TESTIMONY OF ROBERT N. GIAIMO

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. My 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.

could happen within a few weeks.

This is a specific danger and one which

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

in the country. I believe it is not exaggerating to say that we have an opportunity to avert an economic disaster. But we only avert it if constructive leadership is present. We have had years of talk-rounds of faultfinding, bickering, and recriminations-but mainly lack of concerted, coordinated effort. Your committee is in a position to help provide this coordination and leadership, so at long last concrete solutions can be forthcoming.

Again, thank you for the opportunity to appear before you today. New Haven and its railroad are grateful for your interest and appreciative of your help. Congressman GIAIMO. I would like to comment on several things, however.

No. 1, is the status of the bills pending before your committee.

I have introduced a companion bill in the House of Representatives to Senator Pell's bill, and I have also introduced a companion bill to Senator Dodd's bill.

I support both Senators' bills, but Senator Ribicoff's bill is the choice between the two.

I would, with due deference to you, Mr. Chairman, support the Dodd bill, because I believe it provides an immediate infusion of some money by the Federal Government for the first year, whereas the other approach would only have matching grants immediately, and, also, it has a cutoff in termination date, with increased assistance from the States rather than an open-end subsidy-type bill.

What I would like to comment further on, more than anything, is the importance of what your committee is doing in crystallizing, I think, the great deal of talk which has been going on by many people in the past concerning this course of the railroad.

I certainly agree with your statements, Mr. Chairman, that people must sit down and discuss and negotiate, to work out this crisis problem which faces the New Haven Railroad.

I think your committee is to be commended for giving impetus to this, and I hope we are going to see a great deal more of it in the immediate future.

The truth of the matter is that we have many problems here, not just one item.

The New Haven Railroad crystallizes the problems and brings them into immediate focus.

We have the problem of the long-term mass transportation of the future, which President Johnson has supported, and, as you know, it is presently being studied by the Commerce Department.

But this is not the immediate problem of the New Haven Railroad. The immediate problem of the New Haven Railroad is the immediate financial crisis.

Are we going to have a railroad tomorrow, not 5 or 10 years from now, but tomorrow?

And I agree with what you have stated, that if you are going to have a modern future high-speed railroad in the Northeast corridor, which services 47 million people, how on earth, then, can we have a study of that present and future problem, and at the same time allow a presently existing railroad, the only one in the area, and part of that important link, to allow it to go down the drain and to stop operations. It just doesn't make any sense. So I do think that that is of the utmost importance.

The other reason that I think that this is a Federal issue and not just a State and local one, as I have heard some of my colleagues in

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Congress state, is that this is one of the great problems of urban America.

That is what it is, when we look upon it, and this is one of our great problems facing us in the Congress today.

Our position is, How do we move the increasing numbers of people, who must depend on our rail service rather than automobiles or any other means of transportation?

And this, certainly, is a Federal problem, and is not one that can be resolved by the States alone.

In our discussions of subsidies, for example, I think Mr. Martin testified, and made a statement yesterday, that we are trying to get out of the business of subsidies.

I know the attitude of the Bureau of the Budget on subsidies. But the fact is that, in the United States, to keep our economy thriving we do subsidize certain basic industries. We must.

I can enumerate the airlines and shipping, and agriculture, and all those, but I will not.

I will enumerate, however, one new type of subsidy, or near subsidy, and that is the Appalachia bill, for example, that was recently passed and signed into law by our President.

Here is an attempt by the Federal Government, recognizing the need for assistance to build up the economy in a depressed area.

I personally do not agree with this. I personally did not support this legislation, but it indicates that the Federal Government must concern itself with the problems which confront us in the economy, and in the Nation, and it is Congress' function to initiate legislation and not to be guided strictly by the Budget Bureau, or the Department of Commerce, you see.

I feel reasonably certain if this committee recognizes the crisis facing the New Haven Railroad, and can initiate leigslation, that it will help a great deal toward resolving this problem.

And, in addition to all of these other problems, there is one that was touched upon by Mayor Lee, and which I think is of utmost importance to us in Connecticut, and that is the employment of the people involved.

There are 5,000 people here in Greater New Haven, and if they are thrown out of work, it would have a tremendous effect and disruption on our economy.

And when we multiply that by the good many thousands of people in the other cities involved, we can appreciate the impact that that would have.

So that I am of the opinion that we must, at the Federal level, have some type of subsidy. And I suggest it is to be found in all of these bills before us, and the committee.

And I think that would be the only way, in addition to which, we can get some participation on the parts of the States, and, certainly, the State of Connecticut has indicated its readiness and its ability already to participate.

That will be the only way in which we can solve this financial problem involving our New Haven Railroad at the moment, but which, I submit, is affecting, and is going to affect our mass transportation system.

This is the immediate problem, and then, from there, we can get into the long-range problem of how do we modernize, how do we get the

absolutely modern, up-to-date, new type of mass transit system which is some years away, but not too many.

Senator PASTORE. Thank you very much for a very excellent state

ment.

Is Mr. Beebe here?

Mr. BEEBE. Yes.

Senator PASTORE. We are glad to have you here, Mr. Beebe.

Mr. BEEBE. Thank you. My name is William A. Beebe. I am the legislative representative for the Brotherhood of Railroad Trainmen. (The statement of William A. Beebe follows:)

STATEMENT OF WILLIAM A. BEEBE, STATE REPRESENTATIVE, STATE LABOR COUNCIL

AFL-CIO

I appear before you today as a representative of the State Labor Council AFLCIO of the State of Connecticut. We would like to be recorded as supporting any or a combination of any bills which, in the judgment of your committee, would provide Federal funds as a last-ditch means of saving the rail service on the New Haven.

The freight services of the New Haven are vitally important to the economy of Connecticut and the continuing passenger deficit may endanger the entire system. The one is inseparable from the other. At present, lack of available cash threatens the very day-by-day existence of the line.

Labor, therefore, is not only concerned with the nearly 10,000 railroad jobs involved, but the tens of thousands of jobs in industries where the less expensive rail service is figured in the cost of the product. This rail service includes the shipment of raw materials into the plant as well as the outgoing finished products. Consequently, rail service is an indispensable requisite to industries in the highly competitive fields such as heavy industry, chemicals, oil, coal, and the like. If their only alternative is to use the more expensive motor carrier service they would either shift the work to plants out of the State or relocate entirely in an area providing a rail line.

All of this is part of the record of the ICC hearing finance docket No. 21989 relative to the Penn-Central merger held in Boston May 20, 1963.

Moreover, the loss of the $72 million railroad payroll, coupled with millions paid to employees of industries adversely affected, would deal a staggering blow to the economy of the several States involved.

Last year the railroad carried nearly 20 million tons of freight. Assuming the average truck carries 20 tons per load, this would mean the use of nearly 1 million more trucks on our highways in addition to those already operating. The result would be chaotic.

Last year the line carried nearly 26 million passengers. If these passengers were compelled to use private cars and buses the States and the Federal Government would then be required to provide funds for more highway construction and their maintenance.

It seems rather incongrous that the Federal agencies will spend billions of dollars attempting to place a man on the moon, and judging by the testimony given yesterday of the Under Secretary of Commerce, is reluctant to assist in the transporting of its taxpaying citizenry from their homes to their places of employment. An aditorial appearing in a New York newspaper yesterday stated that Uncle Sam is loaning East Pakistan $8.7 million for their railroad. It seems to us if money is available that charity should begin at home.

This is not to say that the States involved do not have a large responsibility, for indeed they do. Admittedly they have except for Connecticut-done little or nothing at all. As of late they have come to life and are manifesting sincere efforts toward formulating a plan.

However, we feel it altogether appropriate at this time that the Federal Government should assume the leadership, and insure that all parties concerned will bring about a truly effective and permanent solution to this problem.

In closing, allow me to reaffirm our position in assuring you the support of our organization toward any bill which, in your judgment, will effect this end. Let me thank you for the opportunity to appear before the committee.

Senator PASTORE. Thank you very much, sir, for an excellent statement.