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Senator PELL. Thank you.

At this point, I would like to request the permission of the chairman to have inserted in the record a report from the American Law Division of the Library of Congress concerning interstate compacts. Senator PASTORE. Is there objection? The Chair hears none. So


(The report referred to follows:)


To: Senate Commerce Committee (attention of Mr. Sender).
From: American Law Division.
Subject: Interstate compacts.

As a precedent for an act of Congress setting out the terms of an interstate compact which had not been previously adopted by the States, we call your attention to Public Law 328, 75 Stat. 688, which gave the consent of Congress to the Delaware River Basin Compact.

Congress frequently gives its consent in advance to compacts to be entered into by named States, or by any States, on specified subject matter, subject to subsequent approval of Congress. See, for example, Public Law 88-206, 77 Stat. 393, consenting to interstate compacts for control of air pollution.

Occasionally, Congress gives consent in general terms for the adoption of compacts between States for specific purposes, without requiring such compacts to be approved by it when adopted. Examples of such legislation are Public Law 86-154, 73 Stat. 333 which, in a single brief paragraph gave the consent of Congress for interstate compacts, not in conflict with any law of the United States for the purpose of developing and operating airport facilities, and Public Law 87-70, 75 Stat. 170, which gave consent to interstate compacts, not in conflict with any law of the United States, for cooperative efforts in comprehensive planning for metropolitan areas.

While time has not permitted a detailed survey to determine how many compacts have been initiated by the States and how many by Congress, a quick survey of the list of compacts heretofore approved indicates that the great majority have probably been initiated by the States.

Legislative Attorney.

Senator PELL. The other point is that you say these bills provide for compacts which contain provisions unacceptable to the Federal Government, especially the provisions for Federal guarantee of bonds up to $500 million. We had understood from Secretary Martin that the principal objection was to the tax-exempt feature of the bonds. Which is it? It cannot be both. I thought it was one or the other, or a combination of both.

Mr. KOHL. Well, with relation to the urban mass transportation program, our objection is to the guarantee itself.

Senator PELL. You do not object to the tax-exempt portion? Mr. KOHL. Well, the tax exempt is a part of the administration position, the Treasury Department. I think you clarified that in your earlier statement.

Senator PELL. Yes, but if we met the Treasury Department's objection either by saying that they would be subject to Federal taxation, or my own personal hope, that I think is less likely, that there would be an understanding the bonds would have such interest rates that they could not have an adverse effect upon the general market-if the Treasury Department's objections in this regard were met, would you continue to feel unhappy because of the guarantee provision?

Mr. KOHL. Yes, I think this does pose a possibility of Federal involvement in case there is financial default on the part of an operation for which bonds are guaranteed. I think another aspect of the

answer might lie in the details of your own proposal, in which the State assumption of obligations, particularly the operating deficiencies, might improve the attractiveness of these bonds so that no Federal guarantee would be necessary.

Senator PELL. I appreciate that.

Senator PASTORE. If the Senator will permit at this point, let me ask a question categorically. If the guarantee element of the Pell bill is modified to be acceptable to the Treasury Department, whereby the Treasury Department will remove its objection, and the service charges or the debt charges of that bond issue become part of the operating expense for which the States themselves under their compact agreement would be responsible, do you see any objection?

Mr. KOHL. No. I think we would be guided by the opinion of the Treasury Department.

Senator PELL. I think the record should show in connection with your views with regard to Government guarantees that as well as being Assistant Administrator of FFHA you already enjoy, your agency, loan guarantees of some $48 billion, so a precedent has been established of guarantees.

Mr. KOHL. In other programs but not in the transportation program. Senator PELL. But, also, as was pointed out earlier, in transportation itself you have guarantees when it comes to the building of aircraft or ships, so it is not a new precedent. I can see reasons why you might object, but it is not a new precedent. This is the point I am trying to establish.

Mr. KOHL. I am speaking strictly with reference to the urban transportation situation, and there this question of the manner of Federal assistance was very carefully explored, and the major emphasis was placed upon the grant program because it seemed to be the most effective way of providing this assistance to capital needs without involving the Federal Government in the details of operation. I think this has to be considered entirely apart from the situation with respect to maritime subsidies. This is an entirely different area in which the flag of the United States is also a matter of great concern, foreign policy, and so on.

Senator PELL. I am not so sure that the flag of the United States in helicopter operations is of such concern.

Mr. KOHL. That subsidy, of course, as you know, is being dropped. Senator PELL. Right. It is under discussion now.

Senator PASTORE. Thank you very much, Mr. Kohl.

We will meet in this same room at 2 o'clock.

(Whereupon, at 12:10 p.m., the subcommittee recessed, to reconvene at 2 p.m.)


Senator PASTORE. Governor Rockefeller, we welcome you to our hearing. We are honored by your presence and we look forward with great anticipation to your ideas on this very important problem that concerns passenger service, railway passenger service along the Atlantic seaboard from Boston to New York and to Washington.

You are at liberty to proceed in any way you like, Governor. If you want to put your statement in the record and give us your own views and recapitulate or if you prefer to read it, you do it any way you want.


Governor ROCKEFELLER. Chairman Pastore, members of the committee, first, I would like to express my appreciation for this opportunity of appearing before your committee and express my appreciation to you and the members of your committee for the tremendous interest and concern which you have evidenced so effectively for a problem which we all share and a problem that is of vital importance to the economic, social, and cultural developments of our respective communities.

Therefore, I come to you today with a feeling that there is an opportunity to take constructive action, and I appreciate the privilege of participating in that discussion.

At the outset, I want to make clear that New York State has a vital concern over the future of this railroad and its services-freight, longdistance passenger and, particularly, Connecticut-New York commutation.

First, if I may say a word for the reasons for the New Haven Railroad difficulties.

Unfortunately, the New Haven Railroad has a long and unhappy history of poor management, in some instances just plain mismanagement, which have contributed to its present predicament. However, in its present circumstances even the most able managament would have difficulty in dealing with the New Haven's problems.

First, the very nature of the railroad itself contributes to its difficulties. It is basically a terminal, high-cost, short-haul line, with an unbalanced traffic pattern. This forces it to incur unduly heavy per diem charges for off-line freight cars that return empty to connecting lines.

In common with other railroads serving the Northeast, the New Haven has suffered from the freight rate differentials that have long favored southern and western long-haul railroads.

Equally important, it faces the competition of other forms of transportation-all of which enjoy Federal subsidies-importantly the 90-10 limited access highways, the waterways, the airlines, airways, and airports.

In addition, the New Haven, like other rail carriers, has had to carry such burdens as taxes on real property and the 10 percent Federal excise tax on rail passenger transportation.

Here is a vital railroad not only the victim of subsidized competition, but a terminal railroad whose very existence is emperiled by ad hoc, onagain, off-again approach of the Federal Government to the Nation's important transportation problems.


The situation of the New Haven Railroad today is a direct result, my opinion, of the lack of the national transportation policy. This lack of a policy is also clearly evident in the piecemeal consideration of rail merger applications by the Federal regulatory body. The New Haven Railroad, the only rail carrier providing direct


access from New York City to New England, has yet to be assured of any place in the developing pattern of rail mergers.

This lack of a national transportation policy-and of a single agency in the Federal Government to administer such a policy-has been particularly critical in the post-World War II years.

The administration which took office in 1961 promised to enunciate a national transportation policy but failed to do so. The present administration has yet to act.

In September 1961, testifying before the ICC on the then proposed Baltimore & Ohio-C. & O. merger, I urged

That a national transportation policy be laid down by the Congress and the President in order to bring stability and balance in the discharge of the Federal Government's constitutional responsibility in the area of interstate commerce;

That there be created a Department of Transportation to pull together all executive functions and responsibilities relating to the various forms of transport-air, water, rail, highway, and pipeline thus creating a place of reference in the Federal Establishment for all activities, both public and private, in the field of transportation; and

That there be a coordinated approach to railroad consolidations, acquisitions, and mergers.

I said then, in 1961, that

The future pattern of the rail network for the eastern half of the United States cannot be handled piecemeal. It must not be left to chance or to the struggle of competing carriers for temporary strategic advantages. Natural economic forces and personal initiatives cannot be allowed to run their course uncontrolled when the interest of the public is so vitally involved as it is in the existence of efficient railroad service.

These words have even greater relevance today.

The New Haven situation is unfortunately only one instance of the problem confronting the Northeastern United States and therefore the Nation.

There's not only the New Haven situation but marching close behind it are the problems of the Erie-Lackawanna, the Boston & Maine, the Jersey Central, the Reading, and others.

Second, what New York State has done recently in the transportation field:

For the past 6 years, New York State has recognized the crisis in rail transportation and step by step has taken action.

Since 1959, New York State upon my recommendation has taken the following legislative and administrative acts:

First, State Office of Transportation: In 1959, the New York State Office of Transportation was created. This office is charged with the coordination of State transportation policy as it applies to all forms of transportation, and in particular with the development of policies and proposals to meet and resolve the special problems of urban and commuter transportation.

In the 5 years of its existence, it has been bringing together the diverse transportation elements within State government and is in the proecss of developing an overall transportation policy for the State.

Second, Tax Relief: In 1959, substantial tax relief was granted to the railroads and the bus companies of the State. In 1961, the tax

relief program was expanded to provide additional relief for the commuter railroads. As of today, the railroads providing essential commuter services are virtually free of taxes on real properties used in this service.

Under this program, bus companies have received a total of approximately $17 million and the railroads nearly $84 million in relief. Railroad tax relief in New York State is continuing at the rate of $25 million each year. To assist the local communities, the State appropriates approximately half of this amount to the affected communities in the form of additional State aid.

Three, Commuter Car Program: In 1959, the State enacted a program to assist and encourage its commuter railroads to acquire new commuter equipment on long-term lease at favorable interest rates.

This program today is based upon a State guarantee of $100 million of Port of New York Authority bonds issued for these purposes. The port authority administers the program for the State.

The New York Central and the Long Island have acquired 117 new, air-conditioned, multiple-unit commuter cars, involving an expenditure of $20 million.

It is interesting to note that, in addition to providing more comfortable service, this equipment has also resulted in substantial savings in operating expenses because of lower maintenance costs.

Four, Station Operation and Maintenance: In 1961, legislation was passed to authorize communities in the commuter area to contribute to meeting the cost of the operation and the maintenance stations. Several local governments are participating in this program.

Five, Metropolitan Transportation Planning: In August of 1961, about a year prior to the imposition of the comprehensive planning requirement of the Federal Highway Act of 1962, Governor Meyner, of New Jersey, Governor Dempsey, of Connecticut, and I jointly created the Tri-State Transportation Committee.

We charged the committee with the development of transportation and land-use plans and programs required for the expeditious movement of people and goods in the 22 county, 17 million population, New York metropolitan region. This committee has already made notable contributions.

Subsequently, upon my recommendation, an amendment to the public works law authorized the conduct of urban transportation studies in upstate metropolitan areas. At present, a dozen studies are now well advanced and will contribute to the future development and growth of the urban areas of the State.

Six, Rail Mergers: The most significant development in the rail industry in recent years has been the series of mergers, proposed or consummated, between major eastern carriers.

Because of the great impact of these proceedings, I requested the appropriate State agencies-the State attorney general and the office of transportation-to intervene in these proceedings on the State's behalf. My concern was that a basic reorganization of the railroad map of eastern territory, if considered piecemeal, could seriously weaken or destroy railroads essential to New York State but not included in one of the mergers.

This would materially jeopardize not only the public interest in efficient transportation but the State's and indeed the Nation's interest in a healthy and growing economy. Exactly this possibility has faced the New Haven.

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