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Senator PASTORE. Thank you very much. Senator Lausche.
Senator LAUSCHE. Governor Dempsey, is this a correct statement that Connecticut is not now collecting any taxes from the New Haven, either on the State, county, or municipal level ?
Governor DEMPSEY. Yes, sir; this was in my statement, Senator Lausche.
Senator LAUSCHE. That was in your statement? Governor DEMPSEY. Yes, sir. Senator LAUSCHE. And that is the fact, is it? Governor DEMPSEY. Yes, sir. Senator LAUSCHE. What about Massachusetts? Is it collecting ? Governor DEMPSEY. I cannot speak, nor would I try to speak, for the State.
Senator LAUSCIIE. What about New York? I will find out later. Do you know what the situation is in New York, Massachusetts ? Governor DEMPSEY. I do not, Senator. Senator LAUSCHE. You don't ?
Governor DEMPSEY. I do not. In my State, we feel that we are the only one that is doing this, if this will help you. We think Connecticut is the only State doing it. We are not sure.
Senator LAUSCHE. You think it is the only one?
Senator LAUSCHE. That is, you removed all taxation against the railroad because you believed that it needed help and you wanted to do it on a local level?
Governor DEMPSEY. That is correct, Senator, and on top of that, I would call your attention to the fact that we have every biennium, since 1961, we have given the railroad $1 million to take care of crossings and to relieve them of taking care of the bridges, and this, we thought, would be the best help, upon the recommendations of the trustees, themselves. They asked us for this and we gave it to them; yes, sir.
Senator LAUSCHE. I commend you for your effort to give help because these recommendations have been made for the last 6 or 8 years to the different States.
Now, with regard to the Federal help. Senator Pastore pointed out the other day that to the New Haven, the Government of the United States guaranteed obligations in an aggregate of $51,600,000 and $28,300,000 of those obligations were defaulted and the Federal Government had to pay them. I merely point that out because it shows the Federal Government has been trying to help.
Governor DEMPSEY. Yes, sir; they sure have.
Senator LAUSCHE. And the probability is that they will have to pay additional obligations which it guaranteed.
Has there been any money thus far allocated under the Mass Transportation Act to help solve this problem?
Governor DEMPSEY. Not as far as Connecticut and New York are concerned, Senator Lausche. The application that we will make and hope to have ready next week, that Senator Pastore asked about, we hope that this will be the first opening here under the Mass Transportation Act. This is Connecticut and New York, together.
Senator LAUSCHE. Why isn't Massachusetts in on that and why isn't Rhode Island ?
Governor DEMPSEY. Senator, not meaning to be impertinent, I wouldn't dare talk for the State of Massachusetts or the State of Rhode Island. They are both here, and I know you will ask them that question.
Senator PASTORE. Massachusetts is a participant under the urban mass transportation program. Rhode Island is not, because this is more or less a commuter problem.
Governor DEMPSEY. In this particular program; yes, sir.
Senator LAUSCHE. Has there been agreement among the four States, which are involved through the service of the New Haven, to get this problem solved, or has there been one State going in one direction and another State in another direction?
Governor DEMPSEY. Senator Lausche, when each Governor went back to his legislature to recommend relief for the New Haven, in Connecticut, as I said to you, we adopted the recommendations intact. Other States did not; did not do it.
Senator LAUSCHE. It was testified yesterday that one State-I believe it was Massachusetts—said, “We will give you tax relief providing you do not remove anybody from the payroll except by first going to a public agency to get approval." Are you familiar with that?
Governor DEMPSEY. Yes, sir; I am, Senator. This was not the condition in Connecticut, and this was the condition we faced in 1961. We had hoped that all of the States would agree with our so-called agreement plan. You are absolutely right. In Massachusetts, this was the condition.
Senator LAUSCHE. Did any of the other States fail to follow on the recommendations of the four that were made?
Governor DEMPSEY. New York did for a while, Senator. They had also a condition which, for a while, they claimed was not met, but that condition has now been, I understand, rectified so that, as of today, I think Massachusetts, perhaps, is the only State that does not grant tax relief.
Senator LAUSCHE. The financial statement that was submitted shows that the New Haven is paying an annual tax obligation-may I ask the trustee how much that is? I don't have the paper available. Senator PASTORE. We will now hear from Mr. Kirk.
Mr. KIRK. Well, Senator Lausche, I think the figures indicated that our taxes paid and accrued in 1964 were something in excess of $9 million. It was brought out in testimony yesterday that of that figure, $5 million-plus represented Federal payroll taxes.
More specifically, that taxes accruing on real estate on the New Haven system today were in the total amount of $2,850,000 in the year 1964.
Senator LAUSCHE. What States are you paying them to, or being obligated?
Mr. KIRK. We are paying them to Massachusetts, Rhode Island, and New York.
Senator LAUSCHE. None to Connecticut?
Mr. KIRK. That is correct.
Senator PASTORE. Could you break that down further, how much, or put it in the record ?
Mr. KIRK. I don't have the figures, but I will see that they are furnished for the record.
Senator PASTORE. Fine. We would appreciate that.
(The following information was submitted subsequently for the record :)
NEW YORK, NEW HAVEN & HARTFORD RAILROAD Co.,
New Haven, Conn., March 23, 1965. Hon. John O. PASTORE, Member of the Senate, New Senate Office Building, Washington, D.C.
DEAR SENATOR PASTORE: At the recently concluded hearings of the Senate Commerce Committee, the trustees agreed to give you a breakdown by State of the State railway taxes accrued in 1964. They are as follows: New York: Real estate taxes_
------- $1, 065, 436 Connecticut : Real estate taxes-------
------------------ 48, 574 Rhode Island: Real estate taxes --
314, 594 Massachusetts: Real estate taxes--
1, 420, 464
------- 2, 849, 068 I should like to point out that the term “railway taxes" is an accounting item relating only to assessments on transportation property. Actually, the New Haven accrues a substantially higher amount of State taxes, which are accounted for according to ICC rules under various headings. In 1964, the total of such taxes was $5,050,039; a detail may be found on the attached schedule A.
We have made preliminary estimates of State railway tax accruals for 1965. Such estimates of course vary with the assumptions made concerning tax relief legislation. The following estimate is based on the New Haven's not qualifying for tax relief in New York on July 1, 1965 (which would be the case under existing legislation), on no renewal of Rhode Island tax relief legislation which expired in 1964, and on Connecticut and Massachusetts retaining present legislation. Based on the foregoing, the following accruals would be made in calendar 1965: New York: Real estate taxes ----
------------ $1,000,000 Connecticut: Real estate taxes.
50, 000 Rhode Island : Real estate taxes.------------
1,000,000 Gross earnings---------------
150,000 Massachusetts: Real estate taxes--
------ 1, 800, 000
4,000,000 1 Reflects eligibility for tax relief Jan. 1-June 30, 1965.
Taxes other than the foregoing would be approximately the same as appears in Schedule A for 1964.
I have taken the liberty to attach a schedule which summarizes the impact of the New Haven's financial distress on the region which the road serves. Schedule B indicates that at the end of 1964, payment of some $17,393,000 in State taxes had been deferred. In addition, over $18,669,000 in tax relief and direct assistance has been granted the New Haven by the States since 1959. Thus, the States and the local communities have had to make up over $36 million in tax dollars from other sources during this period. Very truly yours,
H. W. DORIGAN.
Schedule A.—State taxes accrued by New Haven Railroad in 1964 1
$1, 065, 436 Nontransportation property-------
233, 451 Gross earnings-------
62, 000 State utility tax----
12, 000 New York City : Utility tax
-36, 616 Sales tax.
18, 000 Miscellaneous-
2, 848 Other : 50 percent New York Connecting Railroad.
608, 730 · 40 percent Grand Central Terminal------
20, 544 308, 357 13, 927
314, 594 79, 291
4, 617 21, 122 1, 754
: 1, 420, 464
19, 534 Miscellaneous (registration, etc.)-
5, 316 New Haven share of Boston Terminal (South Station): real estate tax------------------------
Other States : Miscellaneous.
18 Total State taxes_
----- 5.050, 039 1 Pursuant to court order, payment of taxes is deferred with the exception of sales taxes, registration fees, taxes payable through joint facility charges or unrejected leases, and other similar taypes of tax.
2 Credit reflects adjustment for back years. Normal annual accrual for this item is $40,000.
3 Reflects abatement of $463,155 for prior years' taxes. Normal annual accrual for this item is $630,000.
Schedule B.-Statement of unpaid State taxes accrued by New Haven Railroad as of Dec. 31, 1964, and of State tax relief and other assistance,
Massachusetts real estate taxes..-----