is the only way we can properly express our true income situation.
Senator PASTORE. That is since you took over as trustees. Was that the rule before?
Mr. KIRK. I believe it was, sir.
Senator LAUSCHE. On that point, you stated a moment ago that your cash position has been adversely affected by about $2 million for one of the years. Mr. KIRK. In the last year, we lost $2.3 million in cash; yes, sir. Senator LAUSCHE. That is in 1964 ? Mr. KIRK. Yes, sir.
Senator LAUSCHE. Now, your fiscal statement contained on exhibit 3 shows a net deficit of $15 million.
Mr. KIRK. Yes, sir. · Senator LAUSCHE. That means that in this $15 million are many of these deferred debts
Mr. KIRK. That is correct. Taxes chargeable that are not being paid, the per diem claimed, and all items properly charged on a sound accounting basis are reflected in that income account.
Thus, while we eliminated cash attrition prior to 1964 from an operating standpoint, we were actually creating new deferred obligations, most of which one day must be paid as a priority administration charge.
Our trustees' certificates are such an example. Realistically and financially, every day of operation under present conditions, and since July 1961, has deprived the creditors of an additional part of their security.
Senator PASTORE. To what extent?
Mr. KIRK. To the full extent of the losses reported year to year.
Our net income deficit statistics, which we have furnished to the committee indicate the scope of the adverse impact on our creditors.
The trustees have along been aware, and have so stated, that no reorganization would be possible without public underwriting of passenger service. Mr. Smith has testified to the frustrations in this respect in the last 3 years.
* Any program that merely keeps the New Haven going on a cash basis without paying costs on a business basis, will merely prolong the bankruptcy until the property literally disintegrates at the expense of the creditors. Judge Anderson has, of course, made clear that the law cannot permit this to happen.
Recently, for the first time, we have seen in our area an approach by a public authority which recognizes the essentials of our problem. I have reference to the Massachusetts Bay Transportation Authority, an agency created in August 1964.
Last week, the trustees agreed in principle with the authority to enter into a contract under which the New Haven will furnish service on its five Greater Boston suburban lines on a basis which will fairly pay the cost of the service, together with a return on equipment investment and a moderate management fee.
While specific provisions remain to be negotiated, it would appear that our deficit in this portion of our service would be substantially eliminated.
A further important aspect is that the authority will proceed to determine what portions of the service should be continued in the public interest and eventually operated directly by the authority.
In the meantime, the trustees can and will proceed to seek legal authority to discontinue the service as being a responsibility of the railroad, in recognition of public assumption of its responsibility for it.
As a final word to this statement, I would like to say this. The members of the committee may have heard the charge that the New Haven's passenger service is operated inefficiently.
Among railroad people, considerable weight is given to the statistical result known as the operating ratio and that is shown in the exhibit No. 8 submitted to you. I have shown New Haven's passenger service operating ratio for all years from 1947 through 1963.
The operating ratio, of course, does not reflect the impact on the passenger service of taxes and rents.
Let me state this for the record. Year after year, the New Haven Railroad has one of the lowest passenger operating ratios of any railroad in the country.
Thank you, Mr. Chairman.
(Exhibits follow :)
EXHIBITS TO STATEMENT OF WILLIAM J. KIRK, TRUSTEE, NEW YORK, NEW HAVEN
& HARTFORD RAILROAD Co., DEBTOR
ЕхнІвит в Passengers into and out of New York City (Grand Central Terminal and
125th Street Station)
THE CRISIS IN PASSENGER TRAIN SERVICE
1947 1948.1949.1950.1951.. 1952.. 1953... 1954.-1955.
Ratio | Year—Continued
96. 89 1963...
Ratio 102. 22 101. 73 95. 57 98. 26 99. 88 103. 25 101. 62 98. 46