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help railroads meet their commuter and passenger problems and would authorize aid to the extent of $75 million with a limit of $20 million for any one railroad during the first year of the program. This aid would be administered by the Interstate Commerce Commission.
Without objection, a copy of the bill, S. 1289, and an analysis of its provisions will be printed at this point in the record.
(The bill follows:)
[S. 1289, 89th Cong., 1st sess.) A BILL To amend the Interstate Commerce Act, as amended, to authorize the Interstate
and improving essential passenger train services and facilities, and for other purposes
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the “Railroad Passenger Train Assistance Act of 1965".
SEC. 2. The Interstate Commerce Act, as amended, is amended by inserting immediately after part V thereof the following new part:
"SEC. 601. It is the purpose of this part to provide financial aid to common carriers of passengers by railroad subject to this Act to assist them in preserving and improving essential passenger train services and facilities until such time as longer range plans may be formulated to effect a more lasting solution to passenger train service problems, and to encourage State and local governments and their public instrumentalities to extend tax relief and financial and other assistance toward the same end, to encourage the employment of labor, and to foster the preservation and development of a national transportation system adequate to meet the needs of the commerce of the United States, of the postal service, and of the national defense.
“SEC. 602. For the purposes of this part“(a) The term 'Commission' means the Interstate Commerce Commission.
“(b) The term 'expense' means expenditures for labor, materials, services, and other costs incurred in maintaining, repairing, or renewing road property used in transportation service which are chargeable to the maintenance of way and structure operating expense accounts in accordance with the uniform sys. tem of accounts for railroad companies prescribed by be Commission.
"(c) The term 'expense', in referring to expenses directly assignable as solely related to railroad passenger service or to that portion of common expenses assignable to railroad passenger service, means expenses assignable in accordance with rules governing the separation of operating expenses, railway taxes, equipment rents, and joint facility rents, between freight service and passenger service prescribed by the Commission.
“(d) The term 'financial aid', in referring to financial aid granted by any State, municipality, or other political subdivision, or any public instrumentality thereof, means financial aid in the form of direct grants, tax relief, and expenses incurred in the maintenance of the applicant's way and structures which, if incurred by the applicant, would be an expense assignable to railroad passenger service.
"APPLICATION FOR AID; CONDITIONS PRECEDENT TO GRANTING "SEC. 603. In order to carry out the purpose declared in section 601, the Commission is authorized and directed to consider the application of any railroad subject to this Act for financial aid in the operation of a passenger train or trains required by the present or future public convenience and necessity. No such application shall be approved by the Commission unless it determines that (1) the continuance of passenger train operations specified in the application is required by the present or future public convenience and necessity; and (2) the granting of the aid applied for is necessary to carry out effectively the purpose of this part. The Commission shall have power to approve such applications subject to such terms and conditions as in its judgment may be required
to carry out the purposes of this part. Applications shall be under oath or affirmation and in such form as the Commission shall prescribe. A statement of the findings of the Commission under the provisions of this section shall be made a matter of public record by the Commission with respect to each application considered under the provisions of this part.
“DETERMINATION OF AMOUNT OF GRANT
"SEC. 604. (a) The maximum amount of Federal financial aid to be extended to any applicant in the first calendar year it becomes a recipient under this part shall be an amount equal to the lesser of $20,000,000, or the total of —
“(1) expenses solely related to railroad passenger service incurred by the applicant in the two preceding calendar years in the maintenance of way and structures ; plus
“(2) any expenses incurred in the two preceding calendar years in the maintenance of the applicant's way and structures by any State, municipality, or other political subdivision, or any public instrumentality thereof, which, if incurred by the applicant, would be an expense solely related to railroad passenger service; plus
“(3) that portion of common expenses apportionable to railroad passenger services incurred by the applicant in the two preceding calendar years in the maintenance of way and structures ; plus
“(4) any expenses incurred in the two preceding calendar years in the maintenance of the applicant's way and structures by any State, municipality, or other political subdivision, or any public instrumentality thereof, which, if incurred by the applicant, would be an expense apportionable to
railroad passenger services. “(b) The maximum amount of any Federal financial aid to be extended to an applicant during its second year of recipiency under this part shall be eighty per centum of the total amount determined by the Commission to be required by the applicant to continue for one year the operation of passenger train services qualifying for such aid: Provided, That the States, municipalities, or other political subdivisions, or any public instrumentalities thereof, through which the subject passenger trains are operated, provide financial aid at least equal to the difference between such maximum amount and such total amount.
"(c) In determining the maximum amount of Federal financial aid for the third, fourth, and fifth years for which an applicant receives such aid under this part, section 604 (b) shall apply, except that the maximum yearly amount of such Federal financial aid to be extended to such applicant during those years shall in lieu of such 80 per centum be 70, 60, and 50 per centum, respectively.
"(d) In determining the total amount to be required by the applicant to continue for one year the operation of passenger train services qualifying for such aid the Commission shall take into consideration, among other things, the expenses in maintenance of way and structures related to railroad passenger service as set out in section 604 (a) (1), (2), (3), and (4), and in addition, the needs of an applicant to maintain, rehabilitate, or replace equipment necessary for passenger service operations qualifying for grants under this part.
"DISCONTINUANCE OR CHANGE OF CERTAIN PASSENGER OPERATIONS OR SERVICE
"SEC. 605. In the determination of any proposed discontinuance or change in passenger operations or services under the provisions of section 13a of this Act, the Commission shall give appropriate weight to any representations relative to the present or future public convenience and necessity which may have been made by the carrier involved under the provisions of this part and to the amount of tax relief or other assistance extended to the carrier involved by any State, municipality, or other political subdivision, or any public instrumentality thereof, which, in the judgment of the Commission is reasonably related to the purpose of this part.
“ASSISTANCE OF DEPARTMENTS OR OTHER AGENCIES "Sec. 606. (a) To permit it to make use of such expert advice and services as it may require in carrying out the provisions of this part, the Commission may use available services and facilities of departments and other agencies and instrumentalities of the Government, with their consent and on a reimbursable basis.
"(b) Departments, agencies, and instrumentalities of the Government shall exercise their powers, duties, and functions in such manner as will assist in carrying out the objectives of this part.
"SEC. 607. Administrative expenses under this part shall be paid from appropriations made to the Commission for administrative expenses.
“APPROPRIATIONS “SEC. 608. There is hereby authorized to be appropriated not to exceed $75,000,000 to carry out the purposes of this part, and any amounts so appropriated shall remain available until expended.” SECTION-BY-SECTION ANALYSIS OF S. 1289 (INTRODUCED BY SENATOR THOMAS J.
DODD (WITH SENATOR CLAIBORNE PELL), TO PROVIDE A 5-YEAR PROGRAM OF FEDERAL MATCHING ASSISTANCE FOR RAILROAD PASSENGER TRAVEL)
Section 601. The purpose of the bill is to provide assistance for passenger travel by railroad, in a manner intended to encourage the individual States and communities to extend tax relief and financial and other assistance to these railroads.
The bill provides immediate and interim financial help, pending the formulation and putting into effect of a “more lasting solution" to the commuter and passenger problems of the New Haven and other railroads.
For example, the Pell (et al.) bill would give Congressional approval to a public, interstate authority for passenger travel; this is a “more lasting solu tion," as would be the possibility of the rejuvenation of the New Haven by private capital and management once the present crisis is surmounted.
Section 602. The program would be administered by the Interstate Commerce Commission.
The definition of expense follows the standard ICC prescription for expenditures for repairing, maintaining and renewing road property that are attributable to operating expense accounts.
The expenses that count, have meaning, under the bill are those solely or partly assignable to railroad passenger service.
Financial aid by the States, municipalities, and other governmental entities can be direct grants, tax relief and the meeting of expenses attributable to railroad passenger service.
Section 603. Any railroad may apply for assistance for the operation of passenger trains.
The Commission can approve only those applications where it determines that continued passenger train operations are required by “the present or future public convenience and necessity" and the granting of this assistance is necessary to carry out the purposes of this bill.
The Commission is given authority to set terms and conditions when it approves applications.
Section 604. For the first year of the program, during which there is no requirement for State or local matching assistance, the 2 preceding calendar years are used to arrive at a determination of the amount that can be given to a railroad, as follows:
(a) The expenses to a railroad of maintaining the way and structures for passenger services, both those used exclusively and in part for passenger services; and
(6) The expenses for these way and structures incurred by a State, municipality, or other political subdivision.
Only a proportionate share of way and structures expenses, in cases where these are not exclusively for passenger services, could be used.
A maximum of $20 million can be extended to any one railroad during the first year.
This figure is based on the New Haven Railroad's expenses during the years 1960 and 1961, as follows:
In addition, Connecticut has contributed each year up to $500,000 for the New Haven's improvements made on railroad crossings (about $1 million then for 2 years) and has authorized $3 million to help defray some of the New Haven's operating expenses and capital expenditures.
Adding these figures together, we have a total of $18,621,824 which conceivably the New Haven could quality for under the first-year formula.
The years 1960 and 1961 were used, rather than 1962 and 1963, in the example because of a desire to derive as high an estimate as possible for setting a maximum. In 1962 and 1963, expenses dropped off to a total of $12,691,620.
For the subsequent 4 years, the Federal Government would match the State and local contributions, 80 to 20 the second year; and 70–30, 60–40 and 50–50 the third, fourth and fifth years.
The Commission would have some authority to provide less than these percentages, should the State and local contributions run high, for example, in relation to the funds needed by a railroad for operating and modernization expenditures.
Section 605. This provides that whenever the Commission considers a proposed discontinuance or reduction in passenger services, it give "appropriate weight” to the “present and future public convenience and necessity” representations made by a carrier in its application for funds.
The Commission is also to give appropriate weight” to whatever assistance is being given to a carrier by States and communities.
Sections 606 and 607 are standard administrative provisions, relating to help for the ICC from other departments and agencies and to administrative expenses of the Commission.
Section 608. This section appropriates $75 million to carry out the provisions of the bill.
The final figure would have to be worked out by experts because at present I do not think there is any idea of exactly what would be needed for a nationwide, 5-year program of this kind.
The New Haven problem is the most acute, and I have allowed for approximately $40 to $50 million for it.
Senator PASTORE. While some of these bills would provide aid to passenger railroads throughout the Nation, the committee is aware that the proposed legislation was motivated by the plight of the New Haven passenger service.
We scheduled these hearings immediately in order that the Governors of the States, the trustees of the railroad, interested Federal officials and representatives of the commuter and passenger associations could meet with us to help to resolve the problem.
Time is short. On February 15, 1965, United States Circuit Judge Robert P. Anderson, who presides over the reorganization of the railroad, gave the trustees permission to apply to the Interstate Commerce Commission to end commuter service to New York and, ultimately, to discontinue all railroad passenger service in New York, Connecticut, Rhode Island, and Massachusetts.
In this memorandum of decision Judge Anderson clearly defines the problem confronting the New Haven. In my personal opinion, having read it very carefully, it is a masterpiece.
I would ask that a copy of the decision be printed at this point in the record. And, also, that the agency comments be inserted in the record at this point.
(The decision follows:)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
In the Matter of
THE NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY, DEBTOR
MEMORANDUM OF DECISION RE PETITION FOR ORDER NO. 287
The issue before the court is a narrow one. It is not called upon to decide on the merits of whether or not passenger service should, in fact, be discontinued. But in the course of giving recognition to the fact that it is faced with an extremely grave situation with regard to the debtor in reorganization, it is necessary that the court give thought to the contribution of the passenger service to the large operating losses of the Railroad and that the question of passenger service discontinuance be considered. Whether evidence will show that such discontinuance is necessary is a matter for decision by the appropriate commissions and agencies, primarily the Interstate Commerce Commission. The Trustees, who are better informed than anyone else on the subject, have considered and weighed all of the economic, social and legal aspects of the problem and have concluded that such a determination by the authorized commissions and agencies is, under the present circumstances, imperative and that they should apply for it forthwith. The only question now before this court is whether the best interests of the bankruptcy estate warrant the expenditures required for the purpose of making such application. The evidence in support of the petition is devastating and overwhelming. It stands completely uncontradicted. As the service is a losing one and as no reasonable prospects exist for arresting the losses, the Trustees should be allowed to proceed. Cf. In re Fonda, Johnstown & Gloversville R. Co., 95 F.2d 397 (2d Cir. 1938). There is no doubt that the petition should be granted and it is so ordered.
While ordinarily this brief ruling would suffice, in view of the position taken at the hearing by the States of New York, Connecticut, Rhode Island and Massachusetts, the court will discuss the broader aspects of the problem.
The day of the hearing on this petition was the first time, during the more than three and one-half years of these court proceedings, that the states appeared and actively participated in the case. The primary thrust of their arguments was that all consideration of the discontinuance of the passenger service by any tribunal should be deferred. None of the states questioned the facts set forth in the petition, but it was suggested variously that the passenger problem was in the course of solution, that time was needed for legislative action, and that the Trustees had not come forward with proposals for them to consider.
The New York, New Haven and Hartford Railroad is historically the combination of the lines of about eighteen railroads some of which had, themselves, been combinations of still smaller lines. It grew up in response to economic demands of farms, mills, factories and other industries and of the travelling public at the end of the 19th century and the beginning of the 20th. At its peak in 1922–23 its main lines and branches had 2,300 miles of track and its operation required over 38,000 employees. It was built from the savings and investment capital of hundreds of individuals and institutions and its earnings were such as to assure a reasonable return on the money put into it. At the present time the New Haven operates approximately 1,600 miles of track and has less than 10,000 employees. It would be virtually impossible, for the purpose of operating it as a separate, independent railroad, to attract the investment of a single dollar of fresh capital for the obvious reason that there is no prospect of any return on the investment.
1 In its extensive investigation of the New Haven's affairs the Interstate Commerce Commission specifically found that the New Haven's “passenger deficit is the primary cause of its current financial difficulties." 313 I.C.C. 411, 426, aft'd 314 I.C.C. 377 (1961).