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The States have not stood idly by while these crises took place. For more than 8 years-under my administration as Governor and under Governor John Dempsey-the State of Connecticut has labored to save the New Haven and its indispensable commuter service.
The entire State tax burden on the New Haven Railroad was forgiven and the New Haven now pays no taxes in the State of Connecticut, that is, they pay no taxes to the State on personal, real property, or right-of-way. They pay no taxes to any municipality or county or any subdivision of government in the State of Connecticut, and this has been a policy for many years.
Senator PASTORE. On this point, would you be able to furnish for the record the dollar value of this tax relief?
Senator RIBICOFF. Well, we will furnish it for the record at this point before the day is up.
(The information requested follows:)
Under the provisions of the Connecticut tax relief granted the New Haven Railroad, the railroad has been forgiven taxes which would have otherwise cost $4 million. The program has been in existence since 1961; the annual savings to the railroad are estimated at $1 million.
A Connecticut Transportation Authority was established, with authority to operate or to contract to operate the essential New Haven service. Connecticut authorized the appropriation of $3 million in State funds to assure the railroad's life. Since 1961, $500,000 in direct State aid has been extended annually for grade crossing and bridge maintenance.
Last year Connecticut entered into a contract to pay $450,000 for Connecticut's share of the first year's payment on the amount necessary to allow the New Haven to rehabilitate 50 of its ancient commuter cars and acquire 80 new cars from the Port of New York Authority. Rhode Island has extended substantial tax relief-over half a million dollars a year, and Rhode Island is a small State.
Last week Governor Rockefeller proposed the establishment of a New York Metropolitan Commuter Transportation Authority to deal with the Long Island Railroad and regional commuter operations.
On Saturday, Governor Rockefeller and Governor Dempsey announced that they would immediately begin exploring the feasibility of entering through the proposed New York Authority and the already established and funded Connecticut Transportation Authority— into a commuter service contract with the New York Central and the New Haven trustees.
Under the proposal, the New York Central would manage the combined operations of its own commuter lines and those of the New Haven in the New York area. The New York Central-Pennsylvania merger is now before the Interstate Commerce Commission, and I cannot emphasize this too strongly, Mr. Chairman, the ICC should make it a condition of the merger that the New York Central agree to enter into such an arrangement with the authorities of New York and Connecticut.
The Governors' proposal is an encouraging step forward, and it seems clear that real progress is now being made on a state and regional level. The New Haven's problems are not the concern of only Connecticut-or of only New York.
The New Haven's continued passenger and commuter service is a regional concern, far outstripping the capacity of any one State to deal effectively with the problem. And this characteristic of the New Haven Railroad commuter operation is shared by rail commuter systems throughout the Nation.
For a long time there has been talk about the merger of the New York Central and the Pennsylvania. It is my understanding that these railroads are more than willing to take over the freight part of the New Haven road. They are not interested in taking on the commuter and passenger service because they feel that this is too great a loss for them to carry. For them, it is a business proposition. Yet if a merger is to take place, it would seem to me that the tail should go with the rest of the animal.
Now if the New York Central-Pennsylvania takes over the New Haven, and if Connecticut and New York are willing to enter into a contract with the New York Central to run the passenger service, it certainly seems to me that the ICC should definitely require as a condition precedent to the merger, that the New York Central enter into an agreement with the combined transportation authorities of New York and Connecticut. This could be a great step toward the solution of this problem, Mr. Chairman.
Senator PASTORE. What about the rest of the line from Boston to New Haven?
Senator RIBICOFF. Well, Rhode Island and Massachusetts, with Connecticut and New York, would have to enter into a like agreement with the New York Central to make sure that they continued the longdistance passenger service.
If you had a four-State authority, you could allocate the amount of the general losses among them. However, the only authorities are about to be set up are those of Connecticut and New York. They could take care of the commuter passengers.
Senator PASTORE. You would make it a condition precedent to the merger. As I have suggested before, no matter how you look at this, there will be a need for cash. There is going to be a deficit because the passenger service and the commuter service are not profitable operations.
It is quite understandable why the Pennsylvania and New York Central do not want to buy or take in their merger this so-called dead horse, and if it isn't dead, it is almost dead.
Now, the fact remains that these four States should be and are very much interested in the solution of this problem. What amazes me is that up to this time, I have heard of no effort on the part of the representatives of these four States to sit down with the executives of the New York Central and of the Pennsylvania in the diplomatic quiet of a directors' room to resolve the question of whether or not the New York Central and the Pennsylvania would take on this passenger service from Boston to Washington, including the commuter service, and the States make whatever agreements should be made in order to pick up part of the deficit as they are willing to do.
Senator RIBICOFF. I recall your suggestion. I think your suggestion is an excellent one. I agree that if the representatives of the four
States sat down with the New York Central and the Pennsylvania and talked this out, they could make considerable progress.
Those of us who have had responsibility for building roads-you, as Governor of Rhode Island, Senator Lausche, as Governor of Ohio, and myself, as Governor of Connecticut-realize that Detroit builds automobiles a lot faster than the States can build roads. By the time you have finished building a superhighway, it is outmoded. Travel on highways is getting so onerous, so burdensome, so dangerous to life and limb, that the time is going to come when there will be an absolute need for mass transportation. This will make it economical for people to use mass transportation.
Mr. Chairman, I am sure that you and the members of the Commerce Committee realize that the railroads are the most backward of all American industries. The average railroad in America is running as if it were still 1910 instead of the year 1965. There is much that could be done by the railroads of America to modernize themselves new cars, new transportation methods, higher speed. Other countries have been doing it and have been successful. But the railroads have been completely without imagination in America.
Now, of course, they have a practical problem. I have talked to bankers and financers and they are all unwilling at the present time to make the great cash investments in the railroads that are necessary to modernize them.
Now if railroads are essential for the future of this country, we are going to have to face up to the situation and decide what to do about it. We, you and I and many other Senators, pass bills for Appalachia, we pass measures for the farmers, and we pass measures for irrigation projects. We do this even though we are from States that do not benefit. We keep on voting these funds because we realize that they add to the overall wealth of the American economy.
Now, this country cannot exist, with 75 percent of its population in the urban areas, without mass transportation. We will strangle-we will die as a people-if we can't move them back and forth.
And one of the great contributions this committee can make, it seems to me, as you are holding these hearings, is to keep this in mind Now I think it also should be kept in mind that, while you have said that the goad and purpose of this hearing is for the New Haven Road, there are 66 class I railroads in the United States of America and only 3 of these 66 are making any money on carrying passengers. Now what is going to happen with the other 63 ?
That means that today, it is the New Haven; tomorrow, it is another one of these 63; today, it is the New England area; tomorrow, it is the Middle West; the day after, the South; the day after that, it is the Far West. So any policy that we are establishing in these hearings is a policy that will be, not only for the New Haven Road, but for the entire United States of America.
And I have been very careful, Mr. Chairman, in drafting my bill to point out that what I am doing is not just passing a bill for the New Haven. I have drawn this bill to give the Interstate Commerce Commission the opportunity and the authority to step in wherever a railroad faces the same problem as the New Haven. If it weren't
for the New Haven Road, and I will be frank with you, I would not have this bill. But in drawing this bill, we have kept in mind the future of the entire mass transportation system in the United States. Senator PASTORE. The only reason why I made my suggestion was because no matter how you look at this, someone has got to run that railroad. I thought that rather than take the position that we are going to stuff this down the throat of the New York Central and Pennsylvania, which I don't think is the proper way of doing it, we ought to use persuasion and encouragement and inducement more than compulsion. I think it would be fine if these people would only sit down together and see if there isn't some middle ground that can be reached in order to preserve this.
Now, to come back to what you said, you say in the past, while passenger service has been a losing proposition with most railroads, profits in freight transportation have offset these losses.
But as I point out in my opening statement, since the building of the Connecticut Turnpike, the New Haven Railroad has been showing a loss even on the freight service.
I don't want any position taken here that will discourage the New York Central and Pennsylvania from taking over the freight service, at least, because if that ever happens, it will be a double tragedy for the State of Massachusetts and the State of Rhode Island. If we lose the New Haven freight service in these two States, we will suffer economically. I would not want to make a condition here that would discourage the whole package.
I am still encouraged by the fact that the Pennsylvania and the New York Central are willing to include in the merger, so I understand, the freight service. They are reluctant to take over the commuter service and passenger service, and I think there is where you have the real problem. I think that these parties, including Federal agencies, should sit down and talk this over. If anyone is going to run the New Haven, the Pennsylvania and the New York Central, well-managed railroads, could do a rather efficient job. In other words, they will keep the deficit, whatever it is going to be, at a minimum.
Senator RIBICOFF. I agree with you. My feeling is, Mr. Chairman, that once the statements you have made today are spread on the record through the press and television, it will not be very long before representatives of the four States will call up Mr. Perlman and say, "When can we get together?"; and I think, in this, you have rendered a public service.
Senator PASTORE. That is the reason why I made the statement.
Senator LAUSCHE. Did I understand you to say that the officials of the Pennsylvania and the New York Central are in a state of mind where they would undertake to assume the responsibility of both the cargo and the passenger service?
Senator RIBICOFF. They are of the mind to take the freight, Senator Lausche, but not the passenger service. I think the colloquy between the chairman and myself revealed that New York and Connecticut have indicated a desire to enter through their authorities, into a con
tract with the New York Central to run the passenger service. Massachusetts and Rhode Island would have to work out how the New York Central would operate the passenger service at their end.
As the chairman indicated, he thought that the officials of all the four States should sit down with the officers of the railroad to work out quietly what kind of a contract they could enter into.
Senator LAUSCHE. Have New York and Connecticut agreed to operate the passenger service on their own and stand the consequences of either profit or loss?
Senator RIBICOFF. Not yet
Senator LAUSCHE. Is there some indication that they have an inclination to do so?
Senator RIBICOFF. Yes, there is.
Senator LAUSCHE. Are they contemplating asking for Federal aid in connection with that joint operation?
Senator RIBICOFF. Well, the Governors themselves will be before. this committee, I understand, on Thursday.
Senator PASTORE. I understand that the Javits bill calls upon the Federal Government to pick up one-third of the deficit and the States will pick up the other two-thirds. I mean, I don't think we ought to mislead the Senator from Ohio who has a very strong antipathy against subsidizing. I understand that the Javits bill is amenable to the Governor of New York.
Senator LAUSCHE. But the Senator from Rhode Island has at least left the implication that these two States are prepared to pick up the passenger service without the Federal Government aiding in spite of what Senator Javits is saying, that the Federal Government should pick up one-third of the cost.
Senator RIBICOFF. I am not sure that the Governors of Connecticut and New York are willing to assume the whole burden. Senator LAUSCHE. That is what I am trying to find out.
Senator RIBICOFF. As you may recall the Mass Transportation Act, permits the Federal Government to provide assistance on a formula basis. The Mass Transportation Act, however, would not work in the case of private railroads as it has two conditions in it: First, there has to be a long-range plan; and second, there has to be a public authority. It not only covers railroads; it covers buses, and subways, and other means of transportation.
Now my bill S. 325, that is now before you, is designed to take up the gap-to provide the assistance that is necessary to save a railroad like the New Haven or others during this interim period that is not provided in mass transportation. I am going to testify why S. 325 takes up the gap.
Senator LAUSCHE. Thank you very much.
Senator PASTORE. Senator Dominick?
Senator DOMINICK. I wonder whether I could ask Senator Ribicoff just a couple of questions. I think for the record it ought to be shown it is my understanding that the Pennsylvania Railroad had a passenger deficit of its own in 1963, some $34 million, and New York Central had a passenger deficit of $14 million. So you have $48 million of passenger deficits in those railroads. And this may create some