Sleeping car consist reduced to I car

Diner-lounge off - Automat only

Source: Exhibit 76 and RMJ-22 to exhibit 141

These trains averaged a daily maximum of 24 sleeping-car passengers in each direction when 2 sleeping-cars were operated, for a mean load factor of 54.5 percent. During the 15 months when only 1 sleeping-car was operated, maximum average of 18 sleeping-car passengers were accommodated per trip, for a mean load factor of 81.8 percent.

The coach passenger carrying consist of trains Nos. 1 and 2, as of January 5, 1968, amended to reflect discontinuance of trains Nos. 3 and 4 (Golden State) effective March 25, 1968, is 3 chair cars, capacity averaging 44 seats, totaling 132 seats.

The latest available passenger count includes the first 10 months of 1967. This count (Ex. 141, App. RMJ-20A) gives only monthly totals and not an "on-off" count which is necessary for a comprehensive assessment of the adequacy of the coach equipment available. Since no complaints have been voiced regarding the adequacy of the number of chair-car accommodations, it can be assumed that the 3 coaches being operated meet the present needs. These trains were averaging 163 coach passengers per trip during the period described.

51-728 071 pt. 2 - 4

OPERATING COSTS

In computing the costs of operating the involved trains the carrier has used actual costs in instances where ascertainment was practicable. and mileage and system average costs as related to passenger train service where the actual figures were not available, which is the case in most instances. These expenses were developed on the basis of a formula used regularly by the carrier's cost-finding personnel in their reports to management and in section 13a proceedings.

The carrier's cost figures for 1966, reflect total revenues of trains Nos. 1, 2, 3, and 4, of $10,712,000, consisting of $6,890,000 from pas sengers, $3,029,500 from mail, $86,500 from express, $48,600 from other transportation, and $657,400 from dining and buffet. They show operating expenses of $14,868,900, thereby resulting in a net loss of $4,156,900 for that year. (See Appendix D.) No feeder value has been included which is a proper factor to be considered and which would reduce the deficit figure.

Included in these "out-of-pocket" costs are those for other trans portation, other maintenance of equipment, maintenance of way and structures, traffic, general, haul of company material, interest-diesel locomotives, and interest-passenger cars. Generally, such items are disallowed in discontinuances of passenger trains where, as here, they are not shown as expenses which would be eliminated as a result of discontinuance. These are fully allocated costs and are not of a savable

nature.

Adjusting these costs to reflect the disallowance of the abovementioned allocated costs, the stated deficit would be reduced to $2,046,400. Due to the discontinuances of trains Nos. 3 and 4, the carrier's revenue and expense figures for current operations have been further adjusted later in this report and in appendix E.

Although the carrier submitted revenue and expense figures for the first six months of 1967, since they do not include operations during the peak summer vacation season or the Christmas holiday peak season, the examiner elected to use the figures for the last full year period of 1966. It is considered that the full year operation is much. more meaningful. For instance, in 1966, 20 percent more passengers used train No. 1 west of El Paso in the last six months than in the first. East of El Paso, the passenger count was 23 percent higher the last half year than the first half.

The C.P.U.C. computations of the various out-of-pocket factors vary from those of the carrier. This is due to the difference in methods used by each in determining the costs. Since the C.P.U.C. used 1965 statistics and its methods of computations are in many instances different than those accepted or used by this Commission, its very detailed and exhaustive analysis of the carrier's cost evidence wi not be restated in detail. The result of this analysis indicates that, in the opinion of the California commission's cost engineers, the deficit claimed by the carrier is overstated to a considerable degree.

PASSENGER-SERVICE LABOR COSTS

A major element of cost of passenger-train operations consists of operating employees' wages, health and welfare benefits, and payro taxes. For the year 1966, on the involved trains, these costs constitute! 26.21 percent of the total operating expenses.

A detailed analysis of the cause and effects of railroad operating labor costs and practices is set forth in Railroad Passenger Train Deficit, 306 I.C.C. 417, 448. Since the conditions set forth in that report decided May 18, 1959, have existed since 1919, without change, the subject will be discussed in this report only to the extent necessary to bring the subject matter up to date.

While the number of employees of all class I railroad in the country has decreased 33 percent between 1959 and 1966, the total compensation paid, excluding old-age retirement and unemployment insurance taxes, decreased only 2 percent during the same period. Thus, economies affected have been, for the most part, off-set by wage increases. Under agreements between the carrier and the various labor organizations wages are determined on "basic work days". The basic work day for an engineer and fireman in passenger train service is 100 miles of operation. For conductors and brakemen it is 150 miles. If the runs exceed those distances, the crew is compensated on a prorated mileage basis beyond the minimum. For example, on the involved trains the engineer and fireman receive approximately a day and a half basic pay between New Orleans and Lafayette, La., a distance of 145 miles. The running time between these two cities is 3 hours and 16 minutes. Between Sanderson and Del Rio, Tex., the distance is 128 miles, the running time is 2 hours and 55 minutes, and the engineer and fireman receive approximately 14 days' basic pay. In addition, the engineers are paid overtime if their time on duty exceeds the published time schedule.

A 7-day test study, October 16 to 22, 1967, showed that for each trip between Los Angeles and New Orleans, distance 2,033 miles, running time 45 hours and 30 minutes, a total of 54 crew members are used. This is broken down as follows:

This does not include the automat-car attendant, dining car employees, or pullman employees.

STATE TAXATION

Ad valorem tax assessment by the States on the S. P. amounted to $34.4 million in 1966. Those levied on all Class I railroads amounted to $968,372,036, or just under $1 billion. Of the 5 States parties to this proceeding, California received $19.6 million, Arizona $5.7 million, New Mexico $.57 million, Texas $3.2 million, and Louisiana $.95 million. By far, the greatest amount of these taxes were assessed as the result of interstate operations.

No one questions the right of the States to assess taxes on railroad property. The problem arises on the rate of the assessment levied on the rail carriers compared to the rate applied to other property in the same tax district. For instance, the line of the S. P. we are presently concerned with passes through 9 counties in New Mexico. Six of those counties have an assessed tax base of 33% percent, that is to say the properties in those counties are placed on the tax rolls at their market value. The remaining 3 counties have an assessed tax base of 25 per

cent. The New Mexico Tax Commission assesses the S. P. at the rate of 69.27 percent. This tax is not only levied on property permanently located in the State of New Mexico but also on every locomotive and car crossing the State line. An actual car count is required four times each year.

The basis of taxation in Texas is quite different. In that State corporations are not taxed by a State tax commission as in New Mexico. Each tax assessor in each tax district fixes the tax ratio to be applied to the corporation. These ratios vary from 30 to 60 percent whereas other property in the same district will have ratios of 10 to 27.28 percent. The 10 percent ratio is more common.

Arizona, like New Mexico, assesses corporations through a State tax commission. In December 1967 legislation was adopted to raise the railroad assessed ratio from 51 percent to 60 percent. Other utilities will be 40 percent, while all other business properties will be 25 percent and homes and ranches 18 percent.

California assesses S. P. property at 37.5 percent of market value. This assessment is determined by the State Board of Equalization. The private property ratios in the counties through which S. P. interstate trains operate range from 20.6 to 24.7 percent.

In Louisiana the S. P. is assessed on a ratio of 38 percent whereas property generally is assessed from 13 to 18 percent, depending on the parish.

SUMMARY OF PUBLIC TESTIMONY

A considerable number of public witnesses appeared and testified in each of the cities where oral hearing was held. Contrary to some. this examiner attaches little importance to the number of public witnesses in attendance. Persons who are employed, actually in transit on the trains, engaged in household duties and the like, find it im possible to be in attendance no matter how earnestly they may feel about the issue under consideration.

The most meaningful demonstration of the extent the public needs the train service in question is the statistical exhibits which reflect the daily average passenger count. However, the testimony of actual users of the involved trains, especially in the instant investigation, is most important in reflecting the advantages and shortcomings of the service being provided.

The witnesses testified generally that the subject trains have been systematically downgraded. As evidence they point out that the running-time has increased over the years, the pullman, lounge and dining cars have been removed, that the equipment is often dirty. that connections with other trains have been broken, that it is next to impossible to obtain information about arrivals, that pullman accommodations, when available, were hard to get although such space was open when the passenger actually boarded the train, and that many people who previously patronized these trains now make other travel arrangements, including railroads, because of the lack of sleeping-cars and the limited eating facilities. It is gratifying to note that very little criticism was directed to the train crew, but rather many witnesses were complimentary of the courtesy and service they received on the train. This was not the case with station employees

There were several surveys taken by the petitioners and one by tire carrier which purported to reflect the attitudes and impressions of the

train passengers. However, these surveys were so inexact and uncontrolled that little or no probative value can be attached to them.

The carrier presented a number of non-company witnesses who testified to the effect that in their opinion there was little public need for the continued operation of the trains. These witnesses where businessmen whose travel habits are motivated principally by the need to save time, and they naturally use the airlines at their companies' expense. For short distances, or where airline service is not available, they use automobiles, again on an expense account, so that they may have the use of a car at destination.

Several travel agents testified that the continued discontinuance of trains and the removal of sleeping-car and dining car service has seriously affected their business. The type of clientele using the services of travel agents demand comfortable and adequate sleeping and dining facilities. They also complain that the S. P. does not pay commissions on business written by these agents and they characterize such a policy as another means of discouraging train travel.

SPECIAL STUDIES ON THE PASSENGER-TRAIN MARKET

The S. P. introduced two special studies intended to show that there is no present or future need for the operation of passenger trains in intercity service with the possible exceptions of megalopolis areas such as the "Northeast Corridor". Both of these studies were conducted by academicians under contracts with the Southern Pacific Company.

These studies consider and examine a great many factors which influence the travel habits and responses of the public. Unfortunately time and space will not permit a restatement of these studies in detail.

The first study was made in 1965-66 by Professor Ely M. Brandes and Alan E. Lazar of the Stanford Research Institute of Menlo Park, Calif., under contract with the Southern Pacific Company. Professor Brandes is an economist but Mr. Lazar's field is not reflected in the record. It can reasonably be presumed that he is also an economist. This study has three basic conclusions:

(1) That the decline in intercity rail passenger travel will continue unabated. The annual rate of decline will at least equal the rate of decline for the last ten years. This situation is attributable to automobile and air travel, with a small assist by the bus.

(2) Present policy alternatives, to maintain the maximum volume of traffic or to reduce the deficit as much as possible, can determine the rate of decline but a slow rate of decline purchased at the price of a large deficit is not preferable. (3) The reduction of deficit policy is the only realistic policy for a railroad to follow from either the point of view of economics or public policy. From the public policy point of view, the railroads have an obligation to all their users, and many other users depend on the railroads for their economic survival to a far greater extent than do rail passengers.

After concluding that euthanasia is the proper course of action, the authors recommended that the next of kin be pursuaded of the necessity for such action. They advised:

(1) In pursuing a deficit reduction policy, railroads should not rely solely on train discontinuance as a means of reducing the deficit.

(2) In discontinuance cases, railroads should make more vigorous efforts to gain public support of their position, or at least understanding of it.

(3) As part of a policy to gain greater understanding of the problems of rail passenger service, the railroads should adopt an attitude of openmindedness, if