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and, let us say, the air carriers, there should be one agency so that all will know that when you help one you hurt the other and that before you begin granting help you should approach them all at one time.
Has this been done?
(6) Federal agencies such as the Post Office or the Office of Civilian Defense Mobilization have need for transport facilities on a standby basis. They should pay the costs of providing this capacity.
Do you know whether that has been done!
Senator LAUSCHE. I am just going to go down—there are two more here, or three "Federal agencies such as the Post Office"
(7) Congress should provide for railroad passenger equipment acquisition through a credit program with liberal terms.
I think we have done that, in part, under at least the guaranteed loan program.
Mr. WEBB. I would assume that some assistance is available under certain conditions under the Massachusetts Transit Act.
Senator LAUSCHE (continues reading):
(8) There should be a major study of the problems between railroad management and labor in regard to work rules and other contractual relations.
I know that has not been done.
Mr. Webb, are you able to state, and if you cannot answer, I would like to ask the officials, the trustees, whether or not there is an opinion now that there are more workers on this railroad system that are actually needed? Do you know?
Mr. WEBB. No, the trustees would be the proper one.
Senator PASTORE. Are the trustees—is anyone representing the trustees still here?
May I ask you this question : Under the management-labor agreement, do you have areas in your services where you could still retrench the number of employees without impairing the character of your service?
Mr. KIRK. As I attempted to point out before noon, we have gone as far as we believe we can go.
Senator PASTORE. Why don't you come here, Mr. Kirk, and sit down.
Senator LAUSCHE. You have gone as far as you think you can
Mr. KIRK. That is correct.
Senator LAUSCHE. Is that because of your labor-management agreement or on the basis of efficiency and safety? Mr. KIRK. This is on the basis of efficiency and safety.
Senator LAUSCHE. I am not going to take any further time, but here is a whole part of this Doyle report which deals with recommendations for State and local action.
Part of those recommendations have been discussed here. quite certain that if they have been carried into effect, it has been only partially, as illustrated by what Massachusetts did, that it would grant tax relief providing nobody would be laid off and providing
before a layoff was made you had to go to some court and get authority.
The result has been that the proceeding is so cumbersome, that no effort has been made to carry it into effect.
About 3 years ago, when we were discussing the subject of the umbrella that the railroads hold over competitors in rates, one member of our Commission appeared here and read a paper.
In it he read, I recall, 14 or 15 recommendations of what should be done to help the railroads. Do you remember that report? I have been trying to locate it and can't.
Mr. WEBB. I believe that it was Commissioner Hutchinson in 1961, who was then Chairman, who appeared before you. You were holding a hearing on the problems of common carriers generally.
Senator LAUSCHE. Yes. At that hearing I took up those items one by one, the recommendations made.
Will you get a copy of that report, specifically the recommendations, so that they will be included in the record ?
Mr. WEBB. Yes, sir; I shall do that, Senator Lausche.
INTERSTATE COMMERCE COMMISSION,
Washington, D.C., September 6, 1961. Hon. GEORGE A. SMATHERS, Chairman, Surface Transportation Subcommittee, Committee on Commerce,
U.S. Senate, Washington, D.C. DEAR CHAIRMAN SMATHERS : In response to your request during my testimony on August 30 on the decline of the Nation's common carrier industry, we are transmitting this supplemental detailed material on our recommendation with respect to Federal grants of financial aid to insure the continued operation of essential rail passenger service.
Over the years the Commission has expressed serious misgivings with regard to inequitable promotional policies in the field of transportation pursued by the Federal Government. That concern has sprung from the conviction that the inherent advantages of the various modes of transportation should not be neutralized or stifled by Federal subsidies. Our conviction in that regard is just as strong today as it has been in times past. If there were any reason to believe that the progressive elimination of rail passenger service is due entirely to the inherent advantages of competitive modes, including the private automobile, the Commission would not recommend that even a residuum of such service be preserved by enactment of a program of Federal subsidies.
On the other hand, in refusing, as a matter of principle, to recommend that surface transportation be subsidized by the Federal Government, the Commission has also recognized a conflicting principle. For example, in the Railroad Passenger Train Deficit case, 1959, at page 484, we said that: “We adhere to the principle previously expressed, that this country's several forms of transportation should be treated equitably and that no one form should be preferred.”
More specifically, we found in that report:
“The impetus given motor and air travel by Federal, State, and local government promotional programs has unquestionably operated to the disadvantage of railroad passenger service. Vast highway, airport, and airway modernization programs predicated upon anticipated public needs which are now underway, as well as a policy for continued subsidy to air carriers, offer little solace to an industry which is dependent upon private resources and which has witnessed the gradual erosion of its passenger market. It is not suggested that such programs are not meritorious and desirable in the public interest, but the fact is they do exist; they will, as in the past, have a pronounced impact upon railroad passenger service. Yet, there is little evidence of any comparable governmental effort to promote the public interest in railroad passenger service or to prevent or to take into account competitive inequalities that may be induced by such promotional programs.”
It is now clear beyond any reasonable doubt that the progressive eliinination of direct and indirect subsidies which operate to the disadvantage of railroad passenger service cannot be achieved in time to save that part of the service which, under conditions of competitive equality, could be continued. Therefore, in proposing a modest program to alleviate the railroad passenger deficit problem, we do not retreat from our position that the subsidization of transportation enterprises by the Federal Government is generally undesirable except to the extent clearly justified by compelling considerations of national defense.
One further fact must constantly be kept in mind. The United States, like most other countries, is experiencing a population explosion. The impact of this enormous increase in population is intensified by the shift of population from rural areas and smaller communities to large metropolitan centers and by the movement out of these centers to sprawling suburban areas. Rail commutation service will be far more essential and much more widely used 10 years from now than it is today assuming that it is still available. Moreover, the population trends just noted suggest that some intercity rail passenger service could become increasingly competitive with transportation by air. Inasmuch as rail facilities, once lost, cannot be reconstructed except at a fantastic cost, it would be the height of folly to determine the essentiality of rail service solely on the basis of present patronage and without regard to definite future needs.
We believe that a Federal program to ameliorate the railroad passenger deficit problem should possess the following characteristics :
(1) Federal aid should not dull managerial incentives to cut losses;
(2) No aid program should require the Federal Government, in the interest of protecting the public purse, to establish passenger train schedules or to prescribe standards of service and equipment;
(3) Administration of the aid program should not require the services of more than a handful of additional Government employees;
(4) The sums to be disbursed should be determined primarily in accordance with a generally accepted formula and should involve a minimal exercise of discretion ;
(5) The program should encourage the extension of tax relief and other assistance by State and local governments;
(6) The amount of aid should not be so large as to encourage the continuance of passenger operations not required by the public convenience and necessity;
(7) The amount of Federal aid should be large enough, in conjunction with State and local assistance, to insure the continuance of passenger operations required by the public convenience and necessity;
(8) The total cost of the program should be realistic when viewed in the light of general budgetary considerations; and
(9) The program should be sound in concept. The legislation we have in mind would be generally along the following lines which, we feel, would satisfy all of the criteria set forth above:
“Any railroad subject to part 1 of the act may apply to the Interstate Commerce Commission for financial aid in the continuance of specified passenger train operations provided that the operations so specified constitute a substantial part of the carrier's total passenger service and are represented to be required by the present or future public convenience and necessity. If the Commission determines that a grant of financial aid is required to carry out effectively the purposes and policies of the assistance act, it shall authorize such aid, the annual amount thereof to be determined as follows:
“(1) Expenses incurred by the carrier in the preceding calendar year in the maintenance of way and structures which are directly assignable to passenger service; plus
“(2) Additional expenses incurred in the preceding calendar year by any State or States, municipalities, or other political subdivisions and instrumentalities thereof, in the maintenance of way and structures which, if incurred by the carrier, would be a normal, necessary, and proper expense directly assignable to the passenger service; plus
"(3) That portion of common expenses incurred by the carrier in the preceding calendar year in the maintenance of way and structures which is assignable to the passenger service: Provided, however, That the amount of any grant determined in accordance with the provisions of this paragraph shall not exceed the amount of aid received by the carrier from any State or States, municipalities, or other political subdivisions and instrumentalities thereof, which, in the judgment of the Commission, is reasonably related to the purposes and policies of the Federal assistance legislation.
"14) In determining the benefit derived by the carrier from the aid programs of State and local governments and instrumentalities thereof, and the extent to which such benefits are reasonably related to the continuance of passenger train operations required by the present or future public convenience and necessity, the decision of the Commission shall be final.
“(5) In the determination of any proposed discontinuance of service filed pursuant to the provisions of section 13a (1) of the act, the Commission shall give appropriate weight to any representations relative to public convenience and necessity which may have been made by the carrier under this assistance act and to the amount of aid extended to the carrier by the State or States, municipalities, and political subdivisions and instrumentalities thereof directly affected by such proposed discontinuance."
Attached as appendix G to our report in the New Haven case, docket No. 33332 (incorporated by reference in the record of the hearings on August 30 on the decline of the Nation's common carrier industry) is a “Statement of Passenger Revenues, Passenger Deficits, and Expenses of Maintenance of Way and Structures" for class I railroads conducting passenger service for the year 1960. The fifth column of figures in that appendix shows the amount of aid potentially available for each such railroad in 1961 under paragraph (1) of the above recommendation if the legislation were now in effect. The sixth column of figures, subject to the same qualifications, represents the maximum amount of aid that could be extended under paragraph (3) of the recommended legislation to class I railroads. Figures for class II and electric railroads having annual passenger revenues in excess of $500,000 are set forth in appendix H to the report in docket No. 33332. No separation is made of expenses between freight and passenger services since the Commission's separation rules apply solely to class I railroads. In any event, Federal aid under the recommended legislation would be negligible for this group of carriers.
Viewing the legislative recommendation in the light of the desirable characteristics of a Federal assistance program, we believe that the following conclusions are warranted :
(1) Inasmuch as the amount of financial aid is not directly and primarily dedependent upon the size of the passenger deficit, management would have a strong incentive to cut losses arising out of the performance of passenger services.
(2) There would be no necessity for the Federal Government, therefore, to limit the number of passenger trains that might be run.
(3) We estimate that no more than 10 accountants would be required for the administration of the aid program in addition to the number of field accountants already requested for fiscal year 1962–63. Furthermore, we believe that the other administrative requirements of the recommended aid program could be absorbed by the Commission with the addition of no more than 5 or 10 other employees.
(4) Since the Commission's separation rules are already in existence and reflected in rail carrier accounts, little or no discretion would be involved in computing the amount of aid based on maintenance of way and structures directly assignable to passenger service or on the allocation of common expenses between freight and passenger service. Nor would any broad discretion be involved in determining the additional expenses incurred by State and local governments in the preceding calendar year in the maintenance of way and structures which would otherwise be incurred by carriers and directly assignable to passenger operations. Little exercise of discretion would be required in determining whether or not specified passenger operations set forth in the application for aid represents a substantial part of the applicant's total passenger operations. A considerable amount of discretion would at times be involved in determining how much benefit the carrier derived from the aid program of State and local governments. For example, the tax relief legislation recently enacted by the Commonwealth of Massachusetts may prove to be of no benefit to the New Haven Railroad because of its restrictive provisions relative to termination of employment.
(5) The legislation recommended above should encourage the enactment of tax relief and other assistance programs by State and local governments with a view toward insuring the continuance of passenger operations required by the public convenience and necessity. As indicated, the amount of assistance received by the carrier by virtue of that portion of maintenance of way and structure expenses allocated to the passenger service is determined by the amount of aid extended by State and local authorities.
(6) The amount of Federal aid available under the proposed legislation is not so large as to encourage the continuance of passenger operations not required by the public convenience and necessity. In proceedings arising under section 13a(1) of the act, the Commission has held that costs attributable to mainte nance of way and structures may not be included as out-of-pocket costs. Great Northern Ry. Co. Discontinuance of Service, 307 ICC 59. Accordingly, the amount of aid extended under the proposed legislation could never be so large as to discourage the discontinuance of passenger trains seldom used by the traveling public.
(7) We believe that the amount of Federal aid herein recommended is large enough, however, in conjunction with State and local assistance, to insure the continuance of essential passenger operations. If it should develop, for example, that the New Haven would benefit at least to the extent of $5 million as a result of the tax relief and other assistance measures recently enacted by the States of New York, Rhode Island, Connecticut, and Massachusetts, it could qualify for aid from the Federal Government in the total amount of its maintenance of way and structure expenses attributable to its passenger and allied services under the Commission's separation rules. Thus, as was shown in the fourth column of figures in appendix G to our report in docket No. 33332, the New Haven would be entitled to receive $7,339,348 in any year in which the proposed Federal legislation and existing State and local legislation were fully effective, and assuming also, of course, that revenues and expenses in the prior year were identical with those of 1960. Approximately that amount of assistance from the Federal Government is necessary to enable the trustees to rehabilitate the railroad and to prepare a feasible plan of reorganization and in order for the New Haven, thereafter, to survive as a privately owned enterprise.
(8) If the program recommended were now in effect, we estimate that the maximum cost thereof for the current calender year, based on the 1960 figures shown in appendix G to the report in docket No. 33332, would not be in excess of $52 million even on the improbable assumption that all of the railroads in the United States would apply for and receive all the assistance potentially available under the legislation. Any increase in the cost of the program would be most heartening inasmuch as the extent of the increase would be measured by the amount of self-help exercised at State and local levels. It is reasonable to conclude, however, that any increase in the cost of the program would be offset to some extent by the discontinuance of passenger train operations which satisfy no significant public demand for service.
(9) We believe that the program is sound in concept. It recognizes an obli. gation on the part of the Federal Government to pay for a portion of the cost of maintaining the railroad right-of-way in view of the obligations already undertaken by the Federal Government relative to construction and maintenance of airways and highways. The responsibility of the Federal Government in preserving essential railroad passenger service may be expressed in terms of the cost of alternate transport facilities and in terms of military prepared
First, the American Municipal Association, in a survey of mass transportation in New York, Boston, Chicago, Philadelphia, and Cleveland, estimate that if these five cities were to lose their rail commuter service, it would cost $31 billion to build the highways required to serve those commuters. Although rail communication service is generally unprofitable for the carriers, it seems clearly to represent the most economical and efficient means of suburban mass transit, all costs considered. Secondly, the railroads handled 97 percent of all organized intercity troop movements during World War II. While it is unlikely that the railroads will be expected to match that record in the future, it seems reasonably certain that more railroad passenger-carrying capacity will be required for essential military and civilian travel in any future war or grave national emergency than will be available if the present trend of discontinuance is not checked.
The approximate amount of assistance potentially available to most of the major commuter railroads may be roughly estimated by adding to the fifth column of figures in appendix G of our report in docket No. 33332 the benefit derived from State tax relief and other assistance programs not in excess of the amount shown in the sixth column of figures. For the New York Central the sum would be approximately $6,876,000 ($4,032,000 plus estimated benefit of $2,844,000 from 1961 legislation of the State of New York); for the Long Island Railroad approximately $4,842,000 ($1,724,000 plus estimated benefit of $3,118,000 from New York legislation); and for the Pennsylvania Railroad $4,005,089 plus the amount of assistance extended by the State of New Jersey and the city of Philadelphia.