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service alone which will certainly reach a substantial number of millions of dollars for the present year, if continued. In the context of the operating losses of the entire passenger service of nearly $12,000,000 for 1964, not to mention the freight losses of nearly $6,000,000 more, and in view of the fact that the Trustees are faced with the necessity of meeting a weekly payroll of $1,200,000, a grant of cash of a little over $15,000 per week will certainly not suffice to save the Railroad from its ills. This would be as effective as attempting to remedy a broken back by dusting it with talcum powder.

Even though the governors' proposal is directed only at saving the west-end commuter service, it must be considered in the light of the other operations of the Railroad. As they also are suffering operating losses, they can contribute nothing to make up for the losses of the commuter operation and a proposal to save it must provide for the assumption of the substantial losses which the west-end commuter service incurs.

The court is therefore of the opinion that neither this program nor any other gives a sufficiently present and timely prospect of relief from the public authorities to justify the denial of this petition. It has been argued, in support of further delay, that relief may be forthcoming from private sources: that is, through the inclusion of the New Haven as sought by the Trustees in the proposed merger of two trunkline systems, the Pennsylvania Railroad and the New York Central Railroad. The record in these proceedings is to the contrary. In June 1962, the Trustees petitioned for leave to see inclusion in the merged system in the proceedings before the Interstate Commerce Commission. At the hearing on their petition, the Trustees testified that they should have preferred the merger issues to have arisen at a time when the New Haven was further along with its problems, especially the matter of public support of passenger service. The Pennsylvania and New York Central railroads are not in competition with the New Haven for passenger service, however; the Trustees' case for inclusion, as presented both to this court and the Interstate Commerce Commission, rests upon the impact which a merger would have on their freight operations. Their request for inclusion seeks to preserve the freight operations of the road which are so closely linked to the economy of southern New England. Inclusion in a trunk line system is not a harbor of refuge for each and every problem which contributed to the economic collapse of this railroad. It appears to the court that the Trustees have acted prudently in this regard. To have risked the denial of their petition in the merger proceedings by seeking the inclusion of passenger service would have been to jeopardize the future of freight service so vital to the economic health of this region.

There is, then, no reason to sanction any further deferral of steps designed to end these recurring and staggering passenger deficits when the problem and the procedure for its solution have existed for all to see for this length of time. The creditors have borne the onus of the public interest long enough; further delay would only prevent efforts to salvage anything, whether in freight or passenger service, as a going concern. Moreover, the appointed procedures under the Interstate Commerce Act will given public authorities, as a practical matter, sufficient time, with the Congress and the State Legislatures now in session, to také such action as the public interest warrants. Dated at New Haven, Connecticut, this 15th day of February, A.D. 1965.

ROBERT P. ANDERSON, United States Circuit Judge sitting by designation as United States District

Judge, District of Connecticut.

(The agency comments follow:)

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET,

Washington, D.C., March 10, 1965. Hon. JOHN O. PASTORE, U.S. Senate, Washington, D.C.

DEAR SENATOR PASTORE: This is in reply to your letter of February 16, 1965, requesting the views of the Bureau of the Budget on S. 325 and S. 348, bills to provide Federal financial assistance for the preservation and improvement of railroad passenger service.

S. 325 would authorize the Interstate Commerce Commission to provide finan. cial assistance to any railroad for the operation of passenger trains up to the total of expenditures in the previous year by (a) the railroad for maintenance of ways and structures related to passenger servcie, and (b) any State or other political subdivision for the same purpose. Such aid could not exceed the amount of assistance made available to the applicant railroad during the preceding year by any State or local government, exclusive of assistance for maintenance of ways and structures, which in the Commission's judgment was reasonably related to the purpose of the bill. The Commission would also be authorized to provide financial assistance to any railroad for the purpose of acquiring or modernizing passenger cars. Federal expenditures up to $100 million would be authorized.

S. 348 would authorize four States to enter into an interstate compact for the creation of a Northeast rail authority to maintain passenger train service in their States. The compact is incorporated in full in the bill. The authority would be empowered to own, lease, or otherwise acquire facilities, operate such facilities or hire others to do so, and set fares. Signatories to the compact would agree to underwrite deficits, but the authority could not pledge the credit of any signatory except as expressly provided in the compact. The authority could sell tax-exempt bonds up to $500 million to support its activities and make payments in lieu of taxes from any net revenues.

The Secretary of Commerce would be empowered to guarantee authority bonds, the proceeds of which would be used for capital and maintenance expenditures. He could designate a representative to the authority, who would have veto power over any matter relating to the sale of bonds guaranteed by the Federal Government.

In detailed testimony being presented to your committee by the Department of Commerce and the Housing and Home Finance Agency and in a report being submitted by the Department of the Treasury, basic objections to these bills are discussed. We generally concur with the views of those agencies and should like to emphasize the following points:

1. A coordinated plan for the solution of current transport problems consistent with well defined long-term objectives should be a prerequisite of Federal aid.Other Federal grant-in-aid programs for transportation improvements require such plans; e.g., the Federal-aid airport program, the urban mass transportation program, and the Federal-aid highway program. While several States, both individually and in concert, have made partial analyses of the problems of the New Haven Railroad, these States have not been able to agree on any coordinated approach to the solution of problems arising from the transportation of passengers. The proposed bills do not include any planning requirements.

2. Where there are substantial State and local interests and responsibilities, there should be substantial State and/or local financial involvement in the implementation of transportation programs, whether transitional or long term.-Individual States have accorded the New Haven partial or sporadic tax relief, and various other forms of joint assistance have been proposed but not implemented. While S. 325 limits Federal assistance to amounts no greater than those provided by State and local governments, there is no requirement for State or local assisance. S. 348 authorizes borrowing by the proposed authority ; but instead of pledging the full faith and credit of the signatories, it makes the Federal Government the guarantor of the authority's bonds up to $500 million.

3. There should be no Federal guarantee of tax-exempt securities.—This is a firmly established principle of Federal credit policy and is reflected in the Urban Mass Transportation Act of 1964. By creating a large volume of more attractive securities, S. 348 would in itself seriously aggravate problems of Federal debt management and would create a precedent for the extension of tax-exempt federally guaranteed securities into other areas and for other purposes.

4. Federal grants-in-aid to State and local governments for passenger transportation should be limited to capital expenditures.-Existing grant-in-aid programs for other forms of transportation are so limited ; e.g., the Federal-aid airport program and the Federal-aid highway program. The same principle was extended last year to Federal urban mass transportation assistance programs. During action on the Urban Mass Transportation Act of 1964, the issue of capital versus operating subsidies was carefully reviewed and settled in favor of capital assistance. We are aware of no persuasive reason for deviating from this principle. Assistance under the Urban Mass Transportation Act is available in the present case if the State or local governments involved can satisfy the planning and other requirements.

5. Where complex problems are involved, initiative in the formulation and negotiation of interstate compacts should rest with the States.-S. 348 incorporates a detailed compact text which must presumably be accepted or rejected verbatim by the States. It seems to us desirable and perhaps essential in complex situations such as the one concerned here for the States to negotiate a compact among themselves and adopt it before it is presented to the Congress for ratification. This would be so even if S. 348 did not contain the objectionable provisions and omissions discussed above.

For these reasons the Bureau of the Budget recommends against enactment of either S. 325 or S. 348. It would strongly support, however, approval by the Congress of interstate compacts negotiated by interested States to facilitate the cooperative solution of both suburban commuter and inercity rail passenger seryice problems. Such compacts would promote sound comprehensive planning, encourage system economies and facilitate obtaining and using existing Federal aids. Sincerely yours,

PHILLIP S. HUGHES, Assistant Director for Legislative Reference.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., March 3, 1965. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate.

DEAR MR. CHAIRMAN: We have your letter of January 14, 1965, asking for our comments on S. 325.

S. 325 proposes to add to the Interstate Commerce Act, 49 U.S.C. 1 et seq., a new part to be designated part VI, concerned with making available financial and other aid to railroads for the preservation and improvement of passenger train service and facilities, and for other purposes. The ills of railroads operating passenger services and the problems of the traveling public particularly the rail commuter population of metropolitan areas-have received widespread attention in recent years. Section 13a was added to the Interstate Commerce Act by the Transportation Act of 1958, 49 U.S.C. 13a, to provide more equitable treatment of carriers with respect to the discontinuance of unnecessary and unprofitable passenger service.

The railroad loan guarantee program, part V of the Interstate Commerce Act, 49 U.S.C. 1231 et seq., which expired June 30, 1963, was intended to assist needy railroads in obtaining the financing necessary to support both passenger and freight services. We note that the Urban Mass Transportation Act of 1964, Public Law No. 88–365, July 9, 1964, 78 Stat. 302, provides for grants or loans to States and local governments to accomplish the purposes of that act in the de. velopment of comprehensive and coordinated mass transportation systems.

State and local aid of various types, including tax relief and outright financial grants, have been provided, particularly to the New York, New Haven & Hartford Railroad Co. serving the New York metropolitan area. So far these measures have not met with notable success; in fact, the trustees in reorganization of the New Haven are currently seeking to terminate passenger service to a number of Westchester County, N.Y., communities, with the aim of ultimately phasing out completely commuter service in New York and Connecticut.

S. 325 would accomplish its purpose by making direct financial aid available to railroads performing passenger services. Section 609 provides that up to $100 million is authorized to be appropriated to that end. Section 603 provides that railroads subject to the Interstate Commerce Act would make application to the Interstate Commerce Commission for financial aid in the operation of a passenger train or trains required by the present or future public convenience and necessity. Section 604 provides that the maximum amount of such aid would be the expenses incurred in the preceding calendar year for the maintenance of way and structures which solely related to passenger service, plus any expenses incurred during the same period by any State, or political subdivision thereof, that would, if incurred by the applicant, be directly related to passenger service, and that portion of common expenses incurred during such period by the applicant in the maintenance of way and structures assignable to railroad passenger services.

According to Senator Ribicoff, who introduced S. 325, Federal assistance would not exceed whatever financial aid is available from the States, including tax forgiveness. Page 295, Congressional Record for January 7, 1965. Subsection 604 (b) might be made somewhat clearer in this respect if the word subsection were substituted for the word paragraph in lines 3 and 4 on page 5 of the bill. Subsection 604 (c) makes final the decision of the Commission as to the amount of aid to be extended. Such a provision would appear to limit the applicability of section 305 of the Budget and Accounting Act, 1921, 31 U.S.C. 71, requiring that all claims and demands by or against the United States shall be settled and adjusted in the General Accounting Office. We recommend that section 604 (c) be removed or modified.

Additionally, it is noted that section 604 of the bill does not provide any specific criteria for determining the actual amount (within the maximum amount determinable under the formula set forth) of financial aid to be granted. If it is not intended that the maximum amount generally will be the actual amount paid in each instance, your committee may wish to include some such specific criteria. Section 605 of the bill provides for application by any railroad in passenger service for financial aid in the acquisition and modernization of passenger equipment. As in the case of section 604, some specific criteria relative to the actual amount to be granted may be appropriate for inclusion.

The bill differs substantially in scope from the railroad loan guarantee program in effect until June 30, 1963, part V of the Interstate Commerce Act, 49 U.S.C. 1231 et seq. Under that program the Government guaranteed loans made to the railroads by various banking institutions. The present bill proposes direct aid by the Government to the applicant railroads to the maximum extent that similar aid is granted by any State. No provision is made for the ultimate reimbursement of such financial aid as may be granted under this bill.

Since S. 325 provides for the expenditure of appropriated funds, disbursement for the financial aid to the railroads provided in the bill, including contracts and all pertinent records would be subject to audit and review by our Office with reports to the Congress by the Comptroller General as he may deem necessary under the provisions of the Budget and Accounting Act, 1921 (31 U.S.C. 53), and Accounting and Auditing Act of 1950 (31 U.S.C. 67). This would require the Interstate Commerce Commission to make its records fully available to the General Accounting Office. We mention this in view of our experience in seeking information from the Interstate Commerce Commission concerning the certain records we believed were necessary for us to make an adequate, independent and objective audit of a large loan to a railroad under the Railroad Loan Guaranty program. On July 13, 1962, we furnished your committee a report on this denial.

We believe that access to the pertinent records of the applicant carriers is necessary for the adequate administration and audit of the proposed financial assistance program and we recommend that a provision somewhat similar to section 393(b) of Public Law 87-447, 76 Stat. 66, be included in S. 325. Section 393(b) reads:

"The Secretary and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of the recipient that are pertinent to assistance received under this part [Part IV of the Communications Act of 1934, as amended]."

A somewhat similar provision is incorporated in section 9(b) of the Urban Mass Transportation Act of 1964 (49 U.S.C. 1608(b)), relative to negotiated construction or improvement contracts. Other similar provisions appear in section 318(b) of the Trade Expansion Act of 1962 (19 U.S.C. 1918(b)); section 393 (b) of the Communications Act of 1934 as added by the Educational Television Act of May 1, 1962 (47 U.S.C. 393 (b)); section 11(b) of the Clean Air Act as amended by the act of December 17, 1963, (42 U.S.C. 1857j(b)); and section 21 (b) of the Federal Airport Act as added by section 13 of the act of March 11, 1964 (49 U.S.C.A. 1120(b)).

The maintenance of commuter train service in metropolitan areas and passenger train service generally seems to be in the public interest. The question of the desirability of such relief as proposed in S. 325 is, however, a matter of congressional policy and, except for the several suggestions made as to possible changes in the present form of the bill, we have no recommendation to make as to its consideration by your committee. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE,

Washington, D.C., March 10, 1965. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: This is in reply to your request for the views of the Department of Defense on S. 325, 89th Congress, a bill to amend the Interstate Commerce Act, as amended, to authorize the Interstate Commerce Commission to assist common carriers of passengers by railroad in preserving and improving essential passenger train services and facilities, and for other purposes.

The purpose of the bill is stated in its title.

The Department of Defense is interested in a strong, reliable national transportation system for both freight and passengers. However, we defer to the Department of Commerce as to the merits of S. 325.

The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee. Sincerely,

L. NIEDERLEHNER, Acting General Counsel.

THE GENERAL COUNSEL OF THE TREASURY,

Washington, D.C., March 3, 1965. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 325, to amend the Interstate Commerce Act, as amended, to authorize the Interstate Commerce Commission to assist common carriers of passengers by railroad in preserving and improving essential passenger train services and facilities, and for other purposes.

The bill would authorize the Interstate Commerce Commission to extend financial aid to any railroad subject to the Interstate Commerce Act for the operation of passenger trains, and the acquisition and modernization of passenger cars. Appropriations up to $100 million for financial aid would be authorized by the bill.

The Department has no independent knowledge as to the need for the proposed legislation and consequently is not in a position to comment on its general merits.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee. Sincerely yours,

EDWIN F. RAINS, Acting General Counsel.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, February 23, 1965. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate.

DEAR MR. CHAIRMAN: Reference is made to your letter of February 10, 1965, requesting our comments on S. 348.

The bill would grant the consent of Congress to the States of Massachusetts, Rhode Island, Connecticut, and New York to enter into a compact to create their own Northeast Rail Authority, and would guarantee certain loans and other credit to such authority.

We have no special information concerning the advisability of the proposed legislation. We therefore have no comments to offer with respect to its merits or recommendations regarding its enactment. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

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