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That is all.
Mr. SMITH. We have examined the four bills that are before the committee and because of the lateness of the hour, I don't want to go into great detail in our analysis of them, except to say this, that insofar as the bills contemplate a compact between the States or among the States looking toward a supervision of our passenger service on a permanent basis with provisions for underwriting a continuation of such service as they desire, that we recognize to be the good and ultimate solution of the problem.
None of the bills, however, with the exception of S. 1289 sufficiently meets the immediate need of this road, which is an underwriting of the cost of continuing passenger service while the broader and more permanent methods of public participation in the enterprise are worked out.
Senator PASTORE. The only thing that bothers me, Mr. Smith, on that bill, while it is the most direct and easiest approach of all, it is the precedent that bothers me.
I don't know that the Congress has ever taken $20 million and given it outright to a privately run or privately owned institution to pick up the deficit of operation.
That is one thing that concerns me. We have had instances, of course, under the National Transportation Act where a certain amount of money was given for modernization and I think that is the approach of the so-called Ribicoff bill, which would be more or less for maintenance and for modernization and new equipment. The railroad could utilize its own cash for operating expenses.
Mr. SMITH. That is correct. The difficulty with the Ribicoff bill in that respect is that the conditions that are imposed upon that contribution measured by the existence or the extent of tax relief from the States results in a figure too low to meet our present needs.
I would of course agree that just an indefinite undertaking to give money without more would have undesirable features and might be questionable.
I recognize that any assumption of the immediate cost is only as a part of an overall plan on the part of public officials to set up a permanent organization for the purpose of continuing such passenger service.
Senator PASTORE. Don't you think it would be desirable to draw a bill just that way, that would include the long-term aspects and also the emergency aspects so that it would be contained under the same cover ?
Mr. SMITH. That is correct.
Senator PASTORE. In other words, if you had a combination let's say of the so-called Pell bill, which provides of course for permanent solution of the problem, with provisions for temporary emergency relief.
Mr. SMITH. That would meet our problem.
Senator PASTORE. Are all of the trustees in accord on that? Are you, Mr. Kirk?
Mr. KIRK. Yes, sir.
Senator PASTORE. In other words, you are recognizing the fact that this would be a rather unprecendented thing, but you would only recommend it on the grounds that it is temporary relief to carry you over until such time as you have a permanent solution to the entire problem.
Mr. SMITH. That is correct.
Senator PASTORE. We are all in accord here that should we reach such an agreement with New York Central-incidentally, has the Justice Department removed its objection on this question of merger?
Mr. SMITH. We have been told that they have.
Senator PASTORE. As far as you are concerned, it is still being objected to?
Mr. SMITH. We have been told that the Justice Department has withdrawn.
Senator PASTORE. Has removed its objections.
Mr. KIRK. I would like to comment there, to add to what Mr. Smith has said, that we understand that they won't pursue their objections, but up to this point we don't know of any definite steps taken by them to formally withdraw their objections.
Senator PASTORE. If it is true that the New York Central and the Pennsylvania are willing to include the freight service, so to speak, are willing Mr. Smith. We have agreement on that basis.
Senator PASTORE. Fast agreement, and are willing to talk with the authorities, the public authorities with reference to the deficit on the passenger service.
Mr. SMITH. They have indicated to us that they are willing so to talk.
Senator PASTORE. Do you see any disadvantage in immediately sitting down and talking with these executives on a temporary basis as well as on a long-term basis?
Mr. SMITH. You mean us?
Mr. SMITH. We have explored that situation with them and insofar as we are concerned, we could not negotiate with them for their taking over the responsibility for any of the passenger business.
Senator PASTORE. Until the ICC resolves the merger?
Mr. SMITH. Irrespective of that, so far as we are concerned, we have been unable to negotiate with them on the basis that they would assume the responsibility for the passenger service.
They have indicated to us that they are ready and willing to negotiate with public authorities on a basis that would be acceptable to them for a continuation of the passenger service.
Senator PASTORE. Wouldn't that be predicated upon the merger taking place?
Mr. KIRK. Mr. Chairman, I would like to make this statement, however, that if the merger is permitted and we do have this agreement in principle, there is a big problem here of the implementation of that agreement.
It will take a considerable length of time for the New Haven Railroad to be incorporated into the operations of the Pennsylvania and Central by virtue of the various hearings and proceedings before the Interstate Commerce Commission, before our courts, the listening to objections of all kinds from creditors, et cetera.
This might run for a period of 2 or 3 years before this can even be accomplished, so in the interim we are not in averyhappy position with respect to this suggestion.
And No. 2, our agreement in principle with the Penn-Central Railroad is on the basis that the Penn-Central assumes no obligation to run any passenger business, but express a willingness to operate it if a satisfactory agreement can be made with the public authorities.
Senator PASTORE. I realize that, Mr. Kirk.
Mr. KIRK. But this could not be done in this interim period before we in fact can get into the merger.
Senator PASTORE. But you see, we come down fundamentally to the adage that talk is cheap. We get the impression that just because a bill is introduced we have a solution.
We have a long way to go even in the Congress before you even get a bill passed. You know that as well as I do, especially when it involves the expenditure of money.
But there have been reports in the newspapers to the effect that the State of Connecticut and the State of New York have made a proposal that the New York Central would run the commuter service on some kind of a lease basis.
Now what I want to find out from you gentlemen, how can that happen?
Mr. SMITH. How can what happen?
Senator PASTORE. How can the New York Central come into this picture at all? You are running the railroad, aren't you, now?
Mr. SMITH. No. 1, I think that proposal of Governor Rockefeller's is predicated upon a merged New York Central and Pennsylvania system.
Senator PASTORE. That is 3 years from now.
Mr. SMITH. But on the other hand, there have been studies made, a very able study by the Institute of Public Affairs, financed by New York Foundation a couple of years ago, which undertook to demonstrate the feasibility of a public authority handling both the New York Central and the New Haven commutation service into Grand Central Station. It can be done.
Also, an authority which would be set up to handle not only that, but also the commutation of the Long Island Railroad and the commutation of New Jersey lines could also be feasible.
Senator PASTORE. That can only happen if the ICC grants you permission, New Haven, to discontinue that service. Then the authority can pick it up
My question here is how does any authority pick up something that you now own and that you are operating?
Mr. KIRK. They certainly have to come to us to negotiate it, sir, and they haven't approached us in any way, shape, or manner on this front.
Senator PASTORE. If they did come to you, let's discuss legal jurisdiction here, if they did come to you tomorrow, and said here we are, we have set up this bistate authority and we want to run this commuter service west of New Haven into New York. Now what would have to happen before they could do that!
Mr. SMITH. What would happen, sir? Then we would undertake to negotiate with such an authority an equitable basis upon which
they would take over our lines or make a contract with us to operate the service under their supervision.
Having reached that agreement, we would then go to the Interstate Commerce Commission and submit it to them as a changed method of carrying on the same service.
Senator PASTORE. I see, and they would have to pay you for the use of the tracks and so on?
Mr. SMITH. They could do it that way. There are any number of ways they could do it, but it is feasible. A public authority operating the service into Grand Central Station is feasible. There are not, so far as I know, any regulatory obstacles to such a plan.
Senator PASTORE. Any questions? (No response.)
Senator PASTORE. Well, gentlemen, I think that covers it insofar as the trustees are concerned.
This committee is contemplating winding up its hearings in New Haven on Thursday next, that is a week from tomorrow. We will have Governor Rockefeller testify before this committee here on Wednesday afternoon.
Between now and then there may be certain developments. Of course we are going to New Haven primarily to take testimony from interested parties, that is, the public generally, and in all probability you gentlemen will be available in the event that from now until then, certain issues arise that need clarification.
Mr. SMITH. March 10!
We have the distinguished Chairman of the Interstate Commerce
MERCE COMMISSION; ACCOMPANIED BY KENNETH H. TUGGLE, CHAIRMAN, DIVISION 3; MATTHEW PAOLO, DIRECTOR, BUREAU OF ACCOUNTS; THADDEUS W. FORBES, DIRECTOR, BUREAU OF FINANCE; AND EDWARD MARGOLIN, DIRECTOR, BUREAU OF TRANSPORT ECONOMICS AND STATISTICS
Mr. WEBB. Thank you, Mr. Chairman.
Commissioner Tuggle, Chairman of Division 3, is on my left, and on my right is Director Matthew Paolo, who is Director of our Bureau of Accounts. I would also like to ask Director Forbes of the Bureau of Finance, who is in the room, if he will also come up.
Senator PASTORE. Or anyone else you want.
Mr. WEBB. I would like to state for the record that we have in the room Commissioners Murphy, Walrath, Tucker, Tierney, and Commissioner Brown.
Senator PASTORE. That is fine.
Mr. WEBB. Mr. Chairman and members of the committee, my name is Charles A. Webb and I am the Chairman of the Interstate Commerce Commission and have served in that capacity since January 1, 1965.
I appreciate this opportunity to testify on behalf of the Commission on the legislation proposed by Senator Ribicoff-S. 325; Senator Pell-S. 348; and Senator Javits-S. 1234.
Senator PASTORE. Mr. Webb, before you go any further, it is now 5 minutes to 12. I thought we would continue until about 20 minutes past 12. Could you come back this afternoon?
Mr. WEBB. Yes; I would be delighted.
Senator PASTORE. What we will do, we will continue until 20 minutes past 12 and then we will come back at 2 o'clock this afternoon.
Mr. WEBB. I believe that I can finish my prepared statement within that period.
Senator PASTORE. I would rather have you come back because there are many questions.
Mr. WEBB. I might add, Mr. Chairman, that although the Commission has not formally considered Senator Dodd's bill, S. 1289, that I am generally familiar with the contents. It is similar in some respects to Senator Ribicoff's. I will refer to it in the course of my remarks and we would welcome the opportunity to file a written statement on that bill.
Senator PASTORE. We will appreciate that. Without objection, so ordered.
The Commission has long been concerned about the debilitating effect of passenger train deficits on many of the Nation's railroads. Our general concern is reflected in the Railroad Pasenger Train Deficit case (306 I.C.C. 417), decided May 18, 1959. Our particular concern with the problems of the New Haven Railroad is expressed in three reports issued in the New Haven investigation case. The recommended report in that proceeding traces in great detail the decline and fall of a once-prosperous railroad. Our interim report in the investigation case (313 I.C.C. 411), decided March 31, 1961, found that the New Haven's passenger deficit was the primary cause of its financial difficulties and that reorganization proceedings under section 77B of the Bankruptcy Act would not solve the carrier's basic problems. In its final report in the New Haven investigation proceeding, which was decided on August 16, 1961, the Commission recommended that the Congress enact legislation similar to that now proposed by Senator Ribicoff in S. 325 and by Senator Dodd in S. 1289. Copies of these four reports have been filed with the committee.
In addition, we have filed with the committee a 70-page report containing economic background information and extensive comments on the bills under consideration. Therefore, unless the committee so desires, I shall not discuss the specific language of our suggested amendments to S. 325, S. 348, and S. 1234. Most of the suggested amendments are technical or clarifying in nature and do not alter the basic purpose of the proposed legislation.
Senator PASTORE. At this point I think we should incorporate by reference the report that you have mentioned, rather than spell it out.
Mr. WEBB. Thank you, Senator. Since the bills under consideration deal exclusively with ways and means to preserve essential rail passenger and commuter services, it should be emphasized that the passenger deficit problem and the future of rail freight service, at least in the eastern district, are inseparably connected. For many railroads in this region, the income derived from freight service is no longer sufficient to offset losses from passenger service. Even the freight operations of the New Haven, the Erie Lackawanna, and several other important carriers of passengers have been conducted at a loss in recent years.