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Senator LAUSCHE. Is it your position that whatever relief might be given by the Federal Government ought to be conditioned upon tax relief being provided by the State and local governments where this railroad operates?

Mr. WEBB. Yes, sir; primarily, because under the terms of the Ribicoff and the Dodd bills, most of the aid that would be available would be available only for matching State and local tax relief and other assistance.

Senator LAUSCHE. Proceed.

Mr. WEBB. At this point, Mr. Chairman, I would like to call attention to a discrepancy between our figure and that which is set forth in the statement of Mr. Joyce, one of the trustees of the New Haven.

Mr. Joyce indicates in his statement that the cash help that would be provided by S. 325 would be limited to a maximum of approximately $3.5 million to $4 million.

But our figures, which are based on the amount of assistance received from the various States for the year ending December 31, 1964, indicates that the amount of cash assistance available under the terms of the bill would be about $6.5 million.

That figure is derived at on the basis of the following items of assistance: New York real estate taxes, $725,000; Connecticut, gross earnings tax, $1 million, plus Connecticut's assistance in connection with highway railroad crossings, $300,000; the Rhode Island tax relief statutes, $550,000; and then in addition, the New Haven benefits indirectly as a result of New York tax relief which is extended to the New York Central as the owner of the Grand Central terminal.

The New Haven benefits to the extent of one-half of that tax relief, which amounts to over $1 million for the New Haven, $1,343,000.

In other words, the New Haven has a joint facility account with the New York Central involving the Grand Central Terminal Station. They share the expenses and since the tax relief extended by New York for that property amounts to some $2,700,000, the New Haven, as a joint tenant, gets one-half of the benefit of that tax relief.

So as we compute the aid available under S. 325, the maximum aid, it is approximately $6.5 million.

Senator LAUSCHE. $6.5 million to come from whom?
Mr. WEBB. That would be the Federal Government's contribution.

Senator LAUSCHE. How much would be the local government's contribution ?

Mr. WEBB. The local government's contribution would be $4,121,000. And the additional assistance is provided without regard to State and local contributions under the provisions of paragraph (1) of section 604.

Senator LAUSCHE. All you are trying to do is interpret these different bills, is that right?

Mr. WEBB. That is correct. At this time.

Senator LAUSCHE. This is not your opinion that this contribution should be made by the Federal Government?

Mr. WEBB. Yes, sir, the Commission does recommend approval of S. 325.

Senator LAUSCHE. Whose bill is that?
Mr. WEBB. Senator Ribicoff's.

Although the New Haven still has available $4.5 million in undisbursed proceeds of a loan secured by trustees' certificates, this resource should be reserved for use in unforeseen emergencies.

(Supplemental information supplied by Chairman Webb for the record follows:)


Washington, D.C., March 9, 1965. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.O.

DEAR CHAIRMAN MAGNUSON : As you know, the Commission on March 1, 1965, filed with your committee a report on S. 325, S. 348, and S. 1234. At pages 16, 18 and 47 in that report, reference is made to undisbursed loan proceeds amounting to $4.5 million available to the trustees of the New Haven Railroad.

The purpose of this letter is to advise you that on March 4, 1965, the New Haven received a check in the amount of $4.5 million representing the undisbursed portion of the loan referred to in our report to your committee. Sincerely yours,

CHARLES A. WEBB, Chairman. We believe, therefore, that the enactment of S. 325 would insure the continuance of the New Haven's freight and passenger operations, provided that State and local governments contribute approximately $2.5 million in 1965.

Senator LAUSCHE. In addition to the tax relief?
Mr. WEBB. In addition.

Senator LAUSCHE. That would make a total of how much which the States would contribute?

Mr. WEBB. Their contribution then would be approximately the same, about $6.5 million.

Senator LAUSCHE. And Federal Government would be $6.5 million, approximately! Mr. WEBB. That is correct.

The Commission does not regard any permanent program of direct Federal grants to railroads providing essential passenger services as desirable.

Senator LAUSCHE. That is you do not feel the Federal Government ought to enter into a permanent program of subsidizing passenger service with the different railroads of the country that might be suffering from that problem?

Mr. WEBB. No, sir, we do not.

Senator LAUSCHE. 'How many members participated in the reaching of that?

Mr. WEBB. At the time that the Commission considered its report, which was filed with the committee, there were six commissioners who voted to approve the report, two commissioners were necessarily absent, one commissioner did not participate and two commissioners voted in the negative.

Senator LAUSCHE. Did the two commissioners who voted in the negative vote against the measure because you took the position that there should not be a permanent program of subsidy?

Mr. WEBB. No, Senator Lausche, their position was that they did not favor a Federal subsidy program even as a temporary measure.

Senator LAUSCHE. Even as a temporary measure?
Mr. WEBB. Yes, sir.

A long term solution, we would hope, can be found in legislation under which the States would assume responsibility for operating losses, with the Federal Government's assistance limited primarily to the utilization of its credits under appropriate safeguards.

Senator LAUSCHE. Does the Pell bill dealing with this provision of using the Federal Government's credit to provide at least money for equipment and so on?

Mr. WEBB. Yes, sir, that is correct. We would regard the Pell bill as being possibly a long-term solution and it does not provide, of course, for a Federal sharing of the operating losses of the authority.

Senator LAUSCHE. Now the Pell bill recognizes that there may be impediments in the Constitution of some of the States which makes it impossible for the States to guarantee credit.

Mr. WEBB. Yes, sir.
Senator LAUSCHE. Is that substantially correct?
Mr. WEBB. That is my understanding.
Senator LAUSCHE. The Pell bill provides for no direct subsidy?
Mr. WEBB. That is true.

Senator LAUSCHE. And it states that the Federal Government's credit shall be available to guarantee borrowing?

Mr. WEBB. Yes, sir.

Senator LAUSCHE. And then it provides for the establishment of regional authorities embracing the whole area where this railroad operates ?

Mr. WEBB. That is right. It would begin with the four States of New York, Connecticut, Rhode Island, and Massachusetts.

Senator LAUSCHE. All right, proceed. You do think that the Pell bill is sound on a long-term approach?

Mr. WEBB. Yes, sir; we do. Whether or not it is a long-term solution or can be brought into being within a reasonable time or whether you should start with two States or with four, we think that those matters involve essentially a political judgment.

Senator LAUSCHE. When you say whether it shall start with two States or four, if this is a problem of this railroad that serves the whole area, shouldn't the four States try and get together in bringing about a common solution?

Mr. WEBB. Yes, sir; we think that would be the ideal solution over any long period of time. I would suppose that if you started with the States of New York and Connecticut, that they might deal with only a portion of the problem, namely, their own commutation problem.

Senator LAUSCHE. Proceed.

Mr. WEBB. With the amendments previously mentioned and those set forth in our report filed with the committee, we recommend that S. 325 be approved.

Senator LAUSCHE. At that point, the Pell bill, without any subsidies, you think may have the elements of operating as a long-term solution ?

Mr.WEBB. Yes, sir.

Senator LAUSCHE. But you recommend the Ribicoff bill because it provides Federal cash aid to solve a temporary problem.

Mr. WEBB. That is true.

Senator LAUSCHE. And the only reason you are recommending temporary direct financial aid is to give the railroad a breathing spell to develop a long-range program?

Mr. WEBB. Yes, sir; the railroads and the States.

Senator LAUSCHE. And the States. Of course, without the States, I don't think it can be done. All right, you may proceed.

Mr. WEBB. The Ribicoff bill (S. 325) and the Javits bill (S. 1234), unlike the Pell bill (S. 348), would require the Federal Government to defray a portion of the operating losses incurred in the performance of essential rail passenger commuter services.

Our conclusion respecting the Federal Government's responsibility in this matter is based on three fundamental considerations:

First, the large deficits incurred in many essential passenger train operations are attributable in part to Federal programs for the promotion of competing modes of transportation.

During the last 12 years, for example, subsidy payments to one domestic trunkline and two local service airlines serving New England have amounted to almost $100 million.

These subsidies have been increasing annually since 1959. In fiscal 1965, these subsidies were almost three times those paid in fiscal 1954. We do not condemn these Federal subsidy programs(Senator Dominick entered the hearing room at this point.)

Mr. WEBB (continuing). Since they involve modes of transporta tion not subject to our jurisdiction, but we do say that the impact of such programs and the Federal highway program on railroad passenger train operations has been devastating.

Senator LAUSCHE. Do you not take the position inasmuch as we are directly subsidizing the airlines, and indirectly, let's say, and this will be challenged, subsidizing industry, that we should enter into a complete program of subsidizing the railroads?

Mr. WEBB. No, sir, that is not our position. We merely point out here that we have had these large subsidies to airlines in the area in New England in which the New Haven operates and that these subsidies are a part of the cause of the New Haven's present difficulties.

Senator LAUSCHE. If you had to make the choice, would you recommend, one, trying to recoup in some way the subsidies that we're providing for competing modes of transportation, or as another avenue of relief, put the railroads on the same basis of subsididation. Which of the two modes would you approach?

Mr. WEBB. Well

Senator LAUSCHE. That is lessening the subsidies to the airlines and inland water carriers ?

Mr. WEBB. Yes, sir. Our position basically, Senator, is that the promotional policies of the Federal Government, except when considerations of national defense are involved, should be equitable and even for all competing modes.

Senator LAUSCHE. Am I correct that President Kennedy and President Johnson both have recommended the imposition of user charges to, in part, recoup the subsidies which we have to pay to the airlines and inland water carriers ?

Mr. WEBB. Yes, sir, those recommendations make a first step in that direction.

Senator LAUSCHE. In the recommendations of President Kennedy and President Johnson, were there any other modes of recouping taxpayers' expenditures recommended!

I do know of the inland water carriers and the airlines. I will find out later, but I thought maybe you could answer.

Mr. WEBB. I do not recall offhand, Senator.

Senator DOMINICK. Mr. Chairman, I wonder if I could just ask a couple of questions.

Senator LAUSCHE. Yes.

Senator DOMINICK. Your first conclusion, with regard to the endorsement of this bill, Mr. Webb, is the fact that the deficits are attributable in part to Federal programs or competing methods of transportation.

This is quoting from your statement.
Mr. WEBB. Yes.

Senator DOMINICK. Does the fact that you place it first indicate that you place principal reliance on it!

Mr. WEBB. No, there is no particular thought that was more important than the other two considerations.

Senator DOMINICK. You mention the subsidy payments to a domestic truckline and two local service airlines. Were they serving points that were directly competitive with the railroad?

Mr. WEBB. Yes, that is my understanding.
Senator DOMINICK. The local service airlines?

Mr. WEBB. I would have to ask Director Margolin if he knows the answer to that question.

Mr. MARGOLIN. Yes, sir, Senator, for the Northeastern about 60 percent of their system operations may be considered competitive with New England railroads. For the Mohawk & Allegheny, the operations referred to here, represents between 10 and 15 percent.

We can supply more precise figures, but-
Senator DOMINICK. Ien or fifteen percent of what?

Mr. MARGOLIN. Subsidy that has been allocated over the past 2 years.

Senator DOMINICK. Apparently I didn't make my question clear. The New York, New Haven & Hartford Railroad serves certain designated places where its rails go and where its feeder lines go into, cities and commuter and areas and industries. Specific ones all the way from New York all the way to Boston, wherever they go to.

Now, it is my understanding that these airlines that you are complaining about don't hit all of these places; in fact, don't hit most of them. They may hit Boston, they may hit New London, I don't know. They do hit New Haven, the Allegheny does.

Mr. MARGOLIN. The Northeastern hits all of the principal points served by New Haven and Boston & Maine Boston, Mass.,

Hartford, Conn., Manchester and Concord, N.H., New Bedford and Fall River, Mass., Portland, Maine, and Worcester, Mass. They serve Vermont and New Hampshire as well.

Mohawk and Allegheny hit some of the points in the New England states also competitive with railroads-Boston and Worcester, Mass., Bridgeport, Hartford, New Haven and New London, Conn., Providence, R.I. and Keene, N.Y.

Senator DOMINICK. Do you contend a railroad and airline carry the same type of freight?

Mr. MARGOLIN. The reference as I understood here, Senator, and the comments here dealt primarily with passenger service.

Senator DOMINICK. That is correct.

Mr. MARGOLIN. As a matter of fact, one of the trustees this morning testified to the fact that the service between Boston and New Yorkintercity service as distinguished from commuter operations have been heavily affected by the airline service because they had a shuttletype which provided about two services per hour.

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