Mr. LEIGHTY. That is something, that is right. I do not believe it appeared while the Senate was holding their hearings. I don't believe it appeared at any place in the Senate hearings, Congressman. Mr. YOUNGER. It must have, because it is in their bill.

Mr. LEIGHTY. I would say there are several things in their bill that go beyond some of the requests that were made.

Mr. YOUNGER. On page 17, you say, in B:

The passenger problem is not as serious as the carriers allege, since ICC accounting procedures provide no accurate basis for appraising these operations. Then again on page 38 you make the statement—

If we had more confidence in the Interstate Commerce Commission.

we would do so and so. In other words, I take it that you are pretty much opposed to the ICC, and you might be agreeable to my bill to abolish them?

Mr. LEIGHTY. Well, I don't know that they should be abolished, although I would want to reserve a final decision on that until a later time.

I think that if the ICC would fill the purposes for which it was created, as I understand it, it could do a world of good. But as it is functioning today, I think that it may be doing more harm than it is good, and possibly your bill to abolish it might be a good bill.

Mr. YOUNGER. Well, it is agreed upon by the management of all the railroads with whom I have talked. I thought maybe that was one subject on which you and the management could get together.

Mr. LEIGHTY. We have agreed on a number of items in this presentation here, as my testimony shows, but we certainly could not agree on all of them.

Mr. YOUNGER. In your exhibit 13, in explaining exhibits 13 and 14, you gave the profit which each of these trains turned in, but you did not dwell at all on the net annual savings.

If I interpret this exhibit right, while these 2 trains, 20 and 21, actually had a profit of $121,260

Mr. LEIGHTY. That is the revenue train-miles, Congressman. The profit was $67,000.

Mr. YOUNGER. Yes. And the net annual savings if those 2 trains were abolished would be $293,000, is that correct?

Mr. LEIGHTY. That is their method of computing it. That is on the basis that they would not lose any of that revenue. Anybody who has had experience with passenger business knows that is a fact. You cannot take off a train and not lose the revenue, because the people who want to use those trains have other means of transportation. If they are not available and do not have that service, the abolishment of them has in many instances resulted in a loss of as high as two-thirds or even more than that of the revenue.

The savings are like some of these other suggested savings. For example, this so-called passenger deficit of $600 or $700 million. We had a wage case in Chicago a few years ago where they showed a passenger deficit of $670 million for the preceding year.

They had estimated, and it was not a correct estimate, of course, that our proposal would cost about $600 million. We said, "All right, if you will abolish passenger train service, you will save that amount, and you can pay us the amount that you think our case would cost."

"No, no, no. If we abolish passenger trains, the figures would not show anything like that."

When they gave them to us, I would say it is something of that kind that is present here.

Mr. YOUNGER. You did not mention the other column of net annual savings. I wondered whether that was left out purposely or whether it had any bearing on this.

Mr. LEIGHTY. The net annual savings, in our opinion, is merely a compilation based on the erroneous theory that you are going to retain all of that business, and it never happened.

Mr. YOUNGER. In other words, the ICC report and the data which the railroads developed as background for abandonment are not very reliable?

Mr. LEIGHTY. Well, let me say this, that some years ago I handled 13 proposed branch line abandonments, in all of which the carriers claimed that they were showing a deficit. There were only five of those in which there was an actual deficit after the figures were analyzed and presented to the ICC. At that time, the ICC denied 9 of the 13 applications.

They showed tax savings. In one State, the tax commissioner said that their two taxes on individual lines were based on the gross revenue in the State, and then was allocated among the counties. Instead of having a tax savings which meant the difference between a deficit and a profit on that particular line, there would be no tax saving whatever if this line was abandoned.

Those are some of the things that you run into. In another case I ran into the first station on the branch line not including any of the revenues on that particular station, saying that all of that business will go into the nearest main line point, so they did not discuss it. As I say, I can discuss with you for hours some of the personal experiences I have had, in connection with line abandonments, station abandonments, and train abandonments, and other things of that nature and also with respect to securing business.

This is a statement made based upon experience and considered judgment.

Mr. YOUNGER. I must say if your statement is the situation you have relieved the committee of a lot of work, because we can go about something else now. We thought the railroads needed some help.

Mr. LEIGHTY. As I said before, I think they should have help on certain items that we have outlined to you.

Mr. YOUNGER. Well, that is very little help.

Mr. LEIGHTY. I do not think the railroads so consider this ratemaking and some of those other items I mentioned as just a little help. I think they are very seriously interested in them.

Mr. YOUNGER. The difficulty is, you pick out a problem which probably cannot be legislated on, because you have the motor carriers, the farm bloc and others all against you.

Mr. LEIGHTY. All right, but didn't most of this business come from the railroads originally, when they took it away from the railroads? Mr. YOUNGER. Do you mean all trucks?

Mr. LEIGHTY. I don't want to appear here too much as an advocate, but isn't that where they got the business originally? Mr. YOUNGER. Yes, it is.

Mr. LEIGHTY. Why can't it be given back to the railroads?

Mr. YOUNGER. I think that would be rather simple. To take the shackles off the railroads I think that would require a simple piece of legislation.

Mr. LEIGHTY. Don't just take the shackles off the railroads and put them on us.

Just take the shackles off the railroads where it will benefit both of us. That is the way it should be done in our opinion.

Mr. YOUNGER. That is all, Mr. Chairman.

The CHAIRMAN. You are not advocating, Mr. Leighty, removing the regulatory processes as far as the American people are concerned? Mr. LEIGHTY. Of course not.

The CHAIRMAN. Mr. O'Hara.

Mr. O'HARA. Mr. Leighty, of course, you and I have lived through a transition in the transportation system of this country. Personally, as we sit on this committee, we certainly recognize from a practical side, the importance of the railroad industry.

Mr. LEIGHTY. That is right.

Mr. O'HARA. We recognize the importance of the trucking industry. We realize that each of them will be fighting for themselves. But don't you think we have to develop a transportation policy in this country that is going to meet the conditions that we have today?

I do not know how soon it will be before we are transported by rockets instead of by airplanes.

Mr. LEIGHTY. I think there is a definite place for various forms of transportation. I think one of the difficulties is trying to make an exact determination of just how each one fits into the picture. I think it is pretty generally recognized in many of these fields, or some of these fields, that possibly the trucks have an advantage. In many fields the railroads have advantages. In the handling of passengers over long distances, probably the railroads have an advantage.

Your pipelines can certainly handle petroleum and a lot of commodities of that type, better than they can be handled in other ways. I do not think there is any doubt about that. We have to realize that situation. But the difficulty that confronts your committee as I see it is trying to make a determination as to the various equities in the situation, and to attempt to legislate so that each of the various forms has a proper opportunity of handling the business they are best fitted to handle.

Mr. O'HARA. Of course, the problem is a good deal like the story which arose in World War II, in the early days, about the Irishman in Ireland who was trying to decide who to be neutral against. That is similar to the problem we have here.

I have always been hopeful that all of these various modes of transportation would get together some day and write what is a perfect answer to it. But I do not know whether I am going to live that long. Mr. LEIGHTY. I do not think, as long as we have rugged individualists, and I think we are going to have them always, that we will ever find a time when we will all agree.

Mr. O'HARA. There is always a difference of opinion. I lived on the main line of a railroad, when I first came to the town. There were eight beautiful passenger trains a day. Now they have taken so many of them off I don't think I can get a passenger train there.

28621-58-6

Mr. LEIGHTY. I think the only passenger trains left are the Olympian and Hiawatha.

Mr. O'HARA. I think I was the only human being around that route that objected to taking the trains off.

Mr. LEIGHTY. I happened to have been a Milwaukee employee for many years out in the Dakotas, so I know pretty well the history of that railroad.

Mr. O'HARA. I understand in some places things are being done where they are combining as many as three railroad stations under one operator. I do not know how they are going to operate. If you are a station operator, you will spend one day in one town and another one in another.

Mr. LEIGHTY. In that connection, let me say this that better than 90 percent of all the stations that they are concerned with in these various so-called programs furnish more than sufficient revenue in themselves to result in a net profit to the railroad. The savings that can be anticipated from that kind of operation will be more than offset by their revenue losses, which has been pretty definitely demonstrated in several of the hearings before the Commission.

Mr. O'HARA. Thank you.

Mr. YOUNGER. Mr. Chairman, I have one quick question.

The CHAIRMAN. Mr. Younger.

Mr. YOUNGER. Do you believe that all the modes of transportation should be under one supervisor?

Mr. LEIGHTY. I think that would be advisable.

The CHAIRMAN. Mr. Rogers.

Mr. ROGERS. Mr. Leighty, I have just one more question. I believe Mr. Perlman testified before this subcommittee, or someone connected with the New York Central, that their return on their investment showed 0.4 percent, and if they were allowed to break even on the passenger service, where I believe you said they lost $53 million, if they were allowed to break even on that, their return would be about 3 percent. That does not jibe with the figures you have given in here, does it?

Mr. LEIGHTY. The figures I have given here, insofar as the percentage of the railroads is concerned, percentage returned, have been based on capital stock and net income of railroads as a whole, not taking any individual railroad.

Mr. ROGERS. This is being set up on outstanding stock at par value not owned by the railroads?

Mr. LEIGHTY. Yes.

Mr. ROGERS. Why did you use par value?

Mr. LEIGHTY. Because your stock market value fluctuates so much from day to day. It keeps fluctuating. You read about rails being up 3 points or down 2 points, or something of that kind.

Mr. ROGERS. Why didn't you use capital investment?

Mr. LEIGHTY. What do you mean by that?

Mr. ROGERS. I mean the investment the railroads have in their plant and facilities.

Mr. LEIGHTY. Well, figures of that kind have been submitted so many times, and in so much of this so-called investment there seems to be some doubt in the minds of the ICC in connection with some of those figures. Another thing is when there is a reorganization you will find what they call an acquisiton adjustment.

On some railroads it may run over $100 million.

It is capital that is wiped out in the reorganization and still it continues to show as a part of the investment in the railroads as a whole.

We don't think it is a fair method. The ICC in setting their rates you will notice, never come up to that so-called 6 percent because they realize some of these factors that I have discussed here.

Mr. ROGERS. Thank you, sir.

That is all, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mr. Leighty. You, of know that this committee does not have jurisdiction over the taxing features.

course,

Mr. LEIGHTY. Yes; I appreciate that.

The CHAIRMAN. We are very greatly concerned, of course, but there is a limitation on just what we can hear.

Mr. LEIGHTY. I thank you, gentlemen, for the courtesies you have extended to me.

The CHAIRMAN. Thank you very much for your presentation here. We appreciate your testimony.

Mr. LEIGHTY. Thank you.

(The following letter was received for the record:)

Hon. OREN HARRIS,

THE PENNSYLVANIA RAILROAD CO.,
OFFICE OF VICE PRESIDENT, OPERATIONS,
Philadelphia, Pa., May 23, 1958.

Chairman, Subcommittee on Surface Transportation and Communication, Interstate and Foreign Commerce Committee, House of Representatives, Washington, D. C.

DEAR CONGRESSMAN HARRIS: The statement made before your subcommittee on May 19 by Mr. G. E. Leighty, chairman, Railway Labor Executives' Association, is so false and misleading that I am taking the liberty of acquainting you with the facts.

In the latter part of his testimony, Mr. Leighty made the following statement: "The Pennsylvania has also deliberately refused to provide service for special events which would have yielded capacity passenger operations. For example, it would have been possible for the Pennsylvania to have provided special train service for the Army-Navy football game last year, taking passengers from New York, or from Baltimore and Washington, directly to the rail yard terminal at Philadelphia Memorial Stadium. Representatives of some of the Brotherhoods specifically proposed that such service be provided, but the railroad declined to do so. Approximately 100,000 people attended the Army-Navy game, creating almost unbelievable congestion in the Philadelphia 30th Street Terminal. Thousands of people found themselves unable to get any type of transportation out of Philadelphia for many hours that night. This Army-Navy game could have brought thousands of dollars of passenger revenue to the Pennsylvania Railroad. Instead the carrier has deliberately chosen to create great public inconvenience and has increased dissatisfaction with Pennsylvania Railroad services and generally added to the bad reputation of the railroads as passenger carriers." The facts are that this railroad operated 25 trains directly to the Philadelphia Municipal Stadium (the site of the Army-Navy game), carrying 17,794 passengers. Fifteen trains were operated from New York, with 11,895 passengersand we were prepared to operate additional trains had the traffic been available. Ten trains were operated from Washington, Baltimore, and Wilmington, carrying a total of 4,899 passengers-and 1 train which was definitely scheduled was canceled because of lack of passengers, apparently due to the weather conditions. To further illustrate the inaccuracy of Mr. Leighty's statement, during the past week this railroad operated 15 extra nonscheduled passenger trains for special party movements.

Sincerely yours,

J. P. NEWELL.