effective long-term investment of these funds; and (c) the accelerating deterioration of commuter railroad services.

The findings in the following report demonstrate that we are in a period of deepening crisis in metropolitan area transportation and that remedial action is urgent. The surging growth of human and automobile populations in our metropolitan areas is adding to the burden on, and congestion of, transport facilities faster than present improvement programs are giving relief.

The long-range recommendations supported by this report call for changes in organization and process rather than major new spending programs and require only relatively modest increases in the present level of expenditure. However, these modest sums would make the most important possible contribution to the soundness, effectiveness, and longevity of the multibillion dollar Federal and local investment programs. The short-range recommendations, relating only to commuter railroads, are in part changes in procedure and in part an extension of Federal credit for specific immediate needs.

Norman Kennedy of the University of California Institute of Transportation and Traffic Engineering well sums up today's problem: 1

America's present concentration of people and resources in urban areas would not have been possible without the mobility and the supply lines afforded by dependable and economic transportation.

But the very technological changes in transportation that have contributed so much to greater mobility now appear to be stifling it. Street and highway traffic congestion seriously hampers the rapid, continuous and flexible interchange of services and goods by virtue of which urban economy and society exist. Capacity needs to be added to urban transportation systems to raise standards of service and to reduce transportation costs. The question isHow?

This committee believes that in many places the "how" could best be answered by giving commuters free mass transportation which would cost less than providing the additional highway and parking facilities needed for their autos. However, this report will not attempt to answer the "how" in terms of systems and hardware but will propose a method for reaching this complex investment decision through joint Federal-local action and will recommend the appropriate Federal actions.

1. The rail commutation problem

Commutation service by privately owned railroads is provided at serious financial losses which prompt railroads to discontinue commuter trains. This action conflicts with the public need for this service. A balanced efficient mass transportation system in our large metropolitan areas must include rail transportation. The problem of commuter service is an integral part of the policy considerations for the kind and amount of railroad passenger service necessary to serve the public and provide for national defense. Automobile, rail and bus are the major means of transportation in metropolitan areas. Automobile and bus commutation is tied in most directly with highway, street, parking area, and bridge planning

Address to the Governor of California's Commission on Metropolitan Problems, June 20, 1959, p. 2.

whereas rail commutation service is related to the management and regulation of the railroad system.5

Automobiles and busses fill critical needs in solving the commuter problem and these means of transportation must be integrated with rail commutation in any total solution of the mass transportation problem of metropolitan areas. The most pressing aspect of the commuter problem is the deterioration of railroad service and discontinuance of trains caused by the steady losses in furnishing this service. These railroad discontinuances conflict with the clear public need for this service.

Since any balanced, efficient mass transportation system in our large metropolitan areas must include rail transportation, the immediate need is to find ways to preserve the present systems until long-range measures can be effective.

The metropolitan areas in which rail commutation plays an important role in moving people between suburbs and the central business district are New York, Chicago, Philadelphia, Boston and San Francisco with a fringe business operated in and out of such cities as Pittsburgh, Washington, and Baltimore." The areas in which railroads are experiencing the most financial distress from commuter service are New York, Boston, and Philadelphia and to a lesser degree, Chicago.

There are three groups of basic causes acting to produce the present acute situation in railroad commutation. They are:

(a) Fundamental changes in public habits and desires;

(b) Competition has so seriously reduced rail freight revenues, especially in the eastern district, as to eliminate net earnings from rail operations; and

(c) The long-time unfavorable price-cost relationships in suburban service are worsening.

(a) Fundamental changes in public habits and desires.-A basic cause for the rail commutation problem is the change in habits of personal transportation occasioned by: widespread use of the automobile; the general reduction in the work-week from 6 days to 5 days; and the change in use of leisure time wherein people no longer use the downtown area exclusively to shop or for entertainment. The general rise in living standards has allowed people to pay more for transportation and thus to secure the actual or fancied conveniences of automobile commuting. The public "buys" a combined price-service package in transportation and the importance attached to these two factors is shifting to service and convenience.

One result of these changes in patterns of living and transportation has been frantic activity by Federal, State, and local governments to build highways, bridges, tunnels, and parking areas to accommodate this automobile traffic. Each such improvement has only accelerated the use made of these facilities by drivers of automobiles which further decreases use of mass transportation systems, and increases traffic congestion.

The terms "rail commutation service" and "suburban rail service" will appear repeatedly throughout this report. Each is intended to mean service provided by railroads for passengers moving from suburb to city without regard to whether multiple-ride tickets or single one-way fares are involved, unless otherwise indicated.

See exhibit 9. p. 599.

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While total rail commutation traffic has declined from 345 million passengers in 1947 to 221 million in 1957 and there have been many reductions in service, the peak hour traffic on the major routes into the center of cities has been stable or increasing. This traffic trend has placed a heavy demand upon the rail commutation system for home-to-work transportation at rush hours, requiring maximum capacity operation for a total of only 20 hours per week. Traffic in the remaining hours has dwindled to a trickle on most systems.

To identify passenger trends in commuter service a study has been made of selected representative railroads for the years 1949, 1955, and 1959 with respect to the number of commutation passengers carried, passenger miles, passenger revenues, average length of haul in miles, and average fare per mile. The results of this study show significant downward trends in total patronage of rail commutation service with certain exceptions in the Chicago area and the Long Island Railroad serving New York City. As examples:

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1. In the metropolitan New York area, in the period between 1949 and 1959, the Jersey Central had a decrease in the number of commuter passengers carried of 43.9 percent. The Lackawanna had a decrease of 45.6 percent. The Erie had a decrease of 55.1 percent. The New York Central had a decrease of 47.6 percent. The Long Island had a decrease of 12.2 percent between 1949 and 1954, but an increase of 6.6 percent between 1953 and

1958.

2. In the Boston and Philadelphia areas declines of similar degree were experienced by the Boston & Maine, Reading, New Haven, and Pennsylvania Railroads.

3. In the Chicago area, the Burlington had an increase of 52.1 percent in commuter passengers in the 1949-59 period. The North Western had a decrease in passengers between 1947 and 1954 of 2.7 percent, but an increase of 26.4 percent between 1954 and 1959. The Milwaukee had a decrease in passengers between 1949 and 1954 of 3.7 percent, but an increase of 13.3 percent between 1954 and 1959. The Rock Island had a 10-year decrease in passengers of 24.7 percent and the Illinois Central a decrease of 46.7 percent. The Chicago North Shore, an electric line, is operating under an ICC order requiring a trial 1-year operation before further consideration of a complete abandonment request.

4. In the San Francisco area the Southern Pacific had an increase in passengers of 16.8 percent between 1949 and 1954, but a decrease between 1954 and 1959 of 20 percent.

The single important paradox of this study of rail commutation trends is the experience of three railroads in the Chicago area when compared with three other railroads in the Chicago area and with all other commuter rail carriers. All railroads providing commuter service show serious declines in passengers carried in recent years with the exception of the Burlington, Milwaukee, and North Western carriers in the Chicago area."

10

Association of American Railroads, “Railroad Transportation—A Statistical Record, 1921-57," p. 19; Statistical Summary No. 44, July 1960.

See app. A, p. 93, "New Jersey's Rail Transportation Problem," New Jersey State Highway Department, Division of Rail Transportation, Trenton, N.J., for traffic of individual railroad branches.

App. E, p. 626.

10 For this purpose the Long Island RR. is not considered to fall within the exception because it is operating under special State legislation.

71512-61-37

The exact amount of expenses directly and indirectly incurred by the passenger service of the railroads is a matter of some controversy. The present methods of separating railroad operating expense between freight and passenger services were devised some years ago and solely for the broad purpose of dividing total expenses between these categories. The methods were not designed to produce acceptable cost accounting data or even to identify the expenses of the various types of traffic moving on passenger trains. The Interstate Commerce Commission took notice of the many criticisms of these practices and undertook a special investigation 13 at the time of the passenger deficit investigation (docket 31954 reported May 18, 1959). The Commission found that: the methods being used were satisfactory and reasonably adequate for the original purpose; proposed alternatives were each subject to important criticism; and no convincing showing was made that the existing practices were unreasonable or basically faulty for the purpose for which they were used.

The general dissatisfaction with ICC cost separation is reflected in the demands of the New York and Pennsylvania State Utility Commissions for lengthy cost-finding studies on suburban service costs in connection with New York Central and Pennsylvania Railroad cases. These studies produced relatively small changes in stated railroad suburban operating costs and resulting deficits. However, many questions were raised regarding the soundness of the rather old formulas used to separate railroad expenses, and the lack of original records and other empirical accounting data that are accepted as a necessity in other industries today.

It is clear that the ICC has been remiss in allowing outmoded accounting and costing practices suitable for monopoly regulations to continue. Steps should be taken at the earliest opportunity to revise railroad accounting from the workman in the repair shop on up. Railroad costs should be distributed by type of service from the first compilation forward. Profit-centered accounting is so well established in modern American business of all types that its ultimate application to railroads is beyond cavil. The ICC has regulated rates and fares without adequate and necessary data on carrier costs. The Civil Aeronautics Board has done a much more adequate job of developing cost data for regulatory use.

Except for random information in State commission proceedings there is no specific cost information available for railroad suburban services. However, it is not unreasonable to assume that these services are affected in the same way and by the same forces affecting all reported passenger service costs. Notable exceptions would be dining and sleeping car service. The following table indicates the relative increases in car-mile and train-mile expenses of all rail passenger :service.

13 ICC, "Separation of Operating Expenses Between Freight and Passenger Services," Doc. 32141, decided Jan. 27, 1958.

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highest proportion of passenger revenues, and therefore expenses, in relation to freight revenues. In 1954 passenger revenues amounted to 14.1 percent of total transportation revenues in the United States and 18.4 percent of total in the eastern district. Five years later in 1959 passenger revenues were 12.3 percent of national transportation revenues and 16.8 percent of eastern district total revenues. Thus eastern district railroads have experienced relatively higher expenses. and therefore higher operating ratios than companies in other districts. In turn they have been more drastically affected by the recent declines in freight traffic and are the carriers least able to afford it. This has put maximum pressure on the eastern railroads to reduce and discontinue service including commutation. The following table contains indexes showing trends in rail-freight revenues and ton-miles since the Korean war.

TABLE 1.-Class I railroad freight revenues and ton-miles 1956-59, compared with 1953-55 averages

As discussed elsewhere in this report much of these declines in rail freight are the result of intense competition between the regulated modes of transport and competition from private and other unregulated carriers. The 1958-59 period has also been affected by a recession and a major and lengthy steel strike. The basic nature of freight traflic in New England is changing as discussed in part V, chapter 7, "The Provision of Public Carrier Service in Rural Areas." The only reason for taking note of these problems in this connection is to demonstrate the impact that national problems in freight transportation have upon commuter service in our major cities as long as this service is dependent upon freight revenues for continued operation. Railroad management states that in order to continue operations in the highly competitive freight business they must hold the line on freight rates in the face of rising costs. To do this money-losing passenger services must be eliminated.

(c) Revenue-Expense squeeze.-The increasing burden of the passenger deficit is due to the fact that unit expenses are rising much faster than unit revenues. This discrepancy is due in part to the difficulty of matching service offered to service purchased, resulting in a decline in the average number of passengers in each railroad car since World War II, and in part to the continuing increases in prices and wages.

12 Source: Same as table 1.