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Senator PROUTY. Senator Pell, I am sorry I had another committee meeting this morning, so I was unable to hear your statement. I shall read it with a great deal of interest and I think your idea is somewhat intriguing.
Senator PELL. Thank you.
Senator PROUTY. I might ask you this question: Would your proposal, in any way, improve rail service in northern New England ?
Senator PELL. It would only have a subsidiary effect in that the people from your State, sir, and other States of northern New England would be closer to this railroad. It might set the pattern so that, eventually, the authority might be able to help on the transportation of some of the rail lines going in to the northern area.
As you know, as of this time, the transportation in your area and New Hampshire and Maine is almost nil from the viewpoint of the public.
Senator PROUTY. Nonexistent.
Senator PELL. And my hope, some day, is that the megalopolitan concept-we will probably go a little further north and a little further south. I don't see it going into Vermont.
Senator Prouty. I hope it will go 250 miles north.
Senator PROUTY. Thank you, Mr. Chairman. I have no further questions.
Senator PASTORE. Looking at page 8 of your bill, Mr. Pell, article VII:
The authority shall annually submit to each of the signatories a budget of requirements for the next ensuing year. To the extent that revenues from operation as conducted by the authority are inadequate to meet the expenses of the authority, such expenses shall be borne by each of the signatories in the percentage which the passenger miles traveled on the railroads owned, leased, or otherwise operated by the authority within such State's boundaries bears to the total passenger miles traveled on railroads owned, leased, or otherwise operated by the authority within the district. The percentages of such expenses to be borne by each of the signatories shall be set forth in such budget and shall be subject to the approval of the chief executive officer or officers of such signatory.
That does not apply to the interest due on the bonds?
Senator PASTORE. Does not include the interest nor
Senator PELL. In my view, it should include the interest and the amortization.
Senator PASTORE. I think it is quite important, and we should have that clarified for the record. It can be spelled out in detail. I think it is quite important to know just who is to pay the interest and the amortization of a half billion dollars in bonds in the event that the operation shows no profit.
Senator PELL. This is a point that needs to be sharpened in my bill as a question of definition, what the committee, in its wisdom, decides, and the Senate, because the operating expenses are not defined. My view and hope is that it would include the interest and amortization, but from the viewpoint of practicality, if this bill is adopted, it might be decided that it would be handled differently.
But it is not spelled out in the bill, and I believe you have touched on a weakness here and it should be spelled out.
Senator PASTORE. First of all, of course, it is a matter of philosophical outlook. We ought to determine who is to pay the interest and who is to amortize these bonds in the event that the operation doesn't show any profit. You have already maintained that the deficit will have to be picked up by the States.
Now, the question here is, is the responsibility of the State confined alone to the operation, the deficit in operation, exclusive of the interest or the amortization of the bonds?
I would like to get that in the record in very concise, clear and simple language because I think that is a very important point that this committee will have to decide.
Senator PELL. What I have tried to do is to have this point included if it is operating in the black. If it is not operating in the black, then it would not be included and the States would not be responsible for this.
Senator PASTORE. I think the bill ought to be clear on that point and I would hope
Senator PELL. I will submit an amendment, clarifying.
Senator PASTORE. Your assistant can work with our staff members to clarify that point just so we would have the language both ways in the event the committee decided to go either one way or the other. Senator PELL. There is a considerable difference as you point out. Senator PASTORE. Difference of $500 million. Senator PELL. Exactly. Senator PASTORE. Any further questions of Mr. Pell? (No response.) Senator PASTORE. Thank you very much, Mr. Pell. Senator PELL. Thank you. Senator PASTORE. Our next witness is Mr. Dodd.
STATEMENT OF HON. THOMAS J. DODD, U.S. SENATOR FROM THE
STATE OF CONNECTICUT
Senator DODD. Mr. Chairman and members of the committee, I first of all want to express my thanks to Mr. Javits to precede him briefly. I only asked because I have an appointment I promised to keep with a constituent.
Mr. Chairman, I am here today in what I feel is a peculiar role, in response to a serious crisis in the life of my State and my region, to advocate a Government subsidy that would restore a private industry apparently no longer able to fulfill its public function.
Subsidization of our collapsing commuter railroads has only one virtue, in my view—it is better than all its alternatives; and better than the timid rescue attempts which have uniformly failed; better than Government ownership and control; and better than doing nothing and consigning our commuter railroads to total ruin.
And it is better than Government ownership and control. I say this, Mr. Chairman, because I happen to believe that this railroad should be and can be properly and profitably run by private enterprise, and I think it is a great tragedy that it finds itself in its present plight.
I think it is the result of gross mismanagement, and that is why we are all here today.
These railroads should be saved because their functioning embodies a public interest and their ruin would involve a public loss of the first magnitude.
They should be saved with public subsidies because this is the most sensible and, in the end, the least expensive solution to a problem which has grown beyond the scope of private, or local, capacity.
To allow the passenger railroads of New England and New York and New Jersey and other regions to shut down would inflict a disaster out of all proportion to the cost of the cure. It would mean the scuttling of economic assets now worth billions, because of unwillingness to invest millions; the needless incurring of future highway costs of hundreds of millions to replace railroads that could have been saved by a fraction of that cost; and the creation, perhaps, of new Appalachias, depressed areas strangled by inadequate rail transit, which will one day have to be revived by massive antipoverty programs, because shortsighted men forgot about the "stitch in time."
I believe that subsidies now can save the New Haven Railroad, the Long Island Railroad, and others dying of obsolescence because of bad management, management which can't raise the funds even to operate, let alone modernize and revitalize.
I believe that Federal leadership, through a program adequate to the interstate size of the problem, can summon forth the cooperation and the coordination of the States and the localities, which too often have been unwilling to carry their share, lacking any assurance that the other fellow would carry his and thus be deprived of any confidence in the outcome.
And so I have introduced a bill, S. 1289, cosponsored by the distinguished junior Senator from Rhode Island, Mr. Pell. Committee members have been provided with a detailed analysis and I do not wish to prolong these proceedings by repeating it here.
Briefly, S. 1289 provides an immediate Federal transfusion to keep the wheels turning in the first year, and sets up a matching formula for the following 4 years, when the Federal share would successively diminish and then cease. These subsidies will finance the modernization of equipment that is the key to the problem.
The first year the Federal Government would make a 100-percent contribution, with no requirement for State and local matching. But for the subsequent 4 years the Federal contribution of 80, 70, 60, and finally 50 percent would depend on what the other governmental entities do by way of direct assistance, tax relief, and so on. The maximum grant to one railroad in the first, nonmatching year would be $20 million. The total 5-year authorization would be $75 million.
I am frank to say that my bill was drafted primarily, though not solely, to meet the dimensions of the New Haven Railroad dilemma, which is the gravest. But the New Haven's problem is typical of others, and this committee with its broad view of the national need can enlarge the size and alter the shape of my bill, if need be, to make it a truly comprehensive measure.
This bill would fit in with and supplement, logically and coherently, other measures proposed on the Federal and State level, for instance the Dempsey-Rockefeller plan for a $10 million State and local effort matched by an equal Federal outlay—or the high-speed railway concept, or the efforts underway in the mass transit program.
It is in complete harmony with proposals for interstate compacts, tristate authorities, and other regional arrangements which seek to bring order and progress out of anarchy and disintegration.
It would encourage the flow of private investment and stimulate the more vigorous and enterprising elements of railroad management to take up the task of rebuilding our passenger lines. And it would give added logic to pleas that discontinuance orders be held up.
Senator Pastore and members of the committee, time has almost run out for the New Haven and for the communities and the people that depend on it. I believe that the Congress can save it, and with it the future of passenger rail service-which can be of such bright promise. I hope you will give us this last chance.
Thank you for listening to what I had to say.
Senator PASTORE. First of all, I want to congratulate you, Mr. Dodd, for an excellent statement.
I have one or two questions. Your bill envisions after expiration of 5 years the deficit will have to be met exclusively by the States? Senator Dopp. That's right.
Senator PASTORE. There's no machinery set up in your bill to decide what the formula should be on participation by the States for the second, third, fourth, and fifth year?
Senator Dodd. No. Senator PASTORE. They would have to decide that among themselves?
Senator Dodd. Yes, among themselves. My bill is really complementary to Senator Pell's bill and in some respects, to Senator Javits' bill. It is what I described as a transfusion to keep this road alive until the best minds in the country can come up with a way to preserve it. But I think its present status is critical. The New Haven will die unless it gets an immediate transfusion, and I thought my bill might serve that purpose.
Senator PASTORE. The only reason why I asked the question, Mr. Dodd, is because I have maintained for a long time, that there has got to be a cooperative spirit among the Governors or the representatives of the four States.
Even in your case, when you bring this matching down to 80-20, and 70-30, and 60-40, and 50-50, they would have to decide what their share of the 20 or 30 or 40 or 50 might be?
Senator Dodd. Yes, they would. I didn't try to do that. I don't think I could or should.
Senator PASTORE. I want to emphasize that now, just so they will be placed on notice.
Senator Dodd. Yes, your point is very well taken. I don't think there is any doubt that the States should cooperate. I said, as you noted, my own view of that the deterioration of the New Haven is a classic example of mismanagement over the years. I believe the figures will substantiate that viewpoint. And I am convinced this railroad can be profitably, efficiently operated. It seems strange to me that we don't have any governmental entity working on this aspect of the problem.
The stories I hear about the mismanagement of that railroad are appalling. You may say that doesn't help us much now, that the patient is so sick it won't do any good to delve into the reason that brought on this terminal illness.
Well, there is something to that. There is something also to the view that we talk a great deal about private enterprise and are all publicly for it, so we should be expected to work toward the goal of maintaining the New Haven Railroad as a private, profitmaking organization. I would like to see this and I know all of the members of the committee would like to see it healthy and doing well, at the least possible cost to the taxpayers.
I believe this railrooad can be run well and profitable. More importantly, I have talked with railroad people and with financial people who have indicated to me that they think so too. They believe it can be done, but there doesn't seem to be too much talk about that in connection with solving the problem. Even so, I think that until such arrangements could be made, we do need a transfusion, an immediate injection of funds to keep service going and to modernize.
Senator PASTORE. Any questions of Mr. Dodd, Mr. Prouty?
Senator PROUTY. Mr. Dodd, I am particularly impressed with the suggestion which you make in the last sentence of your statement, on page 2, in which you suggest that we might well find it possible or desirable to "enlarge the size and alter the shape” of your bill.
Now, I am particularly concerned with the three Northern New England States, where passenger transportation today is nonexistent, and we are very much concerned with legislation of some kind which is going to rectify that problem because it is a very serious one.
Senator Dodd. I quite agree.
Senator PROUTY. I think you made a very interesting and forthright statement, and I have no further questions. Senator DODD. I am sorry Senator Lausche left.
Although Senator Pell did indicate the difference between my bill and my colleague's bill, is that I do have a termination point on it that might make Senator Lausche a little happier about public funds.
Senator PASTORE. And then you have a formula for participation ? Senator DODD. Yes.
Senator PASTORE. And you have a limitation of $20 million in the first year?
Senator DODD. Yes.
STATEMENT OF HON. JACOB K. JAVITS, U.S. SENATOR FROM THE
STATE OF NEW YORK
Senator JAVITs. Mr. Chairman, I would like to, if I may, make my statement part of the record.
Senator PASTORE. You know, occasionally we can't go on here unless we have a Republican, but I guess we are all right. [Laughter.]
Senator JAVITS. Mr. Chairman, I would like to make my statement part of the record.
Senator PASTORE. Without objection, so ordered.