Mr. HAAN. Senator Hartke, I am from IMC, International Minerals and Chemical Corp., Vernon Haan. I would like to ask the question, and I have listened most times and it seems to be mostly a passenger problem. We represent freight and represent agricultural interests and therefore we have a great interest in proposed abandonment of so-called light density lines which we feel is a completely inadequate attack on the problem. It being maybe $20, $25 million maximum potential improvement in a $400 million a year problem. And we haven't heard anything addressed really to the freight problem and the track abandonment of a light density line.

Senator HARTKE. Let me say I think let's defer that question. You I will be around?

Mr. REGAN. We would like to be.

Senator HARTKE. Tom, we have been dealing here with the passenger end of it primarily. We are dealing with the freight in the next 2 days. You be around. I tell you what we are trying to do; we are trying in a way to eliminate the presentation of documentation which is just so repetitive of things which have come before. All I ask of you is try to come right to the heart of the problem. Because I think most people here have indicated we have got to move. And we are going to move and I think we will.

Mr. BEATY. I wanted to comment, Mr. Chairman, on your statement about this not being just a regional problem. We have been talking mostly about the corridor but it certainly applies to the entire northeast area within the RRRA. And we have got to solve the problem of improved roadbed. If we don't, nothing else matters and we have got to start right now, because deterioration is accelerating. Moving into other regions, you have been holding hearings on the Rock Island and we have submitted statements on that. I think Senator Stevenson has a bill in that would extend the United States Railway Association's responsibilities into that area. We think something like that is necessary. That kind of study on the problem, is necessary. We think that the best route between Chicago and Omahathere are five or six routes-is the Rock Island route. It's in very bad shape. But it's a direct route; goes through the major cities in Iowa. It would be excellent for freight service, and we think that if there is not a healthy freight service, the passenger service just can't happen. We would like to see the United States Railway Association or some other planning agency handle this problem. But mainly, I want to say, we can't sit here and let the administration cloud the issue by coming up with new solutions within weeks of the time that the final system plan is due to come out.

It's just going to cause delay, and delay is going to be extremely costly if it's allowed to happen.

Senator HARTKE. Now, are there any other questions or comments here of the panel before we go? Did you want to say something? Mr. REGAN. Yes, Senator. I am also a country boy from Illinois. I am Tom Regan. We have talked today around what I think are the two major issues here. How could we fund this. It's going to take huge infusions of capital for this so-called rehabilitation. How do you fund it without upsetting the capital market today, which is a very delicate balance, particulary since the country is trying to come

out of a recession. But equally important, nobody has said once you found it, how do you keep from draining the capital out of the railroad system, which has happened over the last 30, 35, 40 years of economic activity to the detriment of the railroads. We need legislation to prevent that. Once we fund it, then we have to keep the revenues in the railroad so that the railroad system can become strong.

It's just a comment, not a question.

Senator HARTKE. Now, any other comments here?

The record will be open this afternoon. We are going to be with the group of the Conference of States on Reorganization in room. 5110, that's the Dirksen Building, at 1:30.

This record is open for any comments and we will go into recess.

AFTERNOON SESSION

Senator HARTKE. Good afternoon. This is the second in a series of roundtable discussions on the United States Railway Association's preliminary system plan. This morning we discussed the issues of passenger service and the implementation of the Northeast corridor plan. This afternoon we will open the discussion to a broader range of issues.

For this purpose, we have with us representatives of the member States of the Conference of States on Regional Railroad Reorganization. These people have been actively involved in the planning process, in both a critical and constructive manner, and should be able to indicate the issues the States think must be resolved before Congress can approve the final system plan.

As I indicated this morning, we are experimenting with a new format that is a little more informal than the normal hearing, but which we think can improve the quality of dialog between the committee and the witnesses, and thus help better educate this committee and the public.

You should feel free to speak up on the topics being discussed. No one will be held to a view expressed here today.

The staff will participate in these proceedings; but I expect you people to do most of the talking.

This can be a wide-ranging discussion. I think it would be helpful if each of you introduced yourselves and made any short statements you may wish to make before we proceed with the discussion.

Before you begin, I wish to place one limitation upon the discussion. This committee will be holding lengthy hearings in the near future on the light density line problem. I'd therefore like to put off discussion of that issue until those hearings.

Introduce yourselves, make a very short statement, and don't tell me how many people you represent. We get the population out of every census figure. That is what we are trying to avoid, some of the repetition of things that are self-serving to some of your constituents.

You write that up and we will present it in the record, if that would make you happier.

I would like to start out now with Mr. Kinstlinger, who is chairman of the conference.

Mr. KINSTLINGER. Good afternoon, Senator.

On behalf of the Conference of States, I would like to express our appreciation for this opportunity.

Senator HARTKE. I have a situation. They have the consumer protection bill on the floor. I have to get back over there. I am going to turn this over to the staff, and they will participate.

I want to apologize for going back, but it is a question of either that or canceling this hearing. As you have taken the time to come here, I would like to proceed in that fashion, if you don't mind.

STATEMENTS OF JACK KINSTLINGER, DEPUTY SECRETARY FOR PLANNING, PENNSYLVANIA DEPARTMENT OF TRANSPORTATION; GERRY PIERI, RHODE ISLAND DEPARTMENT OF TRANSPORTATION; SAM TRIMBACH, MICHIGAN DEPARTMENT OF STATE HIGHWAYS AND TRANSPORTATION; CHARLES SMITH, MARYLAND DEPARTMENT OF TRANSPORTATION; PAUL PHILLIPS, DELMARVA ADVISORY COUNCIL; PETER METZ, MASSACHUSETTS EXECUTIVE OFFICE OF TRANSPORTATION AND CONSTRUCTION; DAVID STEIN, NEW ENGLAND REGIONAL COMMISSION; WILLIAM BLACK, DIRECTOR OF THE INDIANA STATE RAILROAD PLAN, GOVERNOR'S RAIL TASK FORCE; JOHN THERRIEN, SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION; MARTIN ZELL, NEW YORK STATE DEPARTMENT OF TRANSPORTATION; AND KENNETH KYTE, PROJECT ENGINEER, NEW JERSEY DEPARTMENT OF TRANSPORTATION

Mr. KINSTLINGER. We understand, Senator.

I would like to begin by having the various members of the conference around the table, introduce themselves. The conference itself represents 18 States. Obviously, not all of them are present today, but four of the five members of the executive committee are here and about 10 other States.

I will start the introductions. I am Jack Kinstlinger. I am Deputy Secretary of the Pennsylvania Department of Transportation. Mr. PIERI. I am Gerry Pieri from Rhode Island.

Mr. TRIMBACK. Thomas Trimback from Michigan.

Mr. SMITH. Charles Smith, Maryland Department of Transportation.

Mr. PHILLIPS. Paul Phillips, Delmarva. That is Delaware, Maryland, Virginia, the Peninsula.

Mr. METZ. Peter Metz from Massachusetts.

Mr. STEIN. David Stein with the New England Regional Commission.

Mr. BLACK. William Black with the Governor's Rail Task Force in Indiana.

Mr. THERRIEN. John Therrien, South Dakota.

Mr. ZELL. Martin Zell, New York State Department of Transportation.

Mr. KYTE. Kenneth Kyte, New Jersey Department of Transportation.

Mr. KINSTLINGER. We have three prepared resolutions that have been adopted by the conference specifically designed for submission. today.

One deals with the issue of main line structure financing, one with the issue of passenger service, and one is a list of legislative amendments that we would like to see enacted, which deal primarily with the branch-line issue.

We understand that you would prefer not putting emphasis on the branch-line issue this afternoon. So the third resolution on the legislative resolutions we would like to submit to you for the record for review.

But, in order to accommodate your wishes, we won't go into any detail

Mr. ALLISON. I think I should add, the primary reason it is probably not necessary for you to go into the branch-line issue in any detail, is for the most part the members of the Senate Commerce Committee tend to agree with the recommendations that have been made by the Conference of States on the branch-line issue, including the need for further study and review while 100 percent subsidy provisions applies for a period of either 1 or 2 years.

Legislation has been introduced and is before the committee already on that subject. And I can assure you there is a very good chance that the members will process that legislation.

Mr. KINSTLINGER. We appreciate that.

And I would like to call on Mr. Pieri from Rhode Island to review the first resolution, which is on main line structure and financing. And I would like to give you these copies. They have already been furnished to the stenographer, and you have copies there yourself now.

Mr. PIERI. I won't read every word in the resolution, but I will paraphase.

The first point we wanted to make in the resolution was the essentuality of railroads. I think we all know in this room the rail industry is essential to the United States and that other modes could not take over if the railroads ceased to exist.

The second point and it is a major point, is that the national rail problem is, in fact, a national rail problem and one which deserves a national solution.

It is our contention that preliminary system plan, if implemented, might turn out to be a little more than government holding action keeping the rai llines in the Northeast and West alive as the underlying problem migrates across the country to the West.

We know, already, the Rock Island has gone bankrupt, and we all can come up with a list of other railroads teetering on bankruptcy. You should know that nowhere in class I railroads in the United States is return on investments high enough to cover the cost of new long-term debt. The problem is not one confined to the Northeast;

it has merely manifested itself earlier in this region than elsewhere. The solution that is proposed now, is one of simply masking the symptoms where they are most obvious. Simply stated, we now are faced with the reality that revitalized, or even continued rail services is not possible without a extensive national commitment to the rail mode.

We know that the rail mode must be placed on parity with other modes if it is to compete. We cannot help but emphasize that the rail mode cannot continue to be the only mode that pays the full cost of its right of way.

The situation we are in is not the fault of the participants of the planning process. Over the past year, their efforts have been more diligent.

It is not the fault of the structure of the Regional Railway Organization Act. The act of 1973 was a bold and imaginative attempt to solve an extremely complex problem.

Given that, the third point we are hoping to make today is one on the need of a trust fund, transportation trust fund. And the background, we are now all aware there has been an ongoing program of deferred maintenance, that is, maintenance that has not been done, which has left us with the physical plant of the railroads, which is in a badly deteriorated condition, more so in the Northeast and Midwest than elsewhere, but in general, everywhere.

We have a massive need for immediate rehabilitation of fixed plant-tracks, bridges, signals, et cetera. To rectify this, to rehabilitate the track, the amount of money involved is extremely significant. USRA's preliminary system plan indicated $2 billion. A consultant's study available to USRA said 3.74 billion. That did not include the Erie Lackawanna. And we know in the Rock Island, the Boston and Maine and presently solvent railroads, the number is huge.

The purpose is not to argue which number is correct, the purpose is to imply that the number is huge.

Funding capability for such a program simply does not exist in today's railroad industry. The profitability of the railroads and their position in the marketplace, does not allow them to fund this

program.

It could be argued also that the industry should not be required to be the source of these funds because no other mode is required to fund similar facilities. The air traffic control systems, highways,

et cetera.

Therefore, we call for a transportation trust fund administered by the Federal Government containing the following three elements: One: A funding source that is broad based throughout the transportation industry covering all modes both public and privatea tax on fuel is one possibility; a waybill surcharge which doesn't apply to private carriers is not.

Two: That the fund distribution mechanism be administered to provide grants to modes-and to projects within a given mode-in a manner consistent with the national interest rather than in a manner which merely reflects the source of the funds. To reach this goal,