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Seven, Port Equalization: Of vital importance to the Northeastern United States is the need for equalized rates to assure its ports and railroads a fair share of export and import cargo.
Traditionally, the Interstate Commerce Commission has favored southern ports and carriers.
In 1963, the State of New York, together with northeastern railroads and port authorities, carried the case to the Supreme Court which affirmed a lower court decision and eliminated railroad freight differentials devised 89 years ago and long obsolete.
Eight, Hudson & Manhattan Railroad: In 1962, upon the recommendation of Governor Hughes of New Jersey and myself for New York, the legislatures of our two States directed the Port of New York Authority to take over the bankrupt Hudson & Manhattan Railroad and completely rehabilitate this essential trans-Hudson rail service. This $70 million project represents, to my knowledge, the first successful effort in the Nation to utilize excess automobile toll revenue to help provide necessary rail rapid transit as part of a balanced transportation program.
Nine, Long Island Rail Road: The Long Island Rail Road is the largest of all commuter railroads in the United States, carrying some 260,000 passengers daily.
As a State-charatered redevelopment corporation since 1954, it has been virtually exempt from taxation and has paid no interest or amortization of its indebtedness, nor any return to its owner.
During this redevelopment period, it has greatly improved its service to the public and carried on a substantial rehabilitation program.
However, as it approached the end of its special status as a redevelopment corporation next year, it was clear that the Long Island would not be able to generate sufficient funds for necessary capital improvements.
Some 70 percent of its equipment is still more than 30 years old despite the near completion of a $65 million rehabilitation program, including the commuter cars obtained under the New York State commuter car program.
A special committee was appointed by me to make recommendations on the future of this railroad recently recommended a bold and imaginative program calling for the State to purchase the railroad outright from the Pennsylvania Railroad, its sole owner.
It has also proposed the creation of a State metropolitan commuter transportation authority to operate the railroad directly or under contract, and it has projected the sale of $200 million of authority bonds to carry out a modernization program.
This committee pointed out that the alternative to continuation and improvement of this vital commuter railroad would mean construction of 26 additional lanes of limited access highway in one direction to move traffic equivalent to the rush-hour carrying capacity of the Long Island Rail Road. This additional highway construction would cost more than $2 billion, or 10 times the cost of the modernization program of the railroad.
I have endorsed this report of the special committee and will be submitting legislation shortly to create a metropolitan commuter transportation authority to assume responsibility for the Long Island Rail
road and also to deal with other regional commuter problems in behalf of New York State.
Then, the New York & New Haven Railroad:
The work of the Interstate Staff Committee: Because of the critical financial situation on the New Haven Railroad in 1960, I invited on October 24 Governor Ribicoff, of Connecticut; Mayor Wagner, of New York City, and Westchester County Executive Michaelian to meet in my offices in New York City to consider the problem.
That day we created the interstate staff committee on the New Haven Railroad and invited the participation of the Governors of Massachusetts and Rhode Island in this effort. They responded affirmatively.
Armed with assurances of all of the chief executives involved that they would seek tax relief and other financial assistance, the committee appeared before the Interstate Commerce Commission and urged the guarantee of loans to the New Haven to forestall bankruptcy and a complete collapse of the railroad's activities.
This effort was crowned with success.
Upon the committee's recommendation, steps were taken that resulted in a four-State effort to provide tax relief and other financial assistance to the railroad. In an unprecedented cooperative action, all four States enacted tax relief legislation within a few months thus reversing tax policies regarding railroads that had stood on the statute books of the States for generations. Although not all of the States implemented their share of this $6.2 million annual program of tax relief, New York State did its share by providing $1.5 million annually in tax relief to the New Haven Railroad which the line is still enjoying, contrary to testimony heretofore offered.
Senator PASTORE. Governor, could you be a little more specific with reference to that? I think you have touched now on the real essence of this controversy. A contention was made here by Mr. Kirk of the New York & New Haven that there is an imposition on the New Haven of $2,850,000 a year in real estate taxes, that the State of Connecticut has granted complete tax relief, Rhode Island has granted some relief, Massachusetts invoked a condition which, of course, has resulted in no relief whatsoever, but that much of the tax burden on the New Haven consists of the real estate tax imposed in the State of New York. They went so far as to say that originally some tax relief was given and then later on it was rescinded. Could we have that in greater detail?
I mean, you have said here unequivocally that you are providing one and a half million dollars annually in tax relief for the New Haven, which the line is still enjoying contrary to the testimony heretofore offered. I think you are directing yourself to the testimony that I have just brought to your attention.
Governor ROCKEFELLER. Mr. Chairman, the facts of the matter are that the New Haven is enjoying this $1.5 million of tax relief under our laws in New York State. The condition for the granting of this relief by the State is that the railroads should maintain commuter service with adequate facilities. They did not maintain for one period the facilities up to standard either in the railroad stations nor in the cars themselves. The privilege of the tax reduction was withdrawn.
They then cleaned up the cars and the terminal facilities and the money is now available to them again.
We have on four occasions offered to work out arrangements for the financing of the construction of new cars to help them qualify for the future, their problem being lack of funds for maintenance of their existing cars. We offered a program for the building of 87 new cars and rehabilitating 50 cars, a program which I will describe later.
Our legislature has acted to make available the funds for this purpose, the legislature in Connecticut will act today, I guess, today or tomorrow, so that this program will shortly be available if we can work out the proper arrangements with them.
Senator PASTORE. But is it fair for me to say nevertheless, according to your explanation now, the New Haven is not enjoying any real estate tax relief from the State of New York? Governor ROCKEFELLER. It is enjoying it now.
I said there was one short period when they did not enjoy it.
Senator PASTORE. How long did that short period last?
Senator PASTORE. Is that all real estate?
Senator PASTORE. The tax relief for fiscal 1965 of $1.5 million, they haven't taken advantage of that yet, or have they?
Governor ROCKEFELLER. Oh, yes; they are getting that. They are paying no taxes at present.
Senator PASTORE. When will they get it!
Governor ROCKEFELLER. Until the end of this fiscal year, which is April 1, for us in our State.
Senator PASTORE. In other words, am I safe in saying this is from July 1, 1964, to June 30, 1965?
Governor ROCKEFELLER. April 1, 1964—you are right; I am wrong. To July 1.
Senator PASTORE. In other words, they have had this advantage since July 1, 1964!
Governor ROCKEFELLER. I think, Mr. Chairman, that your committee would understand that for us to ask the local communities and the State taxpayers to give this relief and not get service would not inure very much support from the communities and, therefore
Senator PASTORE. It is like a dog chasing his tail, Governor. You are in a vicious circle here. First of all, much of the breakdown of the efficiency of the service and the quality of service is the result of the lack of revenue. I think that these trustees who were appointed by the court have been trying to do the best they can under the circumstances. But like ourselves in government, you realize you have to have money to do the things you want to do, and the minute you don't provide sufficient money to carry out a program, the program breaks down. Now, I mean that is inevitable.
I don't think, whatever the reasons may be, I think that you and I can agree at this juncture that the trouble with the New Haven at the moment, the most important trouble is the matter of lack of cash.
Governor ROCKEFELLER. That I would agree, Mr. Chairman, but I put very close behind it the lack of management.
Senator PASTORE. Would you say so, since 1961, since it has been in the hands of the trustees?
Governor ROCKEFELLER. Before and since.
Senator PASTORE. Are you saying categorically that you think, under the trustees, the railroad has been mismanaged ?
Governor ROCKEFELLER. Well, I think the word “mismanaged” would be hard to prove, but I think that the quality of management, if I could put it that way, does not compare to the quality of management on other railroads. I think it is a factor that lack of money, the lack of equipment, and the lack of the most expert management. But I don't disagree with your previous statement, that is why we have come to a new proposal which I will mention in a minute.
Senator PASTORE. Will you agree, too, that I think we would serve this cause much better if we let bygones be bygones and look to the future and see what we can do about salvaging this very important means of transportation?
Governor ROCKEFELLER. I think that is right. We have to protect the citizens who are putting the money up and be sure that they are getting a dollar's worth for every dollar of taxpayer money that is spent and, therefore, we try to examine these things with great care.
Senator PASTORE. You will never go to jail for that kind of a statement.
Governor ROCKEFELLER. These are the steps taken by the four State Governors working together, an all-out effort to repeal the 10-percent Federal excise tax on rail passenger transportation which was achieved in 1962.
A fare increase of 10 percent which yielded $1.5 million annually.
The committee also recommended labor-management savings of $3.5 million and took up informal discussions to achieve them. This effort was frustrated when the railroad entered bankruptcy and the trustees assumed responsibility.
In addition, the committee worked with the management of the railroad to obtain better utilization of its trucking affiliate.
In October 1961, the Interstate Staff Committee offered its services to the railroad in obtaining key executives of other leading eastern railroads to make a review of its properties, equipment, finances, traffic, management and its future potential. The offer was repeated on several occasions but not accepted.
After bankruptcy, the Federal Government was invited by us to appoint a representative to the Interstate Staff Committee. After considerable urging, an Assistant Attorney General did attend one meeting in February 1962 as an observer and never appeared at any subsequent meetings.
However, on March 22, 1962, a group of nine western railroad executives was appointed by the Secretary of Commerce to make a survey of the railroad. The report of this group, the Whitman report, was scheduled for completion on May 22, 1962.
The Interstate Staff Committee and the governors were unable to obtain any portion of the report and were not apprised of its contents until well into 1963 and then only after congressional pressure for its release.
In a joint meeting in New Haven in March 1962 attended by the Federal judge in bankruptcy, the trustees, the governors, local government executives and Federal representatives, spokesmen for the U.S. Department of Commerce and the U.S. Department of Justice categorically stated that no additional assistance would be forthcoming from the Federal Government and that it was up to the State and local governments to resolve the New Haven's problems.
Indeed, the burden of the remarks by the Federal representatives was to the effect that the Federal Government was interested primarily, if not exclusively, in collecting on its loans to the New Haven.
It was upon the recommendation of the Interstate Staff Committee that a definitive and comprehensive study was provided of the costs and revenues of the three principal services of the New Haven-westend commutation, from western Connecticut and Westchester to New York City; long-distance passenger service; and freight.
This study, conducted with the full cooperation of the New Haven Railroad, was carried out by Dr. Ford K. Edwards, a nationally recognized independent railroad cost analyst and former chief cost accountant of the Interstate Commerce Commission.
Dr. Edwards reported that west-end commutation was far and away the smallest money loser of the three services. The figures for the services in 1961 showed:
Deficit West-end commutation -
$400,000 Long distance or other passenger.
9, 000, 000 Freight---
7,000,000 The costs and revenues pattern has not changed substantially since 1961. In 1964, freight losses were a bit lower and long-distance passenger service losses were somewhat higher.
The Edwards study put to rest the wild and unsubstantial claims that the west-end commuter service was “killing” the New Haven.
This is simply not true.
The study raised the very serious question as to whether or not the New Haven as constituted was a viable railroad in light of the fact that both freight and long-distance passenger services produce such grave deficits. Efforts to solve the Connecticut-New York commuter problem:
The major concern regarding the west-end commuter service has been the old and deteriorating condition of much of commuter car equipment. New York State has accordingly made great effort to obtain new and rehabilitated commuter cars-an absolute essential for the continuation of the service.
My office has discussed with the Alpert management in an attempt to have the railroad participate in the State commuter car program.
Thereafter, on three different occasions in 1962, 1963, and again in 1964, New York State negotiated a lease with the New Haven trustees to provide badly needed commuter cars. All these efforts were frustrated.
In 1962 the Federal judge in bankruptcy turned down the lease which had been approved by the trustees. In 1963 the trustees, after