ance in our transportation systems. Rail, water, air, highway, and pipeline must all be effectively utilized if we are to conserve energy resources and remain competitive in the world markets. Federal Government funding of highway, airport, and canal construction, as well as air and maritime operating subsidies, are indicative of the intent of Congress to foster development of a balanced transportation network, consistent with national priorities. The establishment of a Unified Trust Fund for all modes would assist in the fulfillment of that objective. In 1974, the highway and airport trust funds generated a substantial surplus. The consolidation of these funds, and the addition of rail and water carriers on a similar user charge basis would increase the available annual surplus to approximately $2.5 billion per year. The creation of the Unified Trust Fund would allow the Congress to achieve an appropriate transportation balance by the rational periodic adjustment of expenditures among transport modes to match national requirements. Obviously, the Unified Trust Fund could do much to eliminate the problems which may otherwise confront the railroad industry in the next five years. More importantly, by covering all modes of transport, it would provide the unique opportunity to develop, within the free enterprise system, a transportation network consistent with national priorities. Senator Taft's remarks before the Senate in introducing S. 1801 discussed the burden that obsolescent work rules place on the railroad industry. While that bill may not be on the Sub-Committee's agenda, I should like to add a comment that Title III of the bill, which would require the Secretary of Transportation to formulate a plan toward updating railroad work rules, would fulfill one of the most urgent needs of the railroads and of the economy as a whole. I believe that Title V of the Regional Rail Reorganization Act of 1973 may provide the type of mechanism under which beneficial work rule changes can be accomplished within the framework of collective bargaining. I suggest, however, that such protection for employees displaced as the result of work changes, be extended to all carriers, thereby providing a sound basis for meaningful labor negotiations. I have proposed that a National Rail Labor Security Fund be established. The purpose of the fund would be to provide a method of bringing labor practices into harmony with today's commercial realities. Work rules which have developed over the past century require the managements of rail carriers to employmany people in an unproductive manner. Previous attempts to work out this problem have always resulted in one of two untenable situations. If management succeeded in obtaining work rule changes, the employees displaced bore the burden of the technological change. Unions have always maintained, and I concur in that position, that it is not fair to expect employees who have in many cases devoted their lives to service on the rail carrier, to bear the brunt of this situation. On the other hand, the equally untenable alternative has been that the carrier must either continue to finance uneconomic practices or pay protective costs. The experience of the Penn Central merger, which essentially provided full protection to all its employees, should make it clear to anyone that carriers alone are unable to bear those costs. In my opinion, the burden of technological change is a social cost, just as the burden of displacement under the Regional Rail Reorganization Act of 1973 is a social cost to be absorbed under Title V. The overall cost of a Rail Labor Security Fund will be small compared to the potential benefits, particularly if there are appropriate safeguards to assure that displaced employees, through training programs or otherwise, avail themselves of jobs in other departments of their companies. Therefore, as current work practices are modernized, the cost of employee protection would be phased out through attrition or recall of displaced employees for service in other capacities. The saddest part of the railroad work rule situation is that, while many people aree mployed in uninspiring and unproductive tasks, activities are deferred that could substantially improve carrier performance. More meaningful employment could be provided to the individuals concerned that would ultimately expand the total level of railroad employment. Therefore, while there might be temporary and local displacement, the overall results of updating work rules would be beneficial to the railroad industry, railroad labor, and the public alike. I appreciate this opportunity to place my views before this Committee. THE "OFF-BRANCH COST" CONTROVERSY The single most important disagreement between United States Railway Association and New York State Department of Transportation as regards the United States Railway Association light-density lines analysis concerns the treatment of "off-branch costs" (these costs are defined below). In New York State, off-branch costs as estimated by USRA account on the average for 50% of the total avoidable costs estimated for a branch line: this means many lines are being shown unprofitable that are in reality quite profitable. Table 1 has been prepared to illustrate this. New York State Department of Transportation believes that USRA's estimates of off-branch costs may be twice the true figures. If so, correction would permit 14 more New York rail lines to be included in the Final System Plan. For over a year, New York (and other states) have argued that off-branch costs are not as significant as USRA has maintained they are. In technical discussions the State has repeatedly raised questions as to the questionable assumptions which underlie USRA's estimates. USRA has steadfastly refused to budge from their technically weak position, and has continually ignored repeated requests to substantiate fully their methods. After months of efforts to resolve differences through liaison meetings between State technical representatives and USRA staff, the "Conference of States on Regional Rail Reorganization”, which represents all 17 States in the Region, unanimously approved a resolution on the subject of off-branch costs in November, 1974. The resolution reads, in part: "The . . . methodology (employed by USRA) allocates a very substantial amount of overhead (system) costs to a branch line (on an average cost basis). There is wide disagreement between the state viewpoint and the USRA staff viewpoint on this particular cost element. While it is impossible to trace off-branch costs for each individual branch line within the time allowed, the states insist that a detailed demonstration of the precise off-branch costs of a test series of branch lines should be made. Detailed documentation of the nature (and avoidability) of off-branch costs in these pilot tests, should settle the conflict in perspectives about the scale of the off-branch costs. In addition, the present treatment of off-branch costs in the... methodology is extremely unclear." USRA never responded to this resolution. Neither the Preliminary System Plan nor the "Costing Procedures Manual" (which is supposed by USRA to fully document their using methodology but which does not) give justification for two key assumptions USRA has made: (1) that the elimination of light-density line traffic contemplated by USRA would produce significant savings in off-branch costs; and (2) that these costs savings could be accurately estimated using average variable system-level unit costs. With regard to the first point, USRA argues that the 1 million carloads generated annually on the 10,000 miles of line subjected to their detailed study "obviously" require more plant, equipment and labor than would be necessary if this traffic were not served. This may be true, but USRA proposes to serve 75% of this traffic, leaving only 250,000 cars (about 4.5% of total ConRail traffic) that could be eliminated from the system's annual traffic volume. This amounts to just 685 cars per day, or a few extra cars each day on the many trains running on the entire ConRail system. Con Rail would generate over 15,000 carloads daily. USRA should explain exactly which yard, main-line and system overhead expenses are variable with 685, of 15,000 daily cars, eliminated. USRA should have answered this question conelusively, before proceeding to us average system unit costs (rather than direct, avoidable costs) to justify branch line abandonments. Not only does USRA fail to justify the use of average variable system unit costs for their estimates of off-branch costs, they also rely on a procedure to obtain these average unit costs that is known to be questionable (see page 351 of the Preliminary System Plan). This procedure, which was developed by the Interstate Commerce Commission, is known as "Rail Form A." USRA admits that Rail Form A has been the subject of substantitive criticism. Yet they have blithely overlooked this shortcoming and have relied on Form A completely. In essence, USRA has used a questionable procedure on the strength of questionable assumptions. It is only natural that this would have produced questionable results. The documentation produced by USRA in the Preliminary System Plan for the methods used to evaluate branch line profitability is sketchy at best. The States in the Region have urged that full justification be published, but again, USRA has given no justification for some of the more bold assumptions employed. This means that USRA has possibly performed a faulty analysis-one which would not stand up in any scientific community, and deserving rejection by the public and the Congress. TABLE I [EL lines not included in this list since USRA has not yet provided NYDOT with the necessary information] USRA line code 86-East Syracuse-Fayetteville. 87 Malone-Canadian Border. 89a-DeKalb Junction-Ogdensburg. 90-Emeryville-Edwards. 92/93 Watertown-Limerick. 102-Williamson-Oswego.. 105/107-Charlotte-Riverview. 108 Newark-Sodus Point.. 109-Newark-Marion. (102,996) 140, 600 (82, 431) 111-Windsor Beacon-Rochester. (84, 453) 68, 092 114a-Rochester-Scottsville Yard. (32,683) 55, 873 137-Kingston-Bloomville. (694, 402) 326, 107 203a-Elmira-Southport. (16, 954) 7,897 233/234-Seneca Castle-Penn Yan.. (18, 393) 137, 053 238-Canandaigua track at Stanley. (6,073) 248-Brocton-Mayville... (92, 626) 249-Mayville-Corry, Pa. (212, 280) 226, 068 666a-Green Island-Crescent. 246-16th track at Olean.. 670-Rome-McConnellsville. 1000-Rochester-Lima.. 1020-VanEtten Junction-Geneva Junction 1. (55, 115) 93, 850 (9, 106) 12, 152 (31,976) 132, 976 11, 745 (50, 406) (106, 044) 198, 540 (6,774) X (236, 091) 141, 819 260-Falconer-North Warren, Pa.. • Geneva-Kendaia subsequently included in ConRail. (165, 181) (166, 777) 92, 093 (120, 730) SOUTHERN ILLINOIS TRANSPORTATION ASSOCIATION, SENATOR VANCE HARTKE, Cairo, Ill., July 2, 1975. DEAR SENATOR HARTKE: The Southern Illinois Transportation Association is a group of locally elected officials, industrialists, shippers, and private concerned citizens that are dedicated to the preservation of rail service in Illinois and the country. Attached is a position paper which explains our view on the Rail Reorganization Act of 1973 and reasons for our endorsement of H.R. 6374 (The Staggers Bill). Your support of the opinions outlined in this paper will be appreciated. Enclosure. FREDERIC WINKLER, Chairman. THE SOUTHERN ILLINOIS TRANSPORTATION ASSOCIATION A POSITION PAPER The Southern Illinois Transportation Association unanimously feel that the Regional Rail Reorganization Act of 1973 should not be allowed to become law. Because: A. It is abundantly clear that decisions were hastily made on incomplete and often false data. (An example of such false data is: the USRA's assumption that 607A was completely out-of-service. This assumption was and is, of course, false). B. The Act failed to examine completely the effects that the Railroad Reorganization Act will have on future energy needs and potential energy problems created by the Act. C. The Act failed to consider carefully the effects that abandonment will have on the general economy and more specifically, the effects that abandonment will have on unemployment, the movement of agricultural commodities and the movement of industrial goods. Further, the Southern Illinois Transportation Association supports H.R. 6374, a bill introduced by Congressman Staggers of West Virginia, and cosponsored by Congressman Paul Simon of Illinois. This bill would delay action on the Railroad Reorganization Act of 1973 for a period of two years. This additional time would allow errors such as the total omission of 607A to be corrected. The additional time should also be used to correct the gross error that was used by USRA to determine profitability, i.e. examining a small segment of the line with blinders on to establish profitability. A third advantage of the delay would be to allow additional time to examine the entire railroad system not only the bankrupt railroads of the Northeast and Mid-west. This is particularly important because of recent developments at the Rock Island Railroad and the poor financial report of the Illinois Central Gulf Railroad for the last two quarters. Does the patient need a blood transfusion or major surgery? Additional time will facilitate that decision. Further, the Southern Illinois Transportation Association is dedicated to: A. Vigorous opposition to any or all abandonment of any section or parts of 607A as outlined in the USRA's "Con Rail" proposal. B. The assurance that adequate rail service will be available to present users and any potential users in the already economically depressed areas of Southern Illinois. Further curtailment of Rail Service would have a disastrous economic impact on extreme Southern Illinois, a portion of Western Kentucky, and a portion of Southeast Missouri. Finally, the Governor of Illinois, the State Legislation, and the Illinois Department of Transportation must assist local communities in their efforts to retain and maintain adequate rail service. Monies spent on rail service are a much better long-term investment than unemployment compensation and welfare. DOUGLAS COUNTY FARM BUREAU, Senator ADLAI E. STEVENSON, DEAR SENATOR STEVENSON: Here is some information for the Railroad Branch Line hearings due to begin on Wednesday July 16, 1975. We request that this material be made part of the record in this hearing. We have enclosed a copy of Rock Island Railroad President Ingrams remarks recently which have a very pertinent section, marked, on branch-line railroads as an integral part of the agri-business system. We have a problem in Douglas County due to the United States Railway Association's fixation about eliminating branch lines. We will describe our problem to you in detail, because we believe it is an example of a very great danger to agriculture, not only in Illinois but throughout the nation. In its preliminary System Plan, USRA proposed excluding the "609-line" which is the Penn-Central line from Decatur to Paris, from ConRail. In analysing the traffic on this line, USRA failed to include traffic from Decatur to Paris, and vice-versa, moving on the line, amounting to about 5100 cars per year. Operating costs are overstated by USRA due to the extremely poor condition of the track which limits speed to less than 10 mph and prohibits use of jumbo cars, and gives rise to frequent derailments. This overstatement of operating costs and failure to evaluate revenue potential of the line as a viable railroad, using instead data from its present moribund condition, is the common fault of branch line analyses by USRA. We suspect this is deliberate on the part of USRA, due to their preconceived notions about reducing track mileage in the Final System by some substantial amount chosen in advance. We believe the line is viable. Mr. J. F. Partridge of the P.C. Industrial Department in Indianapolis said it was profitable in 1973 on their most recent cost analysis survey. Mr. William Harsh, Chief, Bureau of Policy, Illinois Department of Transportation, thinks the line is viable as of June, 1975. A transcript of Mr. Harsh's remarks to our local radio station is enclosed. To further illustrate USRA's rush to judgement in the Preliminary System Plan, after recommending against inclusion of the "609-line" in Volume II, USRA included the line in a "coordination project" in Appendix D-1 of Volume 1. This Project IL-11 would have the Baltimore and Ohio Railroad abandon its line from Decatur to Indianapolis, except for a segment from Ficklin to Newman, Illinois, which B & O would reach by obtaining trackage rights from Con Rail from Indianapolis to Terre Haute to Paris (then via the "609-line") to Arcola and Decatur, and trackage rights from Arcola to Tuscola on the Illinois Central Gulf, to connect with the remaining segment. Tuscola produces about $6-million revenue per year for B & O. The traffic from Murdock and Tuscola, originations and terminations, total more cars per year than Rock Island, Moline, Bettendorf, and Kewanee combined. (1973 traffic figures from the Secretary of Transportation's report, "Rail Service in the Midwest and Northeast Region") B & O promptly filed an abandonment application with the Interstate Commerce Commission (Docket AB 19, Sub 26) to cover this ridiculous proposal. Curiously, the application was completed on November 14, 1974 by B & O, but not filed with the ICC until March 18, 1975, the date Rail Service Planning Office public hearings on the Preliminary System Plan began. We suspect that the delay in filing was to prevent the "Coordination projects" (which are really wholesale abandonments by profitable railroads, see Commonwealth of Pennsylvania, Plaintiff, versus United States Railway Association, Defendant, U.S. District Court for the District of Columbia, Civil Action No. 75-0408) from becoming too public prior to the "public input". Our present information is that the draft Final System Plan contains just on line "IL-11. Excluded from Final System Plan." about Project IL-11. Mr. James White of Chessie System Headquarters in Cleveland told Radio Station WITT the morning of July 8 that their present intention is to modify the project so that B & O operates over its own track Decatur to Chrisman, abandons Chrisman to Indianapolis, and obtains trackage rights over Penn-Central (ConRail) Chrisman to Paris to Terre Haute to Indianapolis. We are curious to find out if the B & O will grant trackage rights to ConRail into Decatur under their contemplated revision. The revision would still eliminate one line between Indianapolis and Decatur (B & O's east half and PC's west half, roughly) thus depriving many farmers and small towns of their rail line, when both lines, as they exist now, are profitable as a complete part of their present systems. The separation of these line segments by B & O in this manner is an attempt to mask the highly profitable business at Tuscola and hide behind the "away with branch-lines" body of thought at USRA, just as in the original project IL-11. As we stated in our original opposition to Project IL-11, filed with the Rail Services Planning Office, copy attached, "It is cynical to propose destruction of viable railroad lines to create rental income for a moribund property". This can't be the only example of hasty, sloppy planning in the Preliminary System Plan. Senator Stevenson, there is a leadership vacuum in public life today; no-one will express any view contrary to USRA's tablets off the mountain. We have no national transportation policy. We build billions of dollars worth of Interstate Highways and now we can only drive 55 mph on them. We propose to abondon thousands of miles of railroad track without knowing where the next gallon of truck fuel will come from, and without determining how our townships and counties can pay for the roads to serve the farms which generate so much of our foreign exchange. Will you be the leader we need? Sincerely yours, Enclosures. MERLE BUDDEMEIER, President. According to Wayne Ward, Supt. of Highways, the annual maintenance cost of oiled roads in the county has doubled in the last few years due to oil price increases. This doubled maintenance budget has been, for the county, diverted from the county construction budget, resulting in a 25 percent reduction in the county construction budget. The townships have much less Motor Fuel Tax to work with. They are just curtailing maintenance on about one-third of their |