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(The statement follows:)
STATEMENT OF SENATOR JACOB K. JAVITS
THE FEDERAL ROLE IN THE COMMUTER CRISIS
Commuter rail transportation in the Northeast is now in a critical condition. Its future is a matter of the most vital concern to millions of our urban and suburban citizens, and I believe it deserves the same amount of attention which the Federal Government has paid-in the form of substantial budget requests and congressional appropriations—to competing ship and highway construction programs, and airline and helicopter service.
Many commuter rail lines in the Northeast are beset with operating deficits, which threaten to shut them down, but they do not yet have the opportunity to be saved by Federal help analogous to the millions of dollars now available to competitors through the Civil Aeronautics Board, the Federal Maritime Administration and the Bureau of Public Roads.
A substantial number of the six commuter railroads in the New York areathe New Haven Railroad, the New York Central, the Erie-Lackawanna, the Long Island Railroad, the Pennsylvania, and the New Jersey Central-are operating under heavy financial deficits. The Long Island Railroad, the biggest rail commuter operation to New York, with approximately 85,000 rush-hour customers, has ended 1964 with a deficit of $2,146,350. The New Haven Railroad's operating cash funds were reduced at the end of 1964 to $6.2 million, a loss of $2.3 million for the year. The trustees of the New Haven Railroad estimate that the operating cash fund will have dwindled to $4.4 millionless than 1 month's payroll-by July of this year.
The critical nature of the New Haven's present situation demands emergency action by both the affected States and the Federal Government. We must face up to two basic facts—No. 1, that the New Haven's cash situation is absolutely critical; and No. 2, that it is possible that the U.S. Federal district court judge now presiding over the New Haven under the Bankruptcy Act, could seek to take action on his own to curtail or discontinue passenger service on the ground of protecting the existing assets for creditors of the bankrupt railroad. The trustees state that the commuter service is responsible for $5.5 million of the overall current deficit in net income of $12 million.
Although the Federal Government has not faced the problem of meeting operating costs of commuter rail services, it has expended millions of dollars in subsidies to other means of transportation. For example, the Civil Aeronautics Board, during the past fiscal year, paid a total subsidy of $84,203,000 for international, local service, trunkline, helicopter, and certain other airline services. As stated in the CAB's September 1964 report on subsidies for U.S. certificated carriers, the airlines "subsidy was paid to maintain needed air services at communities which would otherwise represent loss operations and would be without regular air transportation in the absence of subsidy support." I hope this committee will give serious consideration to section 307 of my bill which would permit a similar program for commuter rail services.
As is well known, the Congress last year enacted the Mass Transportation Act of 1964 which provides authorizations for $375 million for Federal grants and loans available to State and local public bodies for capital investments in facilities and equipment of rapid transportation services. The problem of the Federal Government's role in meeting the operational costs of essential commuter services has, however, not been dealt with.
S. 1234, which I introduced on February 23, attempts to deal directly with the critical problems of maintaining commuter rail services. Representative Ogden Reid of New York introduced parallel legislation in the House. This legislation provides the framework of an interstate compact and would create a New York Connecticut Rail Authority which could be organized promptly with the consent of the legislatures of the two States to operate the commuter services. The authority could be expanded to include additional Northeastern States, such as New Jersey, Rhode Island, and Massachusetts, and transit systems within all the participating States. The authority could operate the New Haven's commuter services or a similar line by itself or on a leasing basis and could also administer Federal aid available under the Mass Transportation Act of 1964.
S. 1234 allows the authority to submit to the participating States a request for payment of their shares to be determined under a formula established by
the authority and acceptable to the States. S. 348 assesses the deficit operations of the authority upon the participating States on the basis of a passenger mile ratio for an unlimited period of time.
To overcome any constitutional obstacle which the States might confront in providing for the financing of future debt obligations, S. 1234 expressly requires that the means of payment by the States must be consistent with the States constitution and statutes.
S. 1234 also establishes a new program of Federal-State matching grants to meet the commuter railroad's operating deficits. Section 307 of S. 1234 authorizes the Secretary of Commerce for a 2-year period to pay one-third of any excess of operating costs over revenues which the authority incurred. The participating States would pay the remainder of any operating deficit in an amount dependent on the number of participating States and the agreement among them. In view of extensive CAB subsidies to maintain the operations of airlines, this proposal which establishes a principle of Federal aid for commuter rail deficits does not establish a new precedent for national transportation policy
S. 1234 would also permit the participating States as well as the Federal Government to guarantee tax-free bonds publicly offered by the authority in an amount of up to $500 million for capital expenditures, including the purchase of new commuter cars. The authority could also lease cars from State and interstate agencies such as the Port of New York Authority and make them available to needy railroads.
Governor Rockefeller of New York and Governor Dempsey of Connecticut have already entered into an agreement to support contributions by each State of $5 million and to seek $10 million from the Federal Government under the Mass Transportation Act to purchase 80 new multiple unit commuter cars and to rehabilitate 50 others for the New Haven. The need for a new modernized rail equipment is an urgent one but the need of obtaining cash funds to defray operating costs still remains, in my belief, as the single most crucial one. Enactment of a subsidy program such as herein suggested will provide an answer for this need.
Constructive effort is also being made by Governor Rockefeller and Governor Dempsey to explore the feasibility of a two-State commuter service contract carried out by a proposed New York State Metropolitan Commuter Transportation Authority and the already existing Connecticut Transportation Authority. Such a contract would fit properly within the framework of S. 1234. However, I believe a permanent New York-Connecticut Authority would provide necessary machinery for the immediate as well as the long-term approach to the commuter problems of these States. The permanent bistate authority would provide a comprehensive planning body for regional problems. It is certainly high time that the Congress considered the critical problem of our commuter rail services and express in a clear form its policy as to the extent of the Federal Government's role with respect to financial aid to commuter railroads. The answer to these questions is of deep concern to millions of city and suburban dwellers who depend for their livelihood and recreation on an effective commuter rail system.
Senator JAVITS. Mr. Chairman, I am not trying to duplicate what has already been testified to, but I do think we had better be frank about this matter, as it is before the great Committee on Commerce. We are now talking about an alternative to the nationalization of the railroads of the United States. We have our choice. They are not expendable. The national interest, the national security, the sheer limitations of air transportation, both in volume and by natural inhibitions of weather, demand the continuance of rail transportation.
From all we can see, this is going to go on for some time. I use the plane constantly between New York and Washington. I would be appalled at the fact, though I may not use it five times in a year, that I couldn't get the train if I had to. And most people feel exactly the same way.
So that there is no choice in this matter. We must find a way. Now, whether it is my way, or Senator Dodd's, or Senator Pell's, or Senator Ribicoff's, we must find a way, because nationalization is distasteful to our Nation—that is my conviction. And let us not get to the point where that is the only alternative.
Yet, we are very rapidly in very key areas of the country getting there. So that is point one. We are talking now about what is the most feasible alternative in the national interests, some effort to deal with the problem in a mixed way, Government and private enterprise, or all Government.
The second point, Mr. Chairman, that is very important, is that there is no substitute for direct Federal help if you are going to get this problem off the dime.
I admire greatly Senator Pell's plan, as he does. We have been parties to working on it with him. Nonetheless, he says, and we all understand, that before you can get to that point of a high-speed transportation system for megalopolis, you have to be sure somebody is around alive to enjoy it. And these railroad lines are in imminent danger of being shut down. The New Haven is the most vivid example.
Now, there is nothing so horrendous about subsidies. It all depends on who gets them. Right now, Mr. Chairman, we are subsidizing ships, we are subsidizing highway construction, we are subsidizing airlines, we are subsidizing currently helicopters. Whether we continue that or not is a question. And on this question of airline subsidy, which is the most apposite and about which this committee knows a great deal more than I do, the total subsidy for air carrier services of exactly this nature, that is, the same type of line bringing people from point “A” to point "B,” which you are dealing with in railroads like the New Haven, for fiscal 1965, is $84 million.
Now, when you begin to realize, Mr. Chairman, that if you stopped the New Haven commuter service from Greenwich, Conn., or Stamford or whatever is the near-Connecticut point that is normally figured as commuter service, I think it is a little farther up than New Haven, to New York, you have to build eight lines of highway in order to handle the traffic-if you can handle it whenever it got into the island of Manhattan, and where most of it converges. You begin to realize again there is not much choice in these matters. It is a question of strangulation or of keeping these arteries through which blood is being pumped in the shape of our citizens who move from place to place alive.
Now, the last point-so the first two points: (1) the alternative to nationalization, which is a national acceptance of the responsibility for dealing with these roads; (2) the fact that some subsidy will be necessary, at least to start with, and there is nothing so horrendous about that. We are doing it all the time in other lines, and it has now caught up with us in the railroads; and third, is the question of StateFederal cooperation, which is very interesting, Mr. Chairman, because this is a unique example of where the States are ready to do a great deal more than the Federal Government.
You are not dealing with 90 and 10 as in the highway program; you are not dealing with complete subsidy as in air and in ships; you are dealing with a proposal. Even the States themselves propose a very heavy participation by the States.
Under my bill, it is two-thirds. Under Senator Dodd's bill, a gradually accelerating arrangement. But this is a very real recognition of responsibility by the States and I am very proud to say that my State and Senator Dodd's State are leading in that.
They have already made proposals with respect to the purchase of equipment for the New Haven, and those proposals have now been
expanded to include underwriting of the cost of operating the commuter service to some extent, if they can get some help with that problem, and doing it under a lease so that the New York Central, which is in good management under Mr. Pearlman, its president, may actually operate the commuter service.
And the fourth point, Mr. Chairman, is the merger proposition. We have got to bring about more efficient and economical units of the American railroad system, and if we are going to be doing any subsidizing—as we are obviously going to have to do in one way or another—and as we have already done.
After all, the ICC has guaranteed quite a good deal of these bonds, including bonds for the New Haven, then at least let's get the most efficient use possible and let's get the Department of Justice off the dime on this merger question.
So, for example, in respect of the New York-New Haven-Hartford, the New York Central and the Pennsylvania, may take in the New Haven, their economies are going to be $100 million, at least I understand, when they do merge and they are going to have to use a little of that money, a little of what they are saving by the merger in order to serve the public interest which allows them to continue as monopolies. And part of that public interest is going to be some continuance of some kind of passenger service. So, that is point No. 4.
Let's move on and accelerate the merger movement so as to take the full advantage that we can of minimizing the responsibility which we will have in respect of this new policy. And there is no question about that, Mr. Chairman, this is a new policy.
But, as I say, it is the alternative to the nationalization of the railroad.
Now, with that before us, Mr. Chairman, which it seems to me is our problem—and I know the Chair well enough to know that he likes to cut through the persiflage and get down to the elements of the situation—and that is, as I see it, are what is before us.
The bill which I have, which is in no way, Mr. Chairman, oppositional to Senator Pell's bill or Senator Ribicoff's bill or Senator Dodd's bill, we are all trying to get to the same point, and I have no doubt that once the committee crosses the one mountain of the policy decision that it will take the best in each bill.
I was so gratified and typically generous of Senator Pell, that he said in his prepared statement that he likes the provision in my bill, which keys the underwriting of deficits to the constitutions and laws of the respective States. I like the provision of his bill which takes us ahead to a day beyond mine, beyond Senator Dodd's, beyond Senator Ribicoff's, to really doing something about electrifying the country in terms of transportation.
Analogous to that, for example, is the famous Japanese road which has been such a remarkable success and operates practically on a suburban trolley car basis, like we used to know it in the old days, except with modern technological means.
Senator PASTORE. May I ask a question or two, Mr. Javits, on this point?
Senator JAVITS. Please.
Senator PASTORE. Your bill does not contemplate the inclusion of the commuter service in the merger.
Senator JAVITs. In the which?
Senator JAVITS. No. I think they are trying to merge now, Mr. Chairman, without taking any of the passenger services. My bill does not contemplate anything about the merger. I say that as a basic question of policy.
Senator PASTORE. The question I am leading up to is this, that was merely a premise question. How would the New York Central run it under your proposal, if the railroad is still under the jurisdiction of the court? The reason why I ask these questions is that I was quite intrigued by your bill and I am very much impressed with your presentation, as I always am, Mr. Javits, and you well know that. I don't think there are many in the Senate who excel you in that regard of presenting an issue in its clarity, but the question that I am asking, why didn't you include the entire railroad in your proposition? Why do you confine it alone to the commuter service and how are you going to separate the commuter from the long haul ? In other words, how is New Haven going to run the commuter service unless it runs the whole line?
Senator JAVITS. First, as to what my bill does on that. This bill has an open end for joining in terms of State compacts. It starts with New York and Connecticut, because they are ready. They are doing business now. And it allows others to join by arrangement with them, which they have to do anyhow, so that my concept is expansible and would even be open to New Jersey, which also represents a problem here because there are six lines going into New York City, not just the lines which proceed from the North, but lines which come up from the South and come in from the West.
The second point is how can you segregate out the commuter seryice? You can segregate it out in a contract with the New York Central, for example, as follows: If the court approved a management agreement in which the New York Central preliminary to a merger would operate the commuter services for a fee, and leased the line in terms of that operation from the trust estate, because it is a segregable service. There are certain cars. They start at certain places. They use the line for certain limited purposes. You could work out a contract on that score.
As a matter of fact, Mr. Chairman, we are now contemplating, and it is an open secret, that even before any such bill passes, to give a Federal permission to an interstate compact, a New York authority being created. We are going to do it via Long Island, for example, which can by contract, with the Connecticut authority, which is already in being, actually save the New Haven, if it got any Federal help, because they can by contract between themselves and with the New York Central for management, and with the trustees as approved by the court, bring about a continuance of the service in such a way as to not jeopardize the trust estate, which is the real issue before the court.
As a matter of fact, the Chair is an excellent laywer, and though the law says a great deal about the ICC having to approve the shutdown of commuter service, et cetera, what deeply concerns us in New York, and what concerns the Connecticut Senators, is that the court has constitutional power in bankruptcy. It doesn't depend on the statute, it is the supreme law of the land. We are of the mind if the court can't