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Any further questions of these distinguished gentlemen?
Senator PELL. Pursuing Senator Pastore's line of questioning with regard to the ICC's plans, or thoughts, would I not be correct in saying that even if the New Haven was incorporated, both passenger and freight service into the combined Pennsylvania and New York Central, the new railroad could then apply to you for discontinuance of the passenger service and you would probably render the same decision as you would now be rendering or would
there be any difference? Mr. WEBB. As I thought I indicated, Senator Pell, the merger case, as I see it, has no relationship to the short-range problem that we are dealing with.
As to the long-range problem, if adequate provision is made for underwriting the passenger losses, I should think that there would be no problem for the merged company taking over the passenger operations.
But that would be sometime in the future.
Now, if we conclude that the merger is desirable and that the inclusion of the New Haven is in the public interest, then that decision will undoubtedly be because we have concluded that this offers a long-range hope for improving the freight service as well.
Senator PELL. I am a little confused. Wouldn't we be better advised from the viewpoint of public interest almost to scrap our bills and force the New Haven, force the New York Central and Pennsylvania to take the New Haven, if your reasoning is correct?
I had understood that the criteria used as to whether or not passenger service would be discontinued rests on the economic circumstances of that particular service.
But if you found that the overall health of the company was such that it could, and since we know what it will save will be a lot more than it would lose, it would seem to me you would be forced to conclude to continue and therefore this is a very real factor in the deliberations in the Senate and House.
Mr. WEBB. I don't believe so, Senator Pell. First of course, we could not compel the New York Central and the Pennsylvania to accept a condition which would require them to assume this huge passenger loss, now $12 million a year.
They could reject that condition and, of course, forego their own merger.
Of course they have indicated that they expect to realize certain savings if they are permitted to merge. We do not know, we have not seen the record or heard the argument. We don't know what the amount of those savings is.
It might be expected that some of those savings would be necessary to the merged company to enable it to compete successfully with the new Norfolk & Western and Nickel Plate system and with the new C. & 0. and B. & 0. system, but the crucial question that would be raised before us, if the question is raised, is whether it is fair to require two companies, large though they are, but not financially prosperous, to take over an operation costing $12 million a year, which is a public service obligation, and which the Federal Government and the States are unwilling to assume.
Senator PASTORE. Would you have the authority under the law to do such a thing! I mean if you thought it was in the public interest.
Mr. WEBB. We could not compel them to do it.
Senator PASTORE. If in the public interest you found that you could allow the merger provided they added the other service to it, you would have the authority under the law to make that kind of an order?
Mr. WEBB. Yes; we could do that. Of course, as I say, they would have the option to take it or reject it.
Senator PELL. Thank you.
Senator PASTORE. Would you please explain, Mr. Webb, how the Commission's rules divide expenses of joint facilities, that is between freight service and
Mr. WEBB. Yes, sir. I would like to ask the director of our Bureau of Accounts, Mr. Paolo, to explain that.
Mr. Paolo. I didn't quite get the question, Mr. Chairman.
Senator PASTORE. What is the rule that you use, or how do you divide, you see, joint facilities as to maintenance, and upkeep, in order to find out what loss is against one or the other, as between freight and passenger service? Do you have a system on that!
Mr. Paolo. We do have a system, Mr. Chairman. There are two problems involved here. One is joint facility, which is somewhat different than the separation of ordinary expenses between freight and passenger service.
A joint facility is a facility operated by one railroad, possibly owned by that railroad, but operated for the benefit of two or more railroads.
The first problem here is allocating the expenses between the participating railroads. This is done on the basis of the agreements reached by the several railroads.
The costs of the operation of a joint facility are segregated between different types of expenses. Maintenance expenses, maintenance expenses of equipment, transportation, and so forth, whatever is involved in the particular facility:
It is after the allocations of the joint facility expenses to the participating roads that these expenses are then allocated between freight and passenger services.
Under the rules prescribed by the Commission, the expenses directly allocable to either of the services, freight or passenger, are assigned to those services.
There are other expenses which are designated common expenses, which cover facilities used by both services. These expenses are then allocated on the basis of rules and regulations prescribed by the Commission.
So we have two bases: One, for those expenses that are directly related to either of the services, these are assigned directly. And those expenses representing facilities or services that involve both freight and passenger service, these are allocated under methods prescribed by the Commission.
Senator PASTORE. Are you at variance or are you in accord with the accounting system of the New Haven with regard to this subject? Do you reach more or less the same conclusion that the operating deficit on freight is so much, the operating deficit on passenger service is so much? Are you near enough on that?
Mr. Paolo. Yes, sir; I think we are.
Senator PASTORE. The fact remains even if the passenger service, Mr. Kirk, is discontinued, you still have to maintain those lines for freight service.
Mr. KIRK. That is correct. Senator PASTORE. You might not have to have the depots and things of that kind, but you certainly would have to have roadbed maintenance, signals, and all that sort of thing.
Mr. KIRK. Yes, in recognition of that fact we are submitted from time to time abandonment petitions to the Interstate Commerce Commission to be relieved of freight service and branch lines which comprise a good big percentage of our total mileage that produce very little in the way of revenues.
Senator PASTORE. How many trains do we run from Boston to New York a day?
Mr. KIRK. I don't have that figure in mind.
Senator PASTORE. Can we find out how many people go through the depot in Boston, their destination being New York, and how many people go through the depot in Providence, their destination being New York?
Mr. KIRK. I think we can provide all of those figures.
Senator PASTORE. Someone said to me the other day that 3,000 people a day go through the Providence depot. Does that sound Îike too high a figure ?
Mr. KIRK. I don't believe it does. For instance, forgetting our through traffic, we have 6,000 people in Boston, just on the commuter
And you have a lot of passengers that come out of Providence on a longer haul into New York, et cetera, as well as commuters, I call them commuters from Providence into Boston.
Senator PASTORE. I would like to get the exact-not the exact figure, a more accurate figure, if you will render it for the record. Mr. KIRK. We will see that those figures are supplied to you, sir.
(See supplemental exhibits, dated Mar. 11, 1965, submitted by the trustees, the New York, New Haven & Hartford Railroad Co., p. 318.).
Senator PASTORE. So even the long run involves a lot of people, just as well ?
Mr. KIRK. Oh, yes.
Senator PASTORE. For how many people would you say service was provided by the New York-New Haven last year, 1964? How many people rode your trains, commuter and long haul?
Mr. KIRK. If you will turn to exhibit 7, Mr. Chairman, you will find total revenue passengers carried, and there are additional passenger statistics in exhibit 11, but for 1963, total revenue passengers carried was 25,900,000.
Senator PASTORE. It shows here that in the year 1924 you had 45,800,000. In 1929 you had 34,300,000
Mr. KIRK. I think you are reading the wrong column, sir. If you go back to 1924, in fact you will find 76,800,000.
Senator PASTORE. You mean 76,800,000?
Senator PASTORE. Then in 1949 we carried, I see what you mean. I was reading the wrong column-1924 was 76.8 million, 1929 was 59.4
million. In 1934 it dropped down to 29.8 million, 36,200,000 in 1939. In 1944 it was 68.3 million, 1949 it was 46.7 million. Now in 1963, the year before last, it was 25,900,000.
Now that includes commuter service too?
Senator DOMINICK. I just want to ask Mr. Webb this: You have recited for us six railroads in the eastern metropolitan area which were in trouble besides the New York-New Haven?
Mr. WEBB. Yes, sir.
Senator DOMINICK. If we passed a general bill for an assistance program of the type- I believe it was recommended by Senator Ribicoffwhat do you anticipate the demands might be on Congress for funds under such a bill in order to take care of these other railroads that we already know about?
Mr. WEBB. Well, the Ribicoff bill would take care of them for aif it is amended as we suggest—for a 5-year period.
Senator DOMINICK. I am talking in terms of dollars, money.
Mr. WEBB. I could tell you exactly what would be available to the Erie-Lackawanna, for example, because I know that they received $2.5 million last year in State aid from the State of New Jersey.
Mr. Paolo, I will have him tell you what their maximum benefit would be under the Ribicoff bill. This is the Erie-Lackawanna.
Mr. Paolo. Erie-Lackawanna would be $3,324,000.
Senator DOMINICK. Could you give me-I don't need any exact figures, I just want to know what we are dealing with, because to my surprise, you said that the authority in Massachusetts, to take up the eastern half of Massachusets for the Boston & Maine Railroad, had authorized $220 million worth of bonds. This was in your testimony earlier.
Mr. WEBB. Yes; I believe Commissioner Tucker referred to that.
Senator DOMINICK. This surprised me because if it is for the eastern half of one State, and here we are dealing with seven railroads
Mr. TUCKER. Actually the annual deficit is in the neighborhood of $2.5 million. It is contemplated they will buy certain facilities and certain equipment. That is the total authorization, $200 million plus. But the actual passenger deficit is around $2.5 million.
Mr. KIRK. I would like to comment on that, if I may, because I am fully acquainted with it. This Massachusetts Bay Transportation Authority, and the sums mentioned here, are to be used for many, many purposes.
The contract with the Boston & Maine is for a 3-year period, a period ending December 31, 1967. That is when the aid to the passenger service they are now operating ceases.
It is in this interim that the MBTA, so-called, will establish its own facilities, build rapid transit service to various sections emanating from the core city, et cetera, and use the proceeds from this authorized bond issue for expenditures of that nature.
The aid to railroad commuting services is limited as to time and as to amount.
Senator DOMINICK. Do you anticipate that commuter service would go out of business then, after the transport authority had gotten the other methods and means located ?
Mr. Kirk. That will be a determination by that authority. In connection with these contracts they have taken options to acquire by lease or purchase rights-of-way, involved presently in railroad transportion, subject to continued use for freight purposes, for passenger service after they take over.
Now they may find, they will be there on regulatory authority, they will determine the frequency of service, the rates to be charged, without any recourse to the Department of Public Utilities and the Interstate Commerce Commission, and will determine what they believe is the service that ought to be provided for the area. And they will operate it.
In the meantime the Boston & Maine has been permitted to, by the Interstate Commerce Commission, to cease all passenger operations. They are now operating under a contract with the Massachusetts Bay Transit Authority.
We have a similar petition for the Interstate Commerce Commission to abandon passenger, commuter passenger service on three of the five lines in and out of Boston presently on the same basis.
Senator DOMINICK. Mr. Webb, could you or any of your staff give me an estimate of the costs which you don't have to say definitely, but in general think that this might bring about?
If we passed a bill like the Ribicoff bill and we had to take care of these six or seven railroads that you have mentioned, what would be the cost?
Mr. WEBB. No; we have not worked out the total costs, Senator Dominick. It would be —we will be glad to supply that for the record, though, taking those railroads which are in distress, and are substantial carriers of passengers.
We could take those and give you the amount of aid to which they would be entitled if the bill were enacted this year.
Senator PASTORE. But the bill itself is limited to $100 million, isn't it?
Mr. WEBB. Yes.
Senator PASTORE. Let me ask you, in the case of Lackawanna, you showed where last year you gave them $2.5 million ?
Mr. WEBB. That was the State of New Jersey, which gave them $2.5 million to defray part of their commuter losses.
Senator PASTORE. But under the Ribicoff bill, the States themselves would have to match this on a 50-50 basis, anything we give them they would have to put up half.
Mr. WEBB. Of course, for last year the State of New York did put up $2.5 million, so under the terms of the Ribicoff bill that $2.5 million could be matched and then in addition,
Senator PASTORE. In other words, you would consider what they paid last year as part of the matching funds?
Mr. WEBB. Yes; we would review their eligibility in the light of the assistance they had received in the prior calendar year and in the light of their expenses of the prior year.