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necticut, the distinguished Governor, on the $5 million dollar appropriation, and the $5 million from New York, and the $10 million from the Federal Government, that is a drop in the bucket.

We know, 1 year alone, as you said a moment ago, you were in the red to the tune of $17 million dollars. So how far is $20 million going to take you?

And that is just getting your foot in the door, as a consequence of this so-called complicated matter.

It is not complicated a bit.

Could you, as an individual, distniguished Senator and chairman of this committee, if you had a corporation and you were not successful for any reason whatsoever, including mismanagement, could you go to your legislature, or to your Congress or to your neighbor and say, "Brother, I squandered the money twice before, and I have been in receivership; move over, brother, give me a dime, multiply it by a million, I want to show you how fast I can spend it a third time, your answer would be no.

It is just commonsense. We can talk about this until hell freezes over. The question is what are we going to do about it.

I say this, you are the gentlemen that can do it.
Senator PASTORE. Thank you very much.
Mr. BASSETT. Thank you.

Senator PASTORE. Now, we have certain officials of the State of Connecticut. We have Mr. Frank Reinhold, chairman of the Connecticut Transportation Authority.

Mr. REINHOLD. I am Frank M. Reinhold. I live in Watertown, Conn. I am chairman of the Connecticut Transportation Authority.

I am representing the Governor today in my comments. I don't plan to submit to you honored gentlemen any lengthy statement of our position.

I do want to mention that the statement which our Governor presented in Washington last week is also the statement of the Connecticut Transportation Authority.

I also wish to add that I do plan to leave with your committee a list of the various steps that the State of Connecticut has taken over the period of some 5 or 6 years to aid in this problem of the New Haven.

Senator PASTORE. If there is no objection, we will have that included in the committee files.

Mr. REINHOLD. Thank you, sir.
Now, our problem is one of interstate.

If this were purely an intrastate problem in Connecticut, I believe I am not overstating the fact to say that it would long since have been taken care of.

We do have problems in the cooperation with the adjoining States.

As you well know, we struggled for almost a year in connection with the MU Car Program, all through 1964, and much because of the difficulties with the adjoining States.

However, this is again active. We are working in very close cooperation with the State of New York. And we are doing all we know how to implement the agreement which was reached by Governors Dempsey and Rockefeller within the last 60 days. That agreement seems to be moving fairly rapidly.

I simply want to add that, as a member of the Connecticut Transportation Authority, we do have the funds with which to work. We do believe we know the problem as it exists. And we believe further, that the State of Connecticut, through its legislature, can give us additional funds with which to carry on.

And, gentlemen, I am strongly of the opinion, as an individual, that this matter is far from being completely discouraging.

I think we are finally beginning to move. And we believe that the adjoining States are going to move with us, and that you will see that these States that are involved in this problem are going to do their part, and we do need a certain amount of assistance from the Federal Government.

Now, except for those comments, and the fact I am willing to expose myself to questions, I have nothing more to say at this moment.

Senator PASTORE. Thank you very much.

As a matter of fact, your distinguished Governor appeared before our committee last week and stated the position very succinctly and very completely. You have corroborated pretty much everything he said.

I think, according to this hearing, and I already said it this morning, I think, with a little bit of common sense and coordination, and cooperation, we can resolve this problem.

This does not alleviate what Mr. Bassett has pointed out, nor does it vitiate the purpose of the introduction of these bills.

We do have difficulties. There is no question at all about it.

Only yesterday, in the New York Legislature, representatives of the people in the northern part of that State indicated they could not care less about the passenger train problem that confronts the people of New England.

You will find that pretty much in Congress. People who come from another part of the country sometimes will fail to understand the problems, and make allowances for people in other parts of the country.

As Mr. Bassett pointed out, we, in New England, have supported these programs of benefit to other regions of the country and we have considered them in the public interest.

I quite agree with him, if we are going to subsidize tobacco that many people say give you cancer, if we are going to subsidize corn, which is to make liquor, which sometimes makes people drunk, if we can subsidize rye, which is used to make liquor and make people drunk, why can't we subsidize the New Haven Railroad?

Thank you very much, sir.

Now, Mr. Maurice Reid. I understand he has a very short statement.

Would you kindly make it, sir?

Mr. Reid. Mr. Chairman, Senator Ribicoff, and distinguished members of the committee, I am Maurice W. Reid, president of the Connecticut State Chamber of Commerce, and I am appearing in behalf of that organization. I have a brief statement to make in support, in behalf of the railroad.

Our membership includes firms from all segments of business that are located throughout the State, both large and small, many of which are dependent upon the railroad for transportation of their materials and goods to move in interstate commerce.

The Connecticut State Chamber of Commerce has long been concerned with the condition of the New Haven Railroad.

For instance, Mr. Frank Reinhold, who is now chairman of the Connecticut Transportation Authority was chairman of our transportation committee for many years, and he testified in our behalf at the Interstate Commerce Commission hearing in Boston on May 21, 1963.

We realize that the principal problem of the railroad results from the heavy losses on the passenger service operation, and we agree that this service must be rehabilitated either through an early merger or some form of temporary public assistance, so that the railroad can again be operated effectively under private ownership.

While we are aware of the critical conditions affecting this service, our primary interest is in finding a solution to this problem that would not, in any way, impair the capability of the railroad to continue freight service, which is necessary to support our present industry and attract new industry.

That is the end of our official statement of the chamber of commerce. I would like to explain what we mean by a couple of points.

We said this passenger service should be rehabilitated, and we favor and agree that some form of public assistance was necessary to accomplish this.

We believe that the railroad, through certain circumstances, one of which is mismanagement, which you have heard about today, is in a position now where you could not attract private caiptal to do this job.

We do believe that with proper assistance from the State and Federal Governments, and with proper innovation in management, we could have an effective railroad.

For instance, I would like to endorse the proposal made by Mayor Lee of New Haven, on the one thing that might help, and that is the community taking over the facilities in the town.

In fact, I made this as one of my proposals to the trustees last year, and I guess the Mayor beat me to it, because he said he has been doing it for several years.

This illustrates some of the things that could be done to relieve the railroad of the unfair burden, being in competition with other forms of transportation.

If you have that goal, if you can claim and, in any event, say you have a real effective service, I think it could be run, and even be profitable.

Thank you.
Senator PASTORE. I agree with that.
Now, Congressman Giaimo has a statement to make.

Congressman GIAIMO. Senator Pastore, and Mr. Chairman, and colleagues, Senator Ribicoff, let me welcome you to New Haven. I am delighted that you have taken the time to come up here to hold this hearing, because of the extreme importance which this has to our own city and our State.

I have a formal statement, Senator, which I will not read, which I will ask permission to insert in the record at this time. Senator PASTORE. Without objection, it will so be done. (The statement of Hon. Robert N. Giaimo follows:)

TESTIMONY OF ROBERT N. GIAIMO

My

Mr. Chairman, distinguished Senators, welcome to New Haven.

My name is Robert N. Giaimo. I am a Member of the U.S. House of Representatives, representing the Third Congressional District of Connecticut. district includes the city of New Haven and the 12 surrounding towns and cities, It is also the home of the New Haven Railroad and most of its employees :

It is on behalf of my constituents, and the residents of southern New England, that I welcome this very distinguished committee to New Haven. I want to thank you for giving our citizens the opportunity to testify on the fate of a very important part of their economic life, and I am sure that your understanding of the importance of the New Haven Railroad will be broadened by this trip.

It is my primary purpose today to place in perspective, if I can, the railroad and its relation to the economy of the Northeastern United States. I also wish to emphasize the importance of the economic health of this region to the health of the Nation as a whole. For I believe that the fate of the New Haven Railroad-which is at stake today—is directly tied to future growth of this Nation's economy.

The New Haven Railroad is the major railroad in New England. It is an essential part of the railroad network which serves the Boston-to-Washington “megolopolitan” region. “Megalopolis" is the home of over 47 million people. Almost 30 percent of this Nation's manufacturing is done in this area. It includes 21 percent of our retailing establishments. The headquarters of our whole financial community is the Northeast. It is the most important single industrial area of the United States and the most valuable piece of her real estate. It provides 27 percent of our Federal income taxes.

If there ever was an industrially and economically important area in the United States where transportation facilities should be expanding and improving, it is the Northeast.

Instead, a vital link in this transportation network faces extinction, and its future is in fact to be decided by you gentlemen and my colleagues in the House of Representatives.

The New Haven Railroad services an area of better than 17 million people. Within this area lie the most important cities of the Northeast—New York City, Boston, Providence, Worcester, Hartford, Bridgeport, Springfield, Waterbury, New Bedford, and of course, New Haven,

This area, as has been pointed out by the railroad's trustees, is also vital to our Nation's defense, containing as it does such important installations as the Naval submarine base, Otis Air Force Base, Quonset Point, Westover Air Force Base, and many others.

This area is also vital to the maintenance of our space and defense supply system. Connecticut and Massachusetts alone account for over 10 percent of all prime military contracts. Connecticut is fourth in space contracts and high in individual military contracts. Over 70 percent of the work of United Aircraft, for example, is for the Government.

Without the New Haven Railroad, southern New England would have absolutely no rail service. This includes freight as well as commuter and passenger.

To point out its importance, let me dwell for a minute on the city of New Haven. Our port is the largest in southern New England and is growing daily. We have direct rail connections from our port to facilitate shipping. The demise of the New Haven would doom its port.

The New Haven area currently is enjoying a spectacular growth in personal economy, engendered in part by its world-famous urban renewal plans. Wide spread unemployment and a transportation quarantine would spell disaster for now-prosperous areas such as New Haven.

This is not a “maybe," gentlemen. This is a specific danger and one which could happen within a few weeks.

Not only this, but New England is a manufacturing area. We produce few of our primary supplies. Iron, steel, wire, etc., are brought into our State by rail or truck. It has been estimated (by the President of the Federal Reserve in Boston) that 90 percent of the value created by manufacturing in New England is dependent on material brought into the region to be manufactured. An overwhelming amount of it is brought in by rail. And it is shipped out again to be marketed.

For these, and for the many other reasons which have been and will be presented to you, it is vital that the New Haven Railroad be saved-and saved by immediate assistance, coupled with sensible, long-range plans for development.

There are several proposals before you, all of which are designed to assist this railroad. I would like to discuss them with you in terms of advantages and disadvantages. Of three of these bills, I am a House sponsor. Others I support in part.

First, let us consider the legislation proposed by Senator Pell and others and by me in the House. This bill would provide a four-State authority, composed of New York, Connecticut, Massachusetts, and Rhode Island. This authority would

(1) Authorize the creation of the compact I have just described to form a public authority for the operation of rail passenger service in that area. The bill contains the proposed text of the compact and suggests the structure, organization and scope of the authority.

This is a departure from usual compact forms, but it is in the bill as a guideline and could well be modified.

(2) It would set a formula by which the financial burden would be divided among the States, assigning to the Federal Government the responsibility for guaranteeing the capital of the authority and assigning to the States responsibility for guaranteeing operating costs.

(3) It would require the States to underwrite the annual operating deficits of the authority in proportion to the number of passenger miles traveled in each State per year. When, as is expected, the authority shows a profit, it would be directed to reimburse the States in the same proportion.

(4) It would also assure that the authority would be free of State taxation until such time as its revenues exceed operating costs. As Senator Pell has suggested, this is not the perfect formula, but it presents a possible framework for the cooperation which is needed. It also provides, along with the eight-State compact bill know as the megalopolis bill, a formula for long-range planning in the area of transportation services.

I recommend that this approach be coupled with a system of immediate financial aid to the railroad. There are two proposals. One, offered by Senator Ribicoff, would provide for a $100 million matching fund program. I believe that it is certainly desirable to expect the States to carry their share of the responsibility, but I prefer Senator Dodd's approach (which I have introduced in the House).

Senator Dodd's bill would also provide immediate assistance, but it would give a cutoff date to such assistance, rather than providing an open-end subsidy. It would also require State cooperation, but in a gradually increased manner, allowing the States to install the necessary legislative and budgetary procedures necessary to provide matching funds.

In brief, this bill would provide a total authorization of $75 million for a 5year period, with a limit of $20 million for any one railroad during the first year of operation.

It provides a decelerated formula of Federal support, ending in 5 years. During the first year, the Federal Government's share would be 100 percent, with no requirement for State and local matching funds. But, for the next years, as the railroad becomes more independent, the Federal contribution will decrease as follows: second year, 80 percent; third year, 70 percent; fourth year, 60 percent; and fifth year, 50 percent.

I believe that this measure is preferable to an outright subsidy, since it would provide: (1) immediate assistance; (2) mandatory but gradual State cooperation; and (3) a cutoff date, after which time the compacts and long-range planning envisioned by the other measures should be expected to be in operation, and high-speed transportation and other improvements would be ready to stabilize and build a new transportation system for the Northeast.

It is encouraging to note that President Johnson is an enthusiastic advocate of transportation planning and innovation, especially in the northeast corridor. But, however, desirable long-range planning is—and it is vital—it is equally vital that we do something now-today to save the New Haven Railroad.

All of our dreams of modern transportation, all of the promise of increased technology—will be meaningless if New England is left without an adequate transportation system in the years to come.

It would cost this country far more to build a new transportation system than it would to save the New Haven. It would cost the Government far more to reconstruct New England's economy than it would to take the steps necessary to continue and stabilize its transportation system.

If the Northeast, and southern New England particularly, is deprived of adequate transportation, this area could become the most populous depressed area

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