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Governor VOLPE. The action it has already taken—demonstrated by the fact that taxes were increased 2 cents per package on cigarettes last year alone in order to finance mass transportation-leaves no question but what our State will meet its obligation.

Senator PASTORE. The reason I ask these questions, of course, gentlemen, is not to be facetious, as you well understand. That question will be directed to me on the floor if the bill ever makes the floor.

How do you know the States will cooperate and meet their obligations? I have to turn to the hearings and say this is the documentation for it and that is the reason why I ask the question.

Does the same apply with reference to the Pêll bill ?

Governor VOLPE. Yes, I believe that the overall—the two problems here, the long-range and short-range are interrelated, and one, of course, won't be very worth while unless we solve the short range. But I am certain that our State would be willing to enter into a compact with the other States in providing for the long-range solution.

Senator PASTORE. I would strongly suggest, and I merely make this suggestion in a helpful manner, that in view of what Governor Dempsey said when I referred to the proposed New York CentralPennsylvania merger, it might not be a bad idea for you Governors who cooperate so well among yourselves, to sit down and talk with the executives of those two large railroads and there may be some way out of this.

Now, I don't mean by that that relieves us of our responsibility, because this is an emergency and it has to be met in a forthright way. But the fact remains, that sometimes, it is well to know what is in people's minds and you can only find that out by asking them.

I think it would serve a very healthy purpose if we could determine, as a matter of fact, that they are perfectly willing to take over the freight service without question, but they do have questions to ask on the passenger service. And rather than you people setting up an authority to run a railroad, it might well be that something can be worked out with the New York Central and with the Pennsylvania on a reasonable basis and actually pull us out of this dilemma.

I don't say that will be the solution to the problem, but I think it ought to be explored. Do you gentlemen agree?

Governor CHAFEE. Yes, sir.
Governor VOLPE. I would certainly be very happy.
Governor DEMPSEY. I would be glad to.

Senator PASTORE. Would you have any constitutional problem with reference to assuming your responsibility, Governor Volpe, that you know of ?

Governor VOLPE. No, I don't believe so, because under the act which established the Massachusetts Bay Transportation Authority, we have already given them authority to borrow up to $225 million to finance both capital improvements as well as to pay for subsidies up to a limit, of course.

Senator PASTORE. Senator Dominick?

Senator DOMINICK. I just wanted to welcome Governor Volpe down here. There aren't many of us Republicans left.

Governor VOLPE. Thank you.
Senator DOMINICK. It is good to have you aboard.

I also want to say that I think your statement is most thoughtful and helpful. I have really a considerable concern, however, expressed,

I think, by the chairman very aptly just a few minutes ago, and that is whether the Federal Government can ever get out of the assistance program to railroads if it gets into it at this time. I have yet to see any subsidy which the Federal Government starts, regardless of how you name it, that ever gets lowered. It always seems to increase as we go on.

Therefore, if the Federal Government is going to get into an emergency assistance program, it has either got to be cut off at some point by express provision of law, or it is going to have to be on a policy basis which would be open to any railroad in the country:

We have said here that this is an emergency situation with the New Haven. Well, to be literally truthful, it isn't at all. This situation has been coming along on the New Haven & Hartford for a great number of years. And you could see it as it was progressing downhill rapidly, and you could see what was going to happen, inevitably has to happen.

I wonder why, to be again very frank with you, the Governors haven't gotten together long before this time to discuss what the four States together might have been able to do. I would wonder why conversations haven't been held with the Pennsylvania and the New York Central long before this time? But if we can get them moving now, I think this is great.

Governor VOLPE. May I comment on that?
Senator DOMINICK. I would like to ask one question.

Senator PASTORE. Don't you want a comment on that statement why they haven't been getting together? I think they would like to discuss that.

Governor VOLPE. Senator, may I reply to that, please? The States did get together. I was the Governor in 1961 and 1962, as you may know, and Governor Dempsey was then the Governor of Connecticut, and Governor Chafee's predecessor, Governor Notte, and Governor Rockefeller and myself got together on three or four occasions. We did develop some aid for the railroad.

Connecticut was able to go through with its share of it; Massachusetts, unfortunately, with the legislature I had, did not see fit to approve the recommendations which I made to it with respect to the aid which we were proposing to give to the railroad, although we were the first State probably in the Union to give a subsidy to railroads--the Commonwealth of Massachusetts, back in 1959, gave a $900,000 subsidy annually for 2 years to the New Haven to continue operations of the Old Colony Line of the New Haven Railroad.

So Governors have worked at this problem diligently, I think. More could be done, I am sure, that we stand ready to do our part.

Senator DOMINICK. Fine, that is great, Governor. And I am sure you will. I know how important this is to the whole area.

Let me ask you one more question. Suppose we do give operating subsidies with a termination date, as has been suggested. I think that is the Dodd bill, is it not?

Senator PASTORE. Say that again.
Senator DOMINICK. Operation subsidies with a termination date.
Senator PASTORE. That is the Dodd bill, and also the Javits bill.

Senator DOMINICK. Suppose we do do that, and suppose somehow or other we create a special fund for the purpose of guaranteeing

financing of new equipment. Is it your real belief that new equipment will be able to make this road operate at a profit?

Governor VOLPE. It is my belief that good, strong management, properly financed, with good equipment, ought to be able to run this service with the type of new equipment which all of us hope would be in effect in a situation that could develop as a result of this compact that has been suggested. Yes, it would enable it to run, if not at a profit, certainly a very close to a break-even point.

Senator DOMINICK. I asked that question because I can remember riding this line back in the thirties, when I was still living back East, and one of the questions that always came up then is, When is the line going to get new equipment so it can start operating properly the way it ought to? And this is 30 years ago.

I have some skepticism as to whether this line is ever going to be able to operate properly, frankly, as far as a profitmaking situation is concerned. This is what is bothering me about the Federal Government getting into the middle of it, or whether we have something from then on in that we are as a matter of fact paying for the rest of history.

Governor VOLPE. Let me say, Senator, if I may, as a businessman, I would hope that the Federal Government would only have to participate in this special assistance during a limited period. I would hope that as a result of a permanent solution, that if there were deficits, and I would hope there probably would not have to be deficits, it would be my belief-perhaps not shared by my colleagues, but perhaps shared by them—that the States themselves would assume the deficit that might be accrued and I would hope there would be none.

Senator PASTORE. That is the Pell bill.
Senator DOMINICK. That is all I have, Mr. Chairman.

Senator PASTORE. Well, I can't thank you gentlemen too much. You have come here at a great sacrifice. You are very busy people and we appreciate it very, very much.

We will now recess these hearings

Governor VOLPE. Senator, may I just make one observation, if I may. That before, I am sure, that the bill that finally is presented to Congress will probably be a composite bill

. It certainly would be very helpful to me, and I am sure it would be very helpful to our colleagues, if we might have a chance to peruse the bill before it finally goes into the Congress.

Senator PASTORE. I would appreciate very much if you would direct your staff members, whomever you desire, to be in touch with Mr. Joseph Fogarty and Mr. Stan Sender of the committee and work out the best language possible in the event that a bill has to be drawn. I want to thank you again.

We are in recess now until next Wednesday at 10 o'clock. We will be meeting in room 1318. Our witnesses will be Mr. Martin of the Commerce Department, Mr. Kohl of Housing and Home Finance Agency, and at 2 o'clock that afternoon we will have Governor Rockefeller of New York.

(Whereupon, at 12:05 p.m., the committee was adjourned, to reconvene at 10 a.m., Wednesday, March 10, 1965.)

THE CRISIS IN PASSENGER TRAIN SERVICE

WEDNESDAY, MARCH 10, 1965

U.S. SENATE,
COMMITTEE ON COMMERCE,

Washington, D.C. The committee met, pursuant to recess, at 10:10 a.m., in room 1318, New Senate Office Building, Hon. John O. Pastore presiding.

Senator PASTORE. The hour of 10 having been reached, the committee is ready.. If the witnesses are, we shall proceed.

This is a continuation of the hearing on S. 325, S. 348, S. 1234, and S. 1289.

Our first witness this morning is Clarence D. Martin, Under Secretary of Commerce for Transportation. Mr. Martin, we welcome you here, and you may now proceed.

STATEMENT OF CLARENCE D. MARTIN, JR., UNDER SECRETARY

OF COMMERCE FOR TRANSPORTATION

Mr. MARTIN. Thank you, Mr. Chairman. I have a statement which I will read, and I will be happy to answer any questions after I finish.

The bills before your committee deal with Federal aid for the New Haven Railroad. Two proposals, S. 235 and S. 1289, would provide limited operating subsidy. The other two bills, S. 348 and S. 1234, provide for Federal support of interstate compact organizations and one of these would also authorize Federal subsidy payments for operations. I shall not detail the various proposals with which the members of your committee are well acquainted.

I shall recommend criteria for actions by the various interests involved including State and local governments, the Federal Government, and the railroad industry. The solution to this problem in both its shortrun and longrun aspects requires coordinated actions by these three interests, each acting within its appropriate sphere of interest. For reasons to be discussed below, we cannot support the bills before your committee. We would, however, encourage regional organizations or compacts of States to deal comprehensively with this problem.

The administration fully recognizes that there is a Federal obligation to act constructively in the New Haven crisis. We intend to make intensive use of the existing programs of the Federal Government. An important condition is that State and local governments also assume their obligation in a manner consistent with overall Federal policy.

We believe that the record shows that the Federal Government has taken effective action already in the New Haven situation and in similar problems elsewhere.

Two significant legislative enactments are of importance in this situation. They are the Transportation Act of 1958 which established the railroad loan guarantee program under title V of the Interstate Commerce Act and the Urban Mass Transportation Act of 1964 which rocognizes the Federal obligation to aid metropolitan areas solve their mass transportation problems.

Under title V of the Interstate Commerce Act and the earlier provisions of the Defense Production Act, the Federal Government has made substantial, unilateral contributions to the New Haven.

Under the provisions of the Defense Production Act, some $13 million in loans was made to the New Haven following disastrous floods in 1954. Under the provisions of title V some $35 million in loan guarantees was made available to the New Haven in the period 1958-61. Actually, $12.5 million of this sum was made available between July and December 1961 after the railroad had gone into bankruptcy. Without this extraordinary Federal credit, the railroad would not have had cash to continue its operations. There is still available to be used $4.5 million of this credit for constructive purposes.

Of the $35 million in credit made available through title V, the Federal Government has paid in cash $14,375,000 representing loans in default.

As of December 31, 1964, the outstanding debt owed on title V loans was $27,783,560, including the $14,375,000 in default. On the flood loans the outstanding obligations totaled $8,761,483. The combined title V and flood loan obligations are $36,545,043.

This substantial, unilateral contribution by the Federal Government, stretching over the years from 1954 to 1961, did not improve the status of the New Haven line, did not result in improved service capability, nor did it save the line from ultimate receivership.

There is currently available the program authorized in the Urban Mass Transportation Act of 1964, administered by the Housing and Home Finance Agency. The administration is prepared to take all possible actions under the very reasonable terms of this legislation. This legislation was a recognition by the administration that the Federal Government should have a constructive role in assisting State and local governments deal with problems of mass transportation.

The Urban Mass Transportation Act rightfully stresses the cooperative relationships which should exist between Federal agencies and State and local governments. The act stresses fundamental service improvements, rather than temporary, shortrun solutions to mass transportation crises. Grants of up to two-thirds of the cost of capital improvements can be made. In addition, there is provision for demonstration programs to test new service concepts, difficult administrative arrangements, or new technology.

Under the Urban Mass Transportation Act, applications for grants are sponsored by State or local governing bodies. One-third of the capital cost that cannot be recovered from project revenues must come from non-Federal sources. There must be assurance that the expenditures will be consistent with comprehensive metropolitan area plans. It is possible under this program for State and localities to contract for service with private companies such as the New Haven.

These provisions are sound and proper steps in the construction of well-managed commuter services which will service the public well over many years. They are available now to the public served by the

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