Northeast Deadline

Nothing, it seems, can solve the financial woes of railroads in the Northeast. Six lines* that control half the trackage in the 15-state area are operating in bankruptcy and do not have to pay taxes or meet interest or amortization payments on mortgage loans. Even so, they have continued to lose money at a staggering rate--$222 million for the Penn Central alone last year. The lines have survived only by deferring maintenance that they know is essential, a course that can logically end only in the lines' physically falling apart. Last week two branches of the Federal Government took steps to help--and promptly ran into a head-on collision.

The Interstate Commerce Commission proposed $150 million to $200 million a year in stopgap aid and imposition of a 1% tax on all rail, truck or barge freight movements in the country, with the aim of raising another $400 million a year to keep the Northeast railroads running. The next day President Nixon's new Secretary of Transportation, Claude S. Brinegar, rejected the idea of a federal bail-out and proposed instead a kind of freight version of Amtrak, the quasi-Government corporation that runs long-distance passenger trains (TIME, March 26). Brinegar would create one or more corporations, with presidentially selected boards, that would take over assets of the six bankrupt lines, operate the choicest rolling stock over a "core" system of heavily used runs, and junk the rest. The old lines would be compensated with stock in the new companies. Somehow, those companies would have to raise money from private sources. Said Brinegar: "The problem can--and indeed must--be solved within the private sector."

Both plans seem incomplete. Without some consolidation such as Brinegar wants, federal aid on the scale contemplated by the ICC could become a massive, endless drain on taxpayers. The root problem of the Northeast lines is that their track system was vastly overbuilt around the turn of the century; in an era of trucks and pipelines it no longer carries enough freight to keep all the lines alive. On the other hand, Brinegar's belief that no federal money will be needed is almost surely wishful thinking. "There is no way for a bankrupt railroad to raise money other than through a federal subsidy," says one rail executive. "Even if we streamline our plant, we must still rebuild our tracks and yards and get new rolling stock." Much money will also be needed for severance pay to the union workers who would have to be cut from payrolls in any paring down to a core system, a problem that Brinegar so far has ignored.

A Senate committee headed by Indiana Democrat Vance Hartke has been listening to other proposals, including outright nationalization of the Northeast lines, or nationalization of their rights of way and federal assumption of track maintenance in exchange for a toll charge paid by each railroad. Congress will have the final say, and if it cannot agree on some plan in about three months, the Government's hand may be forced by the federal court that is overseeing the Penn Central's operations in bankruptcy. Federal Judge John Fullam has given the railroad's trustees an ultimatum: devise a viable, Government-approved plan of reorganization by July 2 or start liquidating the line. Even if the Penn Central were to vanish as a corporation, the Government cannot let all its trains stop running. That, says Senator Hartke, "would be a calamity of the highest order. People would be out of work, and there would be shortages of energy, food and manufactured supplies." Thus July 2 is looming as a deadline not only for the Penn Central trustees but for Congress and the Administration.

* The Penn Central, Erie Lackawanna, Boston & Maine, Reading, Lehigh Valley and Central of New Jersey.

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