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Now, it strikes me, as I sit here now, that unless we reach one plan, one plan that can be adopted, that either calls for some contribution on the part of the Federal Government with a contribution on the part of the States or the States do it on their own, there is a strong likelihood here that you are going to have a discontinuance of service and you are going to have a hiatus between the time that the service is discontinued, the passenger service, and the time that the decision is made on the merger.
Now, I realize the reluctance on the part of the Congress to come forth with more money after it has already lost some $28 million, and all of this money, of course, was paid out before the trustees took it over.
They have borrowed money, too, but they have been meeting their obligations. What do you think of a plan, Mr. Webb, whereby we would take the Pell bill, which calls for a four-State authority, which provides for the issuance of bonds up to $500 million, and combining with it a temporary subsidy on a matching grant basis?
Mr. Pell is going to instruct us further on whether or not there would be any obligation on the Federal Government with respect to the debt service but I think there hadn't ought to be.
I think so far as the interest and debt charges are concerned, I think it ought to be charged against the railroad and the authority only ought to get the advantage of the Government's guarantee for the purposes of getting the money at a lower rate of interest. Let us say the Federal Government would match one-third and the States themselves would put up two-thirds, what do you think about that as a solution to this problem both on the immediate and the long-range plan?
Mr. WEBB. It would depend entirely, Mr. Chairman, on how soon the States might be able to come to some accord in the matter. The provision for a Federal contribution for 2 years, did you suggest ?
Senator PASTORE. It has to be litigated for a period of 2 years.
Mr. WEBB. It would be some incentive for the four of them to do so. Whether or not the States can agree on this compact approach, a four-State concept approach within a reasonable time, I really could not say authoritatively.
I do say that the interests of the various States though are quite different. You have Massachusetts, which has largely taken care of its problem with the Massachusetts Bay Transportation Authority.
Rhode Island has a different problem. Connecticut has only one State with which to deal, one railroad rather. But it has an interest both in the long-haul and the commutation service.
New York, on the other hand, has a half dozen major railroads.
Senator PASTORE. Well, if they can't straighten out the problem among themselves, how do they expect us to do it?
Senator LAUSCHE. By putting in money.
Senator PASTORE. That is their request. But whether or not they are going to get it, of course, is another issue entirely.
You have testified today, Mr. Webb, that there is a distinct possibility—those are your words—that the ICC is going to grant the request of discontinuance of passenger service.
Now, let's face it, the Governors of these States will have to make up their minds whether or not they want this service discontinued and
to what extent. I realize it is much easier to look to the Federal Government to come up with the cash. But you have heard Mr. Dominick, you have heard Mr. Lausche, and they echo the sentiments of a lot of other people in the Congress of the United States.
This is not going to be an easy thing to do. But in the meantime, there is an immediate problem that has to be met. I think, myself, that there is a national concern involved in the existence of this railroad, just as much as there is a national concern in many other facets of our economy.
The question is, How far can you go? And that is the reason why we are all here.
Now, you have endorsed more or less the Ribicoff bill. Well, that calls for $100 million being put up on the national level to be matched by the States on a 50–50 basis, isn't that true?
Mr. WEBB. Yes; the matching would be primarily a matching basis. But as to your suggestion, if it can be done, of course we do favor that approach, as soon as you can get a permanent program enacted into being, fine. We do have certain other problems, of course, such as the Erie Lackawanna and its service. Perhaps some provision might be made for New Jersey being permitted to join.
Senator PASTORE. Is that why you are subscribing to the Ribicoff bill, because it goes beyond the New Haven?
Mr. WEBB. The reason primarily we favor the Ribicoff bill is that it gives the States adequate time in which to act. But if the permanent program can be brought into being within the near future, of course, we would favor it.
Senator PASTORE. You see, the unknown quantity here is the merger decision. And you talk about a permanent plan, no plan will ever be permanent because it depends on what you are going to decide on the question of inclusion at the time that you decide your merger question.
Any permanent plan would only be a temporary plan until you make your decision and you are not going to make a decision on the merger until the latter part of this year.
So, you see, any permanent legislation that we may be thinking of here, is subject to what your decision is going to be, and that is the reason why I asked you the question.
Mr. WEBB. No; I do not quite look at it that way, Mr. Chairman. I think that this problem, both the immediate problem and the longrange solution should be resolved independently of our action on the merger case.
It seems inconceivable to me that our decision in that proceeding would solve the short-range problem. As you heard this morning, the New Haven trustees are negotiating with the Pennsylvania-Central to be included, but with them taking over only the freight operations.
Now, if it is suggested that at the time we reach our decision that we ought to consider requiring the Pennsylvania and the New York Central as a condition to our approval of the merger, to take over in addition the passenger operations of the New Haven, then you have a number of very serious question, such as this: Is it really fair or in the public interest to ask two railroads which although large, they are not prosperous, is it fair to ask them to assume a public service obligation that the Federal Government and the States have not assumed and give no indication of assuming? So, I think that it would be prudent not to assume that in this merger case that we are going to in effect solve either the short-range or the long-range problem.
Now, if it is desirable in the public interest to authorize the inclusion of the New Haven into the merged system
Senator PASTORE. Then it would be right to assume it. Now, where does that put me?
Mr. WEBB. No, we cannot make that assumption. But, it has been indicated by the parties
Senator PASTORE. No; you misunderstand me, Mr. Webb. I realize that we haven't brought you here to give us a decision on the merger proceedings. I mean, it would be absolutely unfair. It would be improprietous on my part to ask it, and it would be improprietous on your part to give it. There is no question about that. I don't raise that issue at all.
All I am saying here is that if we go along with the Pell bill and then when the decision is made on the merger proceedings there is an inclusion, whether it be freight or whether it be the both freight and passengers, that would more or less run into conflict with the Pell bill. In other words, it would render his permanent solution only a temporary one until you make your decision.
Do I make myself clear on that?
Senator PASTORE. I think a lot of this depends on what the decision of the merger is going to be. Let's not kid ourselves here. We are all grownup people. The fact of the matter is that you have letters from every Congressman and every Senator in the New England area insisting that there be no merger unless they include both the freight and the passenger service. That is their request; that doesn't mean that you are going to accede to that request. But you have already received these demands. Mr. WEBB. Yes.
Senator PASTORE. You have received these demands. I think you have even received this demand from the New England Council. A lot of people have been writing in to you saying, "Don't allow this merger unless it includes both freight and passenger services." We had a very distinguished Senator, yesterday, who came here and said that it is his strong belief that if we push this thing hard enough, they will include both the freight and the passenger service because the merger will help them save $100 million a year—the merger itself.
Now, of course, that is only one man's opinion. The fact remains that whether or not the inclusion will be made is part of the issue. The question is, When will that issue be decided? And anything that we work out in the meantime may be disturbed by your decision when your decision comes. But that doesn't relieve us of the responsibility of finding an answer in the meantime, so that this service does not die.
Now, doesn't it amount to that? Mr. WEBB. Yes, you have said nothing at all, Mr. Chairman, that I would disagree with, because if the Pell bill or some modification thereof is enacted, the compact comes into being, provision is made for virtually full State assumption of the operating losses of the passenger service, then if we approve the inclusion of the New Haven into the New York Central-Pennsylvania system, there should be no
problem involved in having the merged company assume both the freight and
the passenger operations. Senator PASTORE. The only trouble is that once we solve it through Pell's bill, then it won't ever be included in the merger. There is your practical question. That is the reason why the Governors have been holding off. Everybody in this situation has been waiting for "George” to do it. And in the meantime we are in a dilemma.
Senator LAUSCHE. I am interested in the Bay State authority. You said that Massachusetts has substantially solved its problem on its own in the Bay State ?
Mr. WEBB. Yes, sir.
Senator LAUSCHE. Will you describe just what was done by local people and State people to solve their passenger transportation problem?
Mr. WEBB. I think Director Forbes is more familiar with the details of that, if he might speak on it.
Mr. FORBES. Not too familiar with it. The Massachusetts Bay Transportation Authority has taken over the operation, or will on most of the operations of the Boston & Maine Railroad. The Boston & Maine will conduct the operation, as I understand it, for the Massachusetts Bay Transportation Authority. It would be underwritten by the authority.
Senator LAUSCHE. Am I correct that the Legislature of the State of Massachusetts authorized the authority to issue bonds in the sum of $250 million ?
Mr. WEBB. Could I ask Commissioner Tucker to come to the table ? He is from Massachusetts and he is familiar with the background.
Mr. TUCKER. I believe it is $220 million, Senator.
Senator LAUSCHE. And that $220 million is to be used for what purpose!
Mr. TUCKER. To be used for suburban commuter transportation, Senator.
Senator LAUSCHE. To acquire equipment?
Mr. TUCKER. To acquire it either through bus lines or rail lines in the commuter area. The original intracity area, which is referred to here in testimony as the MTA area, was enlarged to include 78 districts or towns comprising, you might say, 25 percent of the eastern half of the State of Massachusetts.
Senator PASTORE. But all in the State of Massachusetts ?
Senator PASTORE. In other words, this is no interstate problem but an intrastate problem and Massachusetts solved it?
Mr. TUGGLE. I don't believe it is an interstate problem.
Senator PASTORE. I said intrastate. In other words, this commuter service that you are talking about that Massachusetts solved is all within the State of Massachusetts.
Mr. TUGGLE. That is correct, Senator.
Senator LAUSCHE. Has the Boston & Maine been serving that area with commuter service!
Mr. TUGGLE. Yes, Senator.
Senator LAUSCHE. And finding it unprofitable, the State decided, "Well, we will proceed to solve it in the eastern part of our State by setting up an authority.”
Mr. TUGGLE. That is correct.
Senator LAUSCHE. We will authorize the authority to issue $220 million worth of bonds. The authority will be financially responsible but Boston & Maine will continue to operate.
Mr. TUGGLE. That is correct, Senator.
Senator LAUSCHE. That deals with that problem. I have before me the Doyle report. I think it cost the Federal Government $275,000 to prepare it. Mr. Webb, do you know whether any single one of the recommendations made by the Doyle report except the reduction of the passenger tax, has been put into effect ?
Mr. WEBB. It has been some time since I have read that report but so far as I know that is the only one.
Senator LAUSCHE. That is the only one?
Senator LAUSCHE. Now, the Doyle report makes recommendations of Federal action (reads] :
(1) Repeal the 10-percent passenger excise tax.
(2) Adjust the operation of the Federal corporate income tax in such a way that no portion of the local public funds either direct payment or tax relief even to the support of needed rail service be absorbed by the Federal income taxation.
Are you familiar with that?
Mr. WEBB. Yes. That would be helpful to some railroads but would be academic in the case of the New Haven.
Senator LAUSCHE. But that has not been done?
(3) Congress may have to act to restrain State and local taxation of property and earnings which place undue burdens on interstate commerce.
Has that been done?
(4) User charges for federally furnished facilities and services should be levied on the carriers receiving them. This would bring about full-cost pricing and change the competitive balance.
Has that been done?
Senator LAUSCHE. I am sure it hasn't been done. Both Presidents have recommended something turning in that direction but it has not been done [reads] :
(5) There should be an authority on an impartial study of Federal promotional aids to other modes and there should be a Federal agency with overall responsibility for coordinating such programs and weighing the merits of alternative investments.
Before I ask you the question, this recommendation was intended, at least that we will not be dealing, let us say, with inland waterways, aiding them and while aiding them destroying the railroads