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can talk about the East End, West End, and the through service, but our passenger service is operated as an integrated passenger operation.
Senator PASTORE. Let me ask you this question, Mr. Kirk. What was the operating loss for the passenger service both long haul and commuter for the year of 1964? Are you able to get that?
Mr. KIRK. I am going to give you an educated guess and that is all I can do because of this problem, as I say, of how in the world can you properly segregate these costs. Any figure I give you may be challenged by someone else by saying, you arrive at this figure how, because we allocated costs this way and they will say, that is not the way I allocated those costs. So, with that qualification, I will give you this horseback guess.
Senator PASTORE. All right, sir.
Mr. KIRK. The commuter service in and out of Boston in the order of magnitude of a $112 million of the deficit. The suburban commuter service in and out of Grand Central Station of New York in the magnitude ranging from $5 million to $6 million a year. Now that gives us a figure of $61/2 to $7 million for those two services, and without total passenger a loss of $12 million. You would have to attribute some $5 to $51,2 million to the through passenger service.
Senator PASTORE. Well, now, can I put it another way? Mr. KIRK. Yes, sir. Senator PASTORE. And give it some thought, and I know this is the $64 question, so don't answer too fast. If you were approached by the Governors of the four States who came to you and said: “We want to pick up the check on the deficit here on the passenger service," how much would you ask Massachusetts to pay, how much would you ask Rhode Island to pay, how much would you ask Connecticut to pay, and how much would you ask New York to pay?
Now don't answer me too fast. [Laughter.]
Mr. KIRK. Let me be a little bit philosophical, if I may, in my approach to the answer to that problem and that is this. That it is axiomatic that no bankrupt organization can be reorganized unless there is in prospect earning power, because it is earning power alone that can be capitalized to support a financial structure. I would have to state further that there would have to be a degree of continuity of earning power to properly reorganize a company. Now to have that continuity of earning power one cannot sit here and determine what the aggregate payments should be to finance the cost of this passenger service.
Senator PASTORE. How about percentages?
Mr. KIRK. Because the costs vary from year to year. We have demonstrated by our exhibits presented here today that, whereas a year or so ago, the passenger loss was in the order of magnitude of $8.5 million, today it is in excess of $12 million. We must have the costs.
Senator PASTORE. Let me put it differently. You see I am a practical man.
Mr. KIRK. Yes, sir.
Senator PASTORE. You know how much of the service runs through and services Massachusetts, how much of it services Rhode Island, how much of it services Connecticut, and how much of it services New York. Now my question, in order to reach a figure, if we contemplate a loss, and after all, that is the figure you are taking at the end of the year, you have lost so much money- for what reasons, of
course, is something that is bookkeeping—what percentage, what percentage of the deficit would you ask Massachusetts, Rhode Island, Connecticut, or New York to assume in this deficit regardless of what it might be in dollars? Now somewhere along the line we have to come to this formula and I don't think there is anybody in the United States of America who knows the formula better than you three very reputable, intelligent people who have been running this railroad for the last 3 or 4 years.
Senator LAUSCHE. I thought you said ruining. [Laughter.] Senator PASTORE. I have the highest respect for these gentlemen. I have been in contact with them many, many times and they are doing, they are trying to do the best they can.
Senator LAUSCHE. May I say that I respect the manner in which this is being presented and I am not challenging their activities in the operation of this system.
Mr. KIRK. Mr. Chairman, I don't want to sound like a coward, I have come here to be as frank as I can in this situation. As I stated, this allocation has got to be by negotiation.
Now there are many measurements that you can use, ton-miles, passenger-miles, all this sort of thing. I would rather, frankly, than attempt to give an answer off the top of my head, I couldn't at a later date possibly defend, volunteer to assist the States in furnishing them information and giving them concrete answers to concrete questions when and if that time is to come. But I just feel that any answer I give to the question
Senator PASTORE. I shall not press it because I warned you in the beginning about the type of a question I would ask, but I would hope this, that you would whisper it in my ear in the quiet of my office sometime. Mr. KIRK. I would be happy to discuss it.
Senator LAUSCHE. On exhibit 3 you have a tabulation of a tax burden of this railroad. And it shows that for 1964 your taxes were $9,030,000. Will you please tell the committee what type of taxes were covered by that aggregate expense ?
Mr. KIRK. Mr. Senator, in order to give you a correct and definite answer to that question, I would like to have Mr. Hollis Coyle, our comptroller come to the table with specific figures.
This figure includes taxes tied to wages, et cetera. I think Mr. Coyle would be more helpful.
Mr. COYLE. In 1964 the Federal income taxes payable on the earnings of our leased lines, Providence and Worcester, and Holyoke and Westfield, totaled approximately $113,000.
Senator LAUSCHE. That is the Federal tax? Mr. COYLE. Federal income tax which New Haven assumes for the leased lines under the terms of the lease.
The State revenue tax accrued in the State of New York on the business which is intrastate in New York, and a tax which by the way is being deferred, totaled approximately $81,000. Payroll taxes totaled $5,922,000. Real estate taxes totaled $2,849,000. And the multitude of small miscellaneous taxes totaled approximately $65,000.
Senator LAUSCHE. These tax obligations insofar as States were concerned, as distinguishable from the Federal Government, were collected by New York, Rhode Island, Connecticut, and Massachusetts? Mr. COYLE. They would have been collected if they had been paid. Senator LAUSCHE. They were deferred ?
Mr. Coyle. Payable to the municipalities or the States, mostly to the municipalities in the States and very little of it, by the way, in Connecticut, because
Senator LAUSCHE. What type of taxes are you paying mainly to the States?
Mr. COYLE. There are no significant taxes to the States as entities, to the States themselves, paid directly to the States except the $81,000 of this New York State revenue tax. There are a few small taxes like assessments on gasoline and things like that which are paid to the States, but most of the non-Federal taxes are to the municipalities and they are primarily in Massachusetts, Rhode Island, and New York because our tax laws in Connecticut are at the present time such that there are practically no taxes.
Senator LAUSCHE. I observe from a statement issued by the Interstate Commerce Commission on page 397 of the report, for example, the tax relief legislation recently enacted by the Commonwealth of Massachusetts may prove to be of no benefit to the New Haven Railroad because of its restrictive provisions relative to termination of employment.
Mr. KIRK. That is correct. Commonwealth of Massachusetts purported to give tax relief to the New Haven Railroad. We have never received any benefit from that so-called tax relief. We asserted our right to that tax relief and it was denied by the Commonwealth and that has gone on for a period of some years. There is no tax relief in that State.
Senator LAUSCHE. Is it correct that it said we will grant you tax relief, but you must commit yourselves to maintain the present level of employment whether you think you need it or don't need it?
Mr. KIRK. It isn't quite that, Senator. They set up procedures where we had to go into the Superior Court of the Commonwealth to get an order permitting us to drop any employee. It was, as a matter of administrative practice, totally impossible.
Senator LAUSCHE. The South Station has been mentioned here. Where is that located ?
Mr. KIRK. South Station is the terminal in Boston, Mass. It is used jointly by the New York Central and the New Haven Railroad. That is in bankruptcy itself.
Senator LAUSCHE. Is that on the tax duplicate, carrying with it an obligation of the railroads to pay real estate taxes?
Mr. KIRK. Yes, there have been very, very heavy inordinant taxes by the city of Boston on that terminal company, which was the primary reason it had to go into bankruptcy.
Senator LAUSCHE. Do you know when that station was built?
Senator LAUSCHE. And do you know at what value it is on the tax duplicate about $5 million?
Mr. KIRK. No, sir, in the neighborhood of $9 million.
Senator LAUSCHE. Is it on the tax duplicate at its cost greater than the cost was when it was built ?
Mr. KIRK. I don't believe so, sir, but we had this problem, if I may just spell it out for a moment.
It has been the practice there—well I will try to give you general figures. The property was assessed by the city of Boston for $10.5 million. The Post Office Department came along and took a part of the property for post office purposes. And the question was, How much value was in that taking? Now in these rough figures, here is what happened. The assessment, $10.5 million, of which we will say $6.5 million is on the land, $4 million on the structure. The Post Office takes part of the land to the extent of $1.5 million. The Boston Terminal Co., prior to bankruptcy, and of which I was president, the following year, after the $1.5 million taking got this tax assessment from the city. They took $1.5 million of the $6.5 million for the land, and assessed it at $5 million. They reassessed the building from $4 million to $5.5 million so the assessment remained unchanged.
Senator LAUSCHE. Does that situation prevail now?
Mr. KIRK. That situation does not prevail now. The terminal was put into bankruptcy. We and the New York Central from time to time are called upon to pay a portion of those taxes to preserve our rights of appeal under the laws of the State in which we operate there. As I say, that property is now in bankruptcy, it is under the jurisdiction of the same court the New Haven is but it has a different trustee.
Senator LAUSCHE. Did the officials of this railway, prior to your induction into office, offer to give this terminal station to the city of Boston to spare itself of the tax burden?
Mr. KIRK. I don't know if that is the proper expression. When we came on the scene, there purported to be an agreement to sell the property to an individual at a very low sum. And I assume that No. 1, to remove the heavy tax liability from the banks of the two railroads, which would save the railroads more money than trying to sell the property at a higher price.
I don't know. That is an assumption on my part.
Senator LAUSCHE. If you were spared the local municipal, county, and State taxes in the four States, how much money would there be made available for you to amortize or neutralize this passenger deficit ?
Mr. KIRK. Mr. Hollis Coyle just put into the record the figure that in 1964 real estate taxes accrued and unpaid in the States in which we operated totaled some $2,850,000.
Now, if those taxes were eliminated, the situation would be improved to that extent.
Senator LAUSCHE. Was the tax situation that you have thus far described worse at a period in the past before these States woke up
to the proposition that they had to do something about helping you survive?
Mr. KIRK. We all know that in every line of endeavor, every municipality, State, Federal Government, until lately, expenditures have gone up and taxes have gone up. So the taxes have been constantly increasing as tax rates go up, even though assessments remain unchanged. This is what we have been faced with.
But I point this out to you, that since the trustees assumed the administration of this property, no additional tax relief has been granted. All this tax relief was granted prior to bankruptcy in an effort to keep the railroad out of bankruptcy and, in fact, the trustees have been
penalized by the State of New York who took away part of the tax exemption formerly given to the railroad prior to bankruptcy. Senator LAUSCHE. Going to another subject
Senator PASTORE. And, as a matter of fact, the State of New York has the highest and the greatest interest in the commuter service of the entire line; hasn't it?
Mr. KIRK. It has a very substantial interest when we take that very many people into the city.
Senator PASTORE. About 30,000 a day?
Senator LAUSCHE. On that thought, what is the shortest distance that
you haul and the longest distance, the average daily commuter out of New York City? Can you answer that?
Mr. KIRK. The shortest, I believe, is about 16 miles, somewhere in that area.
And if we go back as far as New Haven, we are talkingand a number of people go in daily to New Haven-we are talking 72 miles.
Senator LAUSCHE. To what causes, primarily, which you ascribe your inability to run this railroad on a self-sustaining basis.
I now take up the matter of competition by rail, by truck, and otherwise, tax burden, increased labor costs, deficits in passenger operation, if you will just give me the causes that you ascribe for your difficulties.
Mr. KIRK. If you look at the passenger operations alone, of course, we are not too concerned with trucks, there are autos, buses, and air. For instance, Boston to New York, lots of bus service.
Mr. MOORE. Particularly for the businessman at least, is the very efficient shuttle service in the air between those two cities.
Senator LAUSCHE. Between where?
Mr. KIRK. Between Boston and New York. This has added a very significant adverse effect on our long-haul passenger business.
Now, as to the commuter business, the problem there is inherent in the nature of the business itself. These commuter trains are only busy a short time in the morning, a short time in the evening.
Senator LAUSCHE. What is that time?
Now, this equipment lies idle the rest of the day. As I indicated earlier to the chairman, in the case of New York, this service requires three full tracks in this heavily congested area. These crews are idle a good part of the day and you cannot in the service we provide get more than one run for most of our trains per morning and per afternoon. It is the very nature of the business
Senator LAUSCHE. Does that mean you get two runs from the same workers a day?
Mr. KIRK. In the morning and in the evening: yes, sir.
Mr. Kirk. Yes, sir. And if the spread is beyond 8 hours, we don't get two runs from the same crew.
Senator LAUSCHE. What is the overtime cost?