Appendix — United States Trust Co. of NY v. New Jersey
Supreme Court brief1977
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APPENDIX | nooas, sn.ccent |
IN THE
Supreme Court of the United States
OCTOBER TERM, 1976
No, 75-1687
Unitrep States Trust Company or New York, as Trustee
for The Port of Authority of New York and New Jersey
Consolidated Bonds, Fortieth and Forty-First Series, on its
own behalf and on behalf of all holders of Consolidated
Bonds of The Port Authority of New York and New Jersey
and all others similarly situated,
Appellant,
v.
Tue State or New Jensvy, brenpan T, Byrne, Governor of
The State of New Jersey, and WintuiaM F., Hytanp,
Attorney General of the State of New Jersey,
Appellees.
APPEAL FROM THE SUPREME COURT OF NEW JERSEY
VOLUME Il
Pages 529a—1149a
RS
FILED MAY 21, 1976
PROBABLE JURISDICTION NOTED JUNE 28, 1976
INDEX
Docket Entries:
Superior Court of New Jersey
Supreme Court of New Jersey
Pleadings:
SEED ittinitinteenesscenscce A
Answer and Counterclaim
Answer to Counterclaim ....
a i iatieains
Affidavit of Edwin C. Landis, Jr. in Support of Con-
sent Order (attachments omitted) .. .
Affidavit of J. Sinclair Armstrong, Esq., in Support
of Motion to Maintain Class Action -...............
Judgments and Opinions:
Decision of the Superior Court of New Jersey, May
14, 1975
Judgment of the Superior Court of New Jersey,
May 29, 1975
Decision of the Supreme Court of New Jersey, Feb-
ruary 25, 1976
Other Parts of the Record:
Excerpt From Exhibit P-1—Municipal Credit
Report dated December 28, 1961 (Admitted in
LEividence at page 44)
Exeerpt From Exhibit P-2—Municipal Credit
Report dated December 14, 1962 (Admitted in
Evidence at page 44)
Exhibit P-3—Memo to William H. Morton from
John F. Thompson dated February 27, 1974 (Ad-
mitted in Evidence at page 88)
PAGE
l7la
1\78a
1sda
PAGE
Excerpt from Exhibit P-4—Draft Memo—Port of
New York Authority-Mass Transportation Vs.
Bondholders Security — in Evidence at
page 88) ‘iceeaiiamanmiaaiieaniie 190a
Exhibit P-5-—Letter dated June 10, 1974 from John
F. Thompson to Norman T. Hurd (Admitted in
Evidence at page 102) 194a
Exhibit P-7—Article from “The Daily Bond Buyer”,
May 17, 1974 (Admitted in Evidence at page 111) 196a
Exhibit P-10—Securities Industry Association
News Release (Admitted in Evidence at page 111) 198a
Excerpt from Exhibit P-36—Address by Austin J.
Tobin, April 4, 1962 ........................-- 7 200a
Exhibit P-89—Comparison Chart of Dollar Prices
Port Auth. of N.Y. & N.J. 6.0% 2/1/2006 and
Mass. Port. Auth. 6.0% 7/1/2011 (Admitted in
OS GE I CEO hccssessieccsnsinsisinieianitsianiitnniincana 209a
Exhibit P-90—Comparison: Port Auth. of N.Y. &
N.J. 6.0% 2/1/2006—Mass. Port Auth. 6.0%
7/1/2011 (Admitted in Evidence at page 117) -.. 210a
exhibit P-91—Comparison Chart of Dollar Prices 212a
Exhibit P-92—Comparison: Port Auth. of N.Y. &
N.J. 6.0% 6/1/2008—Mass. Port Auth. 6.0%
7/1/2011 {Admitted in Evidence at page 132) ... 213a
Exhibit P-93—Explanation of Charts (Admitted in
OUD GD RD TED teveerntttaieenitsiennsitinccenitnsinitniieni 215a
Exhibit P-94—-Comparison Chart of Dollar Prices
(Admitted in Evidence at page 115) 2.00.0... 2 16a
Exhibit P-95—Comparison: Kansas Turnpike 334%
10/1/94—Indiana Toll 344% 1/1/94—-Port Auth.
of N.Y. & N.J. 314% 5/1/95—Port Auth. of N.Y.
& N.J. 334% 5/1/94 (Admitted in Evidence at
ED GED cunntennsscsienncemmentticnciatiielitemibiidaamailiaila 217a
PAGE
Excerpt from Exhibit P-202—Index—June 14, 1962,
and pp. 270-271 entitled “Hudson Tubes Finane-
ing; Certification Required by Agreement with
Bondholders” (Admitted in Evidence at page
STE. asisbteiisistnindcaintininsgiieninslinniiinieesiisislliailiesith iia diitiaaediadtiy 219a
P-203—Letter dated March 27, 1961 from Austin J.
Tobin to Commissioners of Port Authority (Ad-
mitted in Evidence at page 816) -—.........0............. 221a
Mxhibit S-i—Article from “The Wall Street Jour-
nal”, August 15, 1974 (Admitted in Evidence at
TC.
Exhibit S-2—Article from “The New York Times”,
November 10, 1974 (Admitted in Evidence at
ED TEE dccvenninaieinmeninennniainaiananntt 234a
Exhibit S-3—Data Sheets: New York-New Jersey
Ports 6% 2008 40th Series and Mass. Ports 6%
2011 (Admitted in Evidence at page 171) ............ 243a
Exhibit S-4—Letter to the Editor from John F.
Thompson, May 1, 1974 (Admitted in Evidence at
page 222) a
Exhibit S-5——Letter to the Editor from William J.
Ronan, May 9, 1974 (Admitted in Evidence at
page 253) ..... . 247a
Exhibit S-15—Memorandum, “The Municipal Bond
Club of New York” (Admitted in Evidence at
RD GED scccnmnenesinneiinegeininnmn 249a
Exhibit S-16—Letter dated May 29, 1974 from John
F. Thompson to Orville H. Schell, Jr. (Admitted
in Evidence at pase 346) ....................--ecc-eec-eeceneeenee Hla
Exhibit S-29—Municipal Credit Report, February
4, 1972, Supplementary to Report dated October
20, 1971 (Admitted in Evidence at page 780) ........ 252a
Exhibit S-31—Municipal Credit Report dated June
14, 1973 (Admitted in Evidence at page 795) ... 263a
lv
PAGE
Lixeerpt from Exhibit S-36—Report of Consolidated
Bonds Thirty-Sixth Series (First Installment) by
Blyth & Co., Ine., November 16, 1970 (Admitted
in Evidence at page SOL) ............cccccccoccesccscseeseeee 279a
Exeerpt from Exhibit S-38—Quotations of Author-
ity Bonds (Admitted in Evidence at page 823) ... 293a
Excerpt from Exhibit S-39—Quotations of Author-
ity Bonds (Admitted in Evidence at page 823) ... 293a
Excerpt from Exhibit S-40—Publication of U.S.
Government Printing Office—1961 Entitled “Hear-
ings Before Subcommittee No. 5 of the Committee
of the Judiciary, House of Representatives”, 86
Congress, 2nd Session (Admitted in Evidence at
SS TERE. <citsntisinesiitcdeicsianiicaathbbatiianpniininineailameeiiiniiiamineneds. Se
Exhibit S-44—Memorandum, “Port Authority of
New York and New Jersey,” dated April 22, 1974
(Admitted in Evidence at page 840) -..................... 380a
Exhibit S-56—Bid and Ask Quotations for Mass.
Port Auth. 434% 1998, ete. (Admitted in Evi-
I I GI tetinlitetetcenneccctesaniiictintinnionaitininineni 38la
Excerpt from Exhibit C-3—1972 Annual Report of
The Port Authority of New York and New Jersey
(Admitted in Evidence at page 878) ...................... J85a
Exeerpt from Exhibit C-4—1974 Annual Report
of The Port Authority of New York and New
Jersey (Admitted in Evidence at page 878) -...... 593a
Exhibit C-5—Port Authority of New York and New
Jersey Investments and Revenues (Admitted in ,
ae 97a
Exhibit C-15—Memorandum from the office of the
Governor, February 10, 1975 (Admitted in Evi-
IE Ie Ga wrrcrecetirensecensnnsensecsdicencittaniincceiiniaiciiien [98a
Exerpt from Exhibit C-17—Minutes of Special
Meeting of Port Anthorityv of New York ard New
Jersey held April 21, 1975 (Admitted in Evidence
OP RE TD ee ccineeceenicceescesnvnnesnnencenpeenllttinagpaatinenasiiigns 404a
he
PAGE
Exhibit C-18—News Release from Port Authority
of New York and New Jersey, April 10, 1975
(Admitted in Evidence at page S880) .................... 405a
Excerpt from Exhibit C-19—Letter of U.S. Depart-
ment of Transportation to Port Authority
of New York and New Jersey with Enclosures
(Admitted in Evidence at page 880) .-........ ieaiisaamale 408a
Exeerpt from Exhibit C-20—Modification of Toll
Rate Schedule for Vehicular Crossings
(Admitted in Evidence at page 880) —.................. 419a
Supreme Court of New Jersey—State’s Supple-
mental Exhibits—(Admitted in Evidence by
order dated September 2, 1975) \..0.002.20.20...-.--2---- 499%a
Supreme Court of New Jersey—Plaintiff’s Supple-
mental Exhibits—(Admitted in Evidence by
order dated September 2, 1975) -.20..00..222..----- 4429
Port Authority of New York and New Jersey—
Kxeerpts from Annual Report for year ended
December 31, 1975—this document is subject to
judicial notice and was added to Appendix by
Stipulation Among Counsel dated July 7, 1976 .... 508a
Port Authority of New York and New Jersey—
Excerpts from Official Statement for Forty-Sec-
ond Series Consolidated Bonds dated July 8,
1976—this document is subject to judicial notice
ancl was added to Appendix by Stipulation
Among Counsel dated July 7, 1976 ...................... 19a
Exeerpts from Stipulation Among Counsel, dated
December 20, 1974 (“Stip.” references are to
pages of the Stipulation, R-JA Vol. IV) ............ 529a
Exeerpts from Exhibit TI to Stipulation Among
Counsel, dated December 20, 1974 ..0..0000000000000... 782a
Iixeerpts from Exhibit IIT to Stipulation Among
Counsel, dated December 20, 1974 0000000000000... 818a
Exhibit V to Stipulation Among Counsel, dated
UIT” SII SUITE scicindctnchintnscicnesiccecelaeaiadnatthataiiastiiaaiaanian 818a
Excerpts from Testimony of John F. Thompson .... 844a
SS ee | SS
vi
PAGE
Excerpts from Testimony of Lester Murphy ............ 974a
Excerpts from Testimony of Michael Zarin ........... 1004a
Excerpts from Testimony of Austin F. Fitzgerald ..1089a
Excerpts from Testimony of Gordon Fowler ........... 1103a
Excerpts from Transcript of hearing, February 11,
TET winsnnsncnnnntsniciarineieniessiiiddaattapipiiadasdetiniiimsiabialipeninninionss 1119a
Letter dated March 10, 1975 from George B. Gelman,
ee SP I weitssinctnncniccciitnenceiatiniasatiapisicanennbenid 1121a
Additional Materia! Added to Appendix by Stipula-
tion Among Counsel dated August 4, 1976 ........... 1123a
529a
Excerpts From Stipulation Among
Counsel Dated December 20, 1974
SUPERIOR COURT OF NEW JERSEY
Law Drvision—BeErRGEN CouNTY
STIPULATION
Unitep States Trust Company
or New York, ete.
THe State New Jersey, et al.
The undersigned hereby stipulate, for the purposes of
this action only, and subject to objections as to relevance,
that the following statements are true and admissible into
evidence.
I. Tue Port Autuority or New YorkK aNp New JERSEY
1. By virtue of Chapter 130 of the Laws of New Jersey
of 1917 and Chapter 426 of the Laws of New York of 1917,
the two States established study commissions to cooperate
in making a thorough investigation of the conditions of the
Port of New York, to submit a comprehensive report rec-
ommending the proper policy to be pursued for the best
interest of the entire Port of New York, and to determine
the legislation, State and Federal, necessary to make such
recommendations effective “to the end that said Port shall
be efficiently and constructively organized and furnished
with modern methods of piers, rail and water freight, and
adequately protected in the event of war.”
2. The two State Commissions thereafter organized
themselves into a single body known as the New York, New
Jersey Port and Harbor Development Commission (the
“Commission”). On December 16, 1920, the Commission
issued a joint report summarizing its work, discussing Port
conditions and setting forth a proposed compact and com-
530a
Excerpts From Stipulation Among Counsel
Dated December 20, i974
prehensive plan and maps and drawings depicting its find-
ings and proposals, (Stip.1)°** *
3. The 1920 Report outlined the chaotic, diverse, inade.
quate and congested Port facilities existing in 1920 re-
stricting the flow of goods by railroad, steamship and
motor truck in the Port area, Extensive discussions of the
freight handling problems of carriers are contained in the
1920 Report. Except in passing, the 1920 Report did not
deal with passenger transportation plans or facilities but
rather the Report recommended proposed solutions to the
problems involved in the movement of freight and com-
modities brought into, out of, and through the Port Dis-
trict. (Stip.2)*°* °
4. The 1920 Report recommended the adoption of a
Compact between the two States, establishing a Port Dis-
trict and creating a Port Authority. It ineluded an exten-
sive discussion of the legal precedents concerning Con-
gressional and State powers over interstate commerce,
The Report stated:
“Permissive or restrictive, as the case may be, the
power of Congress over the instrumentalities of in-
terstate traffic is exclusive, when in a specific case it
has been exercised. But this latter limitation,
coupled with the broad police power of the State and
its control of intrastate commerce, has left to New
York and New Jersey a broad field within which
they may act without express Federal consent, It is
hoped, of course, by securing congressional approval
of any plan which may be adopted, to avoid future
conflict with the Federal authority over interstate
unification and control of the Port. But for the
present the States may act alone.” At p, 446,
53la
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
5. In response to the recommendations of the 1920
Commission and pursuant to the Laws of New Jersey of
1921, Chapter 151 and the Laws of New York of 1921,
Chapter 154, commissioners of both States were appointed
with authorization to enter into an agreement or compact
in the form specified in the statute and to seck the consent
of Congress in respect of the agreement. On April 30, 1921
the Compact between the two States (N.J.S.A, §§32:1-1 to
24; N.Y. Unconsol. Laws §§6401-6423) relating to the Port
Authority of New York and New Jersey (the “Port Au-
thority”) was actually signed. Congressional consent to
“each and every part and Article” of the Compact was
obtained effective August 23, 1921. (Public Resolution No.
17. 67th Congress, First Session (42 Stat. 174)).
(i, The Compact provided in part as follows:
The Preamble of the Compact states that “a better co-
ordination of the terminal, transportation and other facil-
ities of commerce in, about and through the port of New
York, will result in great economies, benefiting the nation,
as well as the states of New York and New Jersey” and that
“the future development of such terminal, transportation
and other facilities of commerce will require the expendi-
ture of large sums of money, and the cordial cooperation of
the states of New York and New Jersey in the encourage-
ment of the investment of capital, and in the formulation
and execution of the necessary physical plans.” Article IT
of the Compact creates the Port of New York District com-
prising an area of about 1500 square miles in both states
centering about New York harbor. Article TIT establishes
the Port Authority as “a body corporate and politic, having
the powers and jurisdiction hereinafter enumerated, and
ouch other and additional powers as shall be conferred upon
532a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
it by the legislature of either state concurred in by the legis-
lature of the other, or by act or acts of congress.” Article
IV states that the Port Authority shall consist of six Com-
missioners, three from each State.* The Commissioners
were to be chosen “in the manner and for the terms fixed
and determined from time to time by the legislature of each
state respectively.” Article VI of the Compact vests in the
Port Authority “full power and authority to purchase, con-
struct, lease and/or operate any terminal or transportation
facility within” the Port District and authorizes the Port
Authority “to borrow money and secure the same by bonds
or by mortgages.” Article VIT provides that the Port Au-
thority “shall have such additional powers and duties as
may hereafter be delegated to or imposed upon it from time
to time by the action of the legislature of either state con-
curred in by the legislature of the other” and further pro-
vides “the Port Authority shall not pledge the cvedit of
either state except by and with the authority of the legis-
lature thereof.” Article XT requires the Port Authority to
make plans for the development of the Port District supple-
mentary to or amendatory of any plan theretofore adopted,
Article XIT authorizes the Port Authority to “make recom.
mendations to the legislatures of the two states or to the
congress of the United States, based upon study and ana-
lysis, for the better conduct of the commerce passing in and
through the Port of New York.” Article AV of the Compact
provides that “Unless and until the revenues from opera-
tions conducied by the Port Authority are adequate to meet
all expenditures, the legislatures of the two states shall
appropriate, in equal amounts, annually for the salaries,
* By Chapter 244, Laws of New Jersey of 1930 and Chapter 419,
Laws of New York of 1930 the number of Port Authority Commis-
sioners was increased from six to twelve.
533a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
office and other administrative expenses, such sum or sums
as shall be recommended by the Port Authority and ap-
proved by the governors of the two states, but each state
obligates itself hereunder only to the extent of one hundred
thousand dollars in any one year.’* Article XXIT defines
“transportation facility” to include “railroads, steam or
electric, motor truck or other street or highway vehicles, tun-
nels, bridges, boats, ferries, carfloats, lighters, tugs, floating
elevators, barges, scows or harbor craft of any kind, air-
craft suitable for harbor service, and every kind of trans-
portation facility now in use or hereafter designed for use
for the transportation or carriage of persons or property”
and defines “railroad” as “including railways, extensions
thereof, tunnels, subways, bridges, elevated structures,
tracks, poles, wires, conduits, power houses, substations,
lines for the transmission of power, car barns, shop yards,
siding, turnouts, switches, stations and approaches thereto,
cars and motive equipment.”
7. By Laws of New Jersey of 19°, Chapter 9 and Laws
of New York of 1922, Chapter 23, a Comprehensive Plan
for the development of the Port of New York was adopted
by the New Jersey and New York Legislatures, The Com-
prehensive Plan received the consent of Congress. Ch, 277,
Publie Res, No, 66, July 1, 1922, 42 Stat. 822. The Compre-
hensive Plan sets forth the development program initially
envisioned for implementation by the Port Authority.
8. In the Comprehensive Plan of 1922, unification of
terminal operations and facilities, consolidation of ship.
ments, adaptation and coordination of existing facilities, im-
* The States paid the administrative +7 of the Port Authority
through the year 1934, 1935 was the first year in which the Port
Authority became self-supporting.
534a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
nrovement of commercial rail, truck and water facilities and
other freight handling improvements are set forth as prin-
ciples to govern the development of the Port Authority.
The Comprehensive Plan proposed to establish direct
freight connections between New Jersey and Manhattan to
furnish “the most expeditious, economical and practical
transportation of freight especially meat, produce, milk and
other commodities comprising the daily needs of the
people.” (NwJ.S.A. 32:1-29). Seetion 8 of the 1922 Compre-
hensive Plan statutes denies the Authority the power to levy
taxes or assessments, and provides that the bonds or other
securities issued by the Port Authority shall at all times be
free from taxation by either State, (Stip. 49) * * °
11. The Progress Report of the Port Authority, 1923,
made the following statements concerning congressional
consent to the Compact and Comprehensive Plan:
“Some of these powers were such as the States
could grant without further action by Congress, but
as carrying out many of the steps involved in the
Comprehensive Plan by the Port Authority would
necessarily involve matters of interstate commerce
and the interstate carriers engaged therein, it was
deemed of importance by the Commissioners that
Congress—which has paramount power over inter-
state commerce—should give the sanction of Federal
authority to the plan, and the Legislatures of both
States, therefore, directed the Port Authority to
apply to Congress for such power. ...
“Tt was only upon the consummation of this step
[congressional consent] that the Port Authority
became fully equipped to exercise the powers out-
EE ea
535a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
lined in the compact and intended to be conferred
by the two States.
“The Comprehensive Plan is now legally author-
ized by the two States and the Congress of the
United States and the police powers of the States
and the interstate commerce power of the Congress
are joined in effectuating the definite plan, with one
coordinating body as the State and Federal instru-
mentality.”
12. Pursuant to the Compact, Comprehensive Plan and
subsequent amendments and supplements thereto, the Port
Authority operates all of the interstate vehicular tunnels
and bridges in the Port District (which include the Holland
Tunnel, the Lincoln Tunnel, the George Washington
Bridge, the Bayonne Bridge, the Goethals Bridge and the
Outerbridge Crossing).
The Holland Tunnel had been constructed by separate
State commissions pursuant to a compact between the
States which received the consent of Congress. Chapters
49 and 50, Laws of New Jersey of 1918 and Chapters 70
and 178, Laws of New York of 1919, consented to by Con-
gress, Chapter 11, Publie Resolution No. 10, 66th Congress
(S.409) (1919). In 1930 the Holland Tunnel was trans-
ferred to the Port Authority in order to enable it to honor
its obligations to bondholders in the face of deficits
incurred in connection with the Arthur Kill, George
Washington and Bayonne Bridges and Inland Terminal
No. 1, Chapter 247, Laws of New Jersey of 1930 and Chap-
ter 421, Laws of New York of 1930.
Also pursuant to the 1921 Compact, the 1922 Comprehen-
sive Plan and subsequent amendments and supplements
thereto, the Port Authority owns and/or operates the fol-
536a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
lowing facilities: Newark International Airport, Teterboro
Airport, La Guardia Airport, John F. Kennedy Tnterna-
tional Airport, two heliports; Port Newark, the Hoboken
Port Authority Marine Terminal, the Elizabeth Port
Authority Marine Terminal, the Columbia Street Marine
Terminal, the Erie Basin Port Authority Marine Terminal
and a Mid-Manhattan Consolidated Passenger Ship Termi-
nal; the Port Authority Bus Terminal, the George Wash-
ington Bridge Bus Station, the Newark and New York
Union Motor Truck Terminals; the Port Authority Trans-
Hudson System (operated for the Port Authority through
its wholly owned subsidiary, the Port Authority Trans-
ae Corporation) and the World Trade Center. ‘Stip.
-12) |
Il. New Jersey's Pusiic Transportation REQUIREMENTS.
A. Demographic and Transportation Factors.
3. The following is an excerpt from the 1972 Master
Plan of the New Jersey Department of Transportation:
“New Jersey is now the most densely populated
State in the Nation. Its problems of urbanization
will continue to mount along with its growth in popu-
lotion, industry, commerce and recreational facilities
and with the State’s increasing importance as the
geographic center of the Northeast ‘megalopolis.’
“In the past, this growth has meant:
“The highway system has been unable to keep
pace with travel demand. The density per lane-
mile of daily travel has increased by 56.7 percent
over the past 20 vears,
“Paradoxically, coincident with a signficant
decline in suburban passenger rail service, there
537a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
has been, in recent years, an increased public de-
mand for improved commuter rail service. At
present, during the morning peak hour over 54,000
people make the trip between New Jersey and
Manhattan by rail.
“Bus service has shown a continual decline in
the last decade, yet in the morning peak hour more
than 55,000 persons travel by bus from New Jersey
to Manhattan.
“A 32 percent increase* in population through
1990 wil! result in the changing of more than 1,300
square miles of land from rural use to urban use.
“By 1990, motor vehicle registrations in the
State will rise to 5,384,000—up 42 percent.
“Annual vehicle miles of travel on the State
Highway System will increase 109 percent through
1990, registering a total of 28.1 billion vehicle
miles.
“As a result of increased personal income and
leisure time there will be a significant increase in
recreation-oriented travel on the State’s highways.
“Passenger rail patronage will experience a 75
percent increase to total 626 thousand daily riders
in 1990.
“Bus ridership will increase to 1.6 million daily
riders by 1990, an increase of 24 percent.
“A comprehensive plan to meet the 20-year
needs resulting from this growth in the future is
estimated to cost almost $7.0 billion. It includes:
*The latest official projection of the State of New Jersey is for a
27 percent increase curing the same period (Population Estimates for
New Jersey, July 1, 1973, p. 16) Ffootnote added by stipulation].
538a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“The highway plan will total $4.276 billion in-
cluding $900.0 million for completion of the Inter-
state System, $1.866 billion for the construction of
other freeways, $734 million to dualize presently
undivided facilities, $588.0 million for widenings
and $188 million to correct troublesome spot loca-
tions.
“On the State’s passenger rail system, including
commuter rail and rapid transit, the costs will
amount to $1.897 billion.
“An additional $278 million is the estimated cost
to provide bus riders of the State with adequate,
modern service.
“The above breakdown of estimated costs does not
include the anticipated escalation in costs over the
20-year time frame of the pian.
“PasSENGER Rar Services
“The commuter railroad system is operated by
five companies which provide service to an average
of 166,130 weekday passengers on a total of 467
route miles.
“Rapid transit services are provided by two pub-
lie agencies* and one public company** on a total of
26 route miles providing service to an average of
192,400 weekday passengers.
“The total network of passenger rail systems pro-
vide service to 15 of the State’s 21 counties, the ex-
ee ne dll
539a
; ; I
'ecerpts From Stipulation Among Counse
— Dated December 20, 1974
ceptions being Burlington, Cumberland, Gloucester,
Salem, Sussex and Warren Counties.*
“In 1950, there were approximately 1,100 route-
miles of track in existence in the State providing
commuter service to 20 counties, and there were
more than 349,000 passenger trips a day. The —
cline in service over the past 20 years has resul
in only 467 route-miles of track remaining ing =
today, providing service to 15 counties with only
166,000 passenger trips daily. | |
“However, existing rapid transit facilities provide
service for an additional 192,000 passengers per day.
Total rail utilization now averages 358,000 passenger
trips per day. | _
“Although there has been a significant decline in
annual rail trips between New Jersey and New oe
rail patronage during the commuter peak periods has
remained constant.
“While still providing service, the Penn Central,
Reading and Lehigh Valley Railroads have gone =
bankruptcy in recent months. The Central a
of New Jersey has been in bankruptcy since 1967.
(Stip. 17-20)
es 2* *
“Tae Corripor STATE
“While the above indicators can be related to
growth within the State’s boundaries, New Jersey
also is in the unusual position of experiencing con-
siderable travel across her boundaries. rages of
this, New Jersey has been aptly termed the ‘Corri-
dor State.’
i ice has been
the 1972 Report rail passenger service
nme Cane County. [footnote added by stipulation]
*Port Authority operates PATH and the Delaware River Port
Authority operates PATCO. [footnote added by stipulation |
**Transport of New Jersey operates the Newark subway. | foot-
note added by stipulation}
ei i A a tlhe
540a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“This considerable interstate movement is attribu-
table in part to New Jersey’s location in the geo-
graphic center of megalopolis. The influence of the
great urban centers of New York City and Phila-
delphia has caused the number of people crossing
between New Jersey and Pennsylvania to be ranked
highest in the Nation while the movements between
New Jersey and New York is second highest.
“The largest single movement—commuter travel
between New Jersey and Manhattan—amounts to
480,000 person-trips daily. Of this number, slightly
less than 50 percent use some form of public transit
—rail or bus. The morning and evening peak-hour
movements are especially significant. During one
peak hour in the morning more than 123,000 com-
muters cross the Hudson River into Manhattan. Of
this total, 87 percent use some form of public transit.
“While the commuter problem is not as severe be-
tween the Camden area and Philadelphia, the same
trend has emerged. One result has been the con-
struction of the Lindenwold High Speed Line aimed
principally at meeting the demand for interstate
commuter travel.
“With the expectation that many of New Jersey’s
rural areas will become suburban ‘bedroom com-
munities’ for highly concentrated urbanized areas, it
is expected that the density of travel across the
State’s borders will become even more significant in
the future. (Stip. 20-21)
“Before a plan can be developed outlining a solu-
tion to serve the transportation needs of the State,
a set of objectives—specific goals toward which ef-
fort is directed—must be derived. Such a listing of
54la
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
objectives can lead to policy guidelines defining the
atmosphere in which transportation needs can be
met.
“TRANSPORTATION OB) 2CTIVES
“Provide a transportation network equitable to
all segments of the State populace
“Increase comfort and convenience of travel
“Reduce adverse impacts on the natural envi-
ronment
“ Promote desired pattern of land development
“Increase safety
“Reduce travel time and cost per trip
“Provide a choice of travel modes
“Be realistic in terms of physical, social, finan-
cial and environmental restraints
“PoLicy GUIDELINES
e s e
“ComMon CARRIER
“Maintain and strengthen the existing rail and
bus system by replacing obsolete equipment.
“Improve the efficiency and quality of rail and
bus operations.
“Extend service to areas deficient in service.
“Improve coordination within the total trans-
portation system. (Stip. 22)
“Core SecTor
“The core sector includes all of Hudson County,
Newark, and the adjacent portions of the municipali-
ties surrounding Newark. Travel in this sector has
several distinct patterns. The Newark portion is
542a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
heavily oriented to the Newark Central Business
District, with a relatively low level of travel to Man-
hattan. The Hudson County portion of the sector
has a large amount of local, relatively short distance,
travel. Trips to Manhattan are most prevalent from
the area north of the Lincoln Tunnel. Most travel in
the core sector is by bus. The only major rail move-
ments are on PATH, between southern Hudson
County and Manhattan, and on the Newark subway.
Rail improvements in this sector will be designed to
improve travel to and within the Newark CBD and
to solve the specialized problem of access to Newark
Airport. |
“Newark Arrport Accrss—Rail access to Newark
Airport will be designed to provide service to a
variety of points including Manhattan and the
Newark central business district.
“This aecess would he provided by an extension of
the tracks of the Port Authority Trans-Hudson
Corporation—(PATH) from the present terminus
in Penn Station—Newark. A transfer station will
be located on airport property west of the Newark
Airport terminal complex. This station will permit
passengers to transfer to and from the proposed
Inter-Terminal Transportation System (ITTS)
which will inter-connect the three terminal buildings
of the new compiex.
“The rail access proposal will connect with and use
tracks on the Central Railroad of New Jersey right-
of-way near Elizabethport Yard and will continue
westward to a terminus that must be determined. A
park-ride facility near the crossing of the CNJ main
line and the Garden State Parkway is one possible
043a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
terminus. Extension of the service to either Plain-
field or to the Raritan area is also being considered.
“CENTRAL SECTOR
“The Central Sector includes the area of the State
extending from New Jersey Route 3 and U.S. Route
46 on the north to and including the New Jersey
Turnpike between Perth Amboy and Bordentown
on the South. Suburban rail service is provided in
three major corridors by the Morris and Essex Line
of the Erie Lackawanna, including the Gladstone
Branch; the Main Line of the Jersey Central and
the Main Line of the Penn Central. Additional
suburban service is provided on the Greenwood Lake
and Montclair Branches of the Erie Lackawanna and
the New York Branch of the Reading. Travel in
this area is largely oriented to Manhattan with a
secondary focus at Newark. The majority of com-
muter travel to Manhattan is by rail, with some bus
travel to midtown Manhattan. Most travel to New-
ark is by bus, with rail travel important only for
the longer distances.
“Rail service in the central sector is oriented to
three Manhattan entry points. These points of entry
are the Penn Central tunnel and the Midtown and
Downtown PATH tunnels serving the 33rd Street
and World Trade Center areas respectively. Access
to Newark is at two points; the Erie Lackawanna
and Penn Stations. With the exception of the
Morris and Essex, all lines have access to all Man-
hattan entries. The only direct service provided to
Penn Station, Manhattan, is from the Penn Central
Main Line. Access from other lines to Penn Station,
New York, as well as all access to Manhattan via
544a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
PATH, requires a transfer. One of the principal
goals of planning for this sector is to improve Man-
hattan access, including access to Penn Station, New
York, for all lines and direct service to some point
on Manhattan for all lines. (Stip. 24-25)
“FINANCIAL CoNSIDERATIONS
“The ability of the Department to successfully
implement this Master Plan over the next 20 years
is tied inextrivably to the annual funding of its con-
struction programs.
“The financing of highways, under existing federal
programs, is fundamentally different from the pro-
grams for the other modes in that it is based on
annual apportionments to the various states based on
a pre-set formula—whereas UMTA [Federal Urban
Mass Transportation Administration] and FAA
furnish federal capital funds on a grant basis for
each proposed project for which an acceptable appli-
cation has been filed.
“Fiscal projections based on historic data assure
that normal transportation funding will have to be
augmented by substantial amounts of additional
monies annually.
“As stated earlier in the report all indicated costs
are based on present day estimates and have not
been escalated to reflect inflationary costs. No
attempt has been made to establish priorities dur-
ing the development of the Master Plan. (Con-
sequently, the individual projects have not been
scheduled or programmed. It would therefore, not
be realistic to attempt to expand the cost of the
individual components without precise knowledge as
to the year of contract award.
ee ee
4
i
:
+ §45a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“Qn the other hand, it would be fair to assume
that the economic history of this country proves
there will be an increase in these costs over the next
20 years.
“Funpinc Gap To IMPLEMENT 20 YEAR PLAN
Highway Construction $4276.0
Federal and State Matching Pro-
grams 2332.0
Deficiency —$1944.0
Railroad Passenger Service $1897.0
Federal UMTA Grants 1264.7
Local Matched Share (State) —$ 632.3
Bus Service $ 278.0
Federal UMTA Grants 185.3
Local Matched Share (State) -$ 92.7
Airport Development Program $ 49.0
Federal Aviation Administration
Grants 24.5
Local Matched Share (State) —~$ 24.5
Tora, Funprne Gap $2693.5
(All Amounts in Millions)”. (Stip. 27-28)
o * =
6. The four private companies which operate commuter
railroad services in New Jersey are all being reorganized
under federal bankruptcy laws. Three of these four com-
panies reported operating at a deficit in 1960; they attribu-
ted their deficits to losses incurred on passenger rail mass
transit operations even though one had lower passenger
losses than when it operated at a profit and another’s
deficit was twice as large as its passenger loss. (Farley
Committee Hearings, January 26, 1961, pp. 17-22). The
four railroads reported to Highway Commissioner Palmer
the following results for 1959 and 1960:
d46a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
t
By First
1959 7 £1960"
rs ,
1959 corporate corporate =
passenger profit profit passenger
deficit or deficit or deficit deficit
Pennsylvania ($37,000,000) $7,200,000 ($ 5,000,000) ( $32,000,000
Erie Lackawanna ($ 8,000,000) ($10,000,000) ($16,000,000) ($ my vend
Reading ($ 7,000,000) $ 1,800,000 —$ 1,100,000 _($ 7,000,000)
Contral ($ 6,300,000) ($ 2,800,000) ($ 3,400,000) (3 6,000,000)
7. Reorganization proceedings for the Central Railroad
Company of New Jersey were instituted in 1967, for the
Penn Central Transportation Company and for the Read-
ing Company in 1970 and for the Erie Lackawanna Rail-
way in 1972. (1973 Program, page 17). The 1973 [New
Jersey Department of Transportation Transit Develop-
ment] Program (Exhibit I) published on September 1,
1973, said of these proceedings:
“In several cases, the Federal District Courts have
instructed the railroad companies to prepare plans
for the cessation of passenger and freight service, and
in these cases, it is the policy of the State of New
Jersey to impress upon the federal courts the neces-
sity of continuing most of these rail services.” (1973
Program, page 17).
“Cessation of mass transportation services in these
urban areag [refers to the Philadelphia as well as
the New York City area] would produce intolerable
conditions on the personal lives of the residents of
the areas. The State is now directed by the federal
government to reduce the levels of air pollution in
these areas to a significant degree within the next
five years. It has been determined that the existing
basic rail and bus systems will fail within the next
atte cto inn
ct Laie waa aN ill el ek STR AUN ao
547a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
few years unless a major investment in capital facili-
ties, equipment, and operating subsidies is provided
by the public.” (1973 Program, page 19).
8. On January 2, 1974, Congress enacted the regional
Rail Reorganization Act of 1973 (45 U.S.C. §701 et seq.).
Congress found and declared in this statute that: “Essen-
tial rail service” in the midwest and northeast region is
provided by railroads that are insolvent and attempting to
undergo reorganization under the Bankruptcy Act; “this
essential rail service is threatened with cessation or sig-
nificant curtailment because of the inability of the trustees
of such railroads to formulate acceptable plans of reorgan-
ization”; the public convenience and necessity require ade-
quate and efficient rail service in this region “to meet the
needs of commerce, the national defense, the environment
and the service requirements of passengers, United States
mail, shippers, States and their political subdivisions, and
consumers”; “continuation and improvement of essential
rail service in this region is also necessary to preserve and
maintain adequate national rail services and an efficient
national rail transportaion system”; “rail service and rail
transportation offer economic and environmental advan-
tages with respect to land use, air pollution, noise levels,
energy efficiency and conservation, resource allocation,
safety, and cost per ton-mile of movement to such extent
that the preservation and maintenance of adequate and effi-
cient rail service is in the national interest”; and that these
needs could not be met without substantial federal partici-
pation. Among the goals of the federal plan for reorgani-
zation and modernization of the railroads in the northeast
corridor are: the establishment of improved high-speed
rail passenger service; the utilization of those modes of
548a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
transportation in the region which require the smallest
amount of scarce energy resources and which can must
efficiently transport energy resources; the attainment and
maintenance of any environmental standards, particularly
the applicable national ambient air quality standards and
plans established under the Clean Air Act Amendments of
1970; and the movement of passengers and freight in rail
transportation in the most efficient manner consistent with
safe operation, including the requirements of commuter and
intercity rail passenger service.
The Act established the United States Railway Associa-
tion, which was authorized to carry out the purposes of
the Act and in furtherance thereof to issue bonds, deben-
tures, securities or other obligations guaranteed by the
Secretary of Transportation, with the maximum aggregate
amount of obligations outstanding at any one time not to
exceed $1.5 billion. Pending implementation of the final
system plan, the Secretary of Transportation was author-
ized to expend up to $85 million to be paid to the trustees
of railroads in reorganization for the continued provision
of essential transportation services by such railroads.
With respect to local rail service, Congress found and
declared (45 U.S.C. § 762) that: “The Nation is facing an
energy shortage of acute proportions in the next decade”;
“railroads are one of the most energy-efficient modes of
transportation for the movement of passengers and freight
and cause the least amount of pollution”: “abandonment,
termination, or substantial reduction of rail service in anv
locality will adversely affect the Nation’s long-term and
immediate goals with respect to energy conservation and
environmental protection.” Accordingly, the Secretary was
directed to provide financial assistance to States or local or
nae
ee
et Fel een
Pe ee ey ey
foe t
vie es
4
4
:
;
3
549a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
regional transportation authorities for the purpose of rail
service continuation subsidies, 70% of which is to be paid by
the federal government and 30% of which is to be paid by
the affected State. Federal funding up to $90 million total
per year for 2 years is authorized. The Secretary was
authorized to issue regulations within 90 days to put this
program into effeet. Such regulations have not yet been
promulgated. On December 16, 1974 the Supreme Court
of the United States upheld the constitutionality of the Act.
9. Pursuant to the Regional Rail Reorganization Act
of 1973 the United States Railway Association has sub-
mitted a plan recommending that approximately 300 miles
of trackage owned by bankrupt railroads in New Jersey be
abandoned. (Stip. 30-35) * * *°
In October 1974, Alan Sagner, the New Jersey Commis-
sioner of Transportation publicly stated that even if the
final federal plan called for a reduction of 150 miles of rail
lines in New Jersey, “that could have a disastrous impact
on our economy and environment.” At the request of Gov-
ernor Byrne, the New Jersey Legislature approved for
submission to the voters of New Jersey in the November,
1974 elections a proposed $100 million rail preservation
bond issue that would allow the State to purchase railroad
rights-of-way that would be abandoned under the federal
plan. This bond issue was defeated in the November, 1974
election by a vote of 893,622 to 854,083.
10. In September, 1974 Commissioner Sagner stated
publicly :
(1) The State of New Jersey has not yet spent $106 mil-
lion of the mass transportation bond issue of $200 million
authorized in 1968. The bulk of this money is expected to
be obligated within the next year on the reelectrification of
590a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
and the purchase of 200 new commuter cars for the Morris &
Essex Division of the Erie-Lackawanna Railroad, electri-
fication of the New York and Long Branch Railroad from
South Amboy w Red Bank and the purchase of 1,50C@ new
buses and 300 used buses, but $68 million of the total funds
is expected to remain contractually uncommitted as of July
1, 1975.
(2) According to 1970 census figures 3.6% of the 2,839,545
people in New Jersey who work commute by railroad.
11. In support of a $200 million proposed bond issue for
highways, Commissioner Sagner said in his question and
answer release of September, 1974:
“1. We should not ask for new money for public
transporation projects until we have met the follow-
ing criteria:
“We have obligated the money the voters author-
ized in 1968; we hope to do this within a year. We
developed a comprehensive public transportation
plan that will show the voters what type of public
transportation service will be available after the
expenditure of necessarily large sums of capital.
This study is underway, but will take at least a
year to complete. We should also, at that time,
be able to predict the annual operating subsidy
needed to maintain the public transportation sys-
tem. The voters should be prepared to undertake
this obligation when they approve a project.”
“2. Improving the roads without providing a
mass transit alternative will encourage a greater use
of cars and will add to the problem of air pollution
when we are trying to reduce it. Isn’t that correct?
ws ss eT ai or ONT a aaeed ett tie os Se
55la
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“The Department is developing public transporta-
tion programs, but no matter what is done, individual
cars will be used for the foreseeable future. The New
Jersey Energy Office and the Tri-State Regional
Planning Commission have publicized statements in-
dicating that congestion, as opposed to free-moving
traffic, increases pollution.
“3. Some groups say the highway safety and im-
provement bond issue would do nothing for mass
transit. Is that true?
“The most vital and widespread form of mass
transit now and in the foreseeable future is the bus.
The bus travels on highways.
“4. If the highway projects are so important, why
aren't you wiiling to make this a combined highway-
public transit bond issue, if only to get the support
of the public transit advocates, and thereby give the
highway portion a better chance of approval?
“As explained, it would be irresponsible to request
funds now, for a public transportation bond issue as
the public transportation money is not needed now,
Proposing a combined highway safety and improve-
ment public transit bond issue to win support of the
public transit advocates and environmentalists would
not be honest. A serious problem in government
today is the inability of the citizens to trust public
officials. In the long run such tactics would result
in the Department losing credibility and support for
all future efforts.” (Stip. 36-39) * * *
B. The Energy Crisis
1. On February 4, 1974, the New Jersey Legislature
enacted the Emergency Energy Fair Practices Act of
552a
Excerpis From Stipuation Among Counsel
Dated December 20, 1974
1974 (L. 1974, e. 2, amended and supplemented by L. 1974,
ce. 6). Section 2 of this Act stated: “The Legislature finds
and determines that because of world conditions and the
manner in which energy sources and fuels are allocated and
distributed that an energy shortage now exists and may
continue for the foreseeable future.” Section 3 of the Act
authorized the Governor “to proclaim by Executive Order
the existence of an energy emergency” and to establish a
State Energy Office and appoint an Administrator with
broad powers to control the use and distribution of all
fuels.
2. On February 5, 1974, Governor Byrne issued Execu-
tive Order No. 1 in which he proclaimed the existence of
an energy emergency, created the State Energy Office and
established the position of Administrator of that Office.
3. On or about March 14, 1974, a civil action entitled
Byrne, et al. v. Simon, et al., Civ. No. 74-372, was instituted
in the United States District Court for the District of New
Jersey in which the complaint alleged that the State of
New Jersey had not received from the Federal Energy
Office an equitable allocation of gasoline for the month of
March 1974.
4. In support of an application for an Order to Show
Cause, plaintiffs in Byrne v. Simon submitted an affidavit
dated March 13, 1974 by Richard W. DeKorte, who had
been appointed Administrator of the New Jersey Energy
Office. Paragraph 4 of that affidavit stated:
“In many communities there were wholesale clos-
ings of service stations. As a result, large numbers
of people were totally unable to obtain gasoline and
therefore were prevented from either engaging in
553a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
their respective employments or from obtaining nec-
essary food supplies, medical services, and other
necessities of life. An already high unemployment
rate was threatened with further increases. This
was due to the fact that many employers were not
able to obtain deliveries of necessary products and
were faced with situations where many employees
were either tardy or not coming in at all. Obviously,
there were severe economic dislocations in the busi-
ness community.
“In those areas where a few retail gasoline sta-
tions were in fact open, it was commonplace to ob-
serve long lines of cars extending on to the public
roads of New Jersey that were waiting for gasoline.
Ingress and egress to homes and commercial estab-
lishments on many occasions were blocked. Traffic
on said roads were severely disrupted. The threat of
serious accidents not only to property but more im-
portantly to life was constantly present. And ten-
sions and emotions were rising to dangerously high
levels. State and local law enforcement personnel
were on alert in order to be prepared for public
safety problems of the worst magnitude.
“Emergency services were severely cut back. It
was not uncommon to learn of local law enforcement
personnel, first aid personnel, and fire fighting per-
sonnel that were not able to obtain sufficient quanti-
ties of motor gasoline that allowed them to be
anywhere near the minimum state of readiness
that is necessary for them to carry ovt their
responsibilities.”
554a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
There is no shortage of gasoline in the State of New J ersey
as of December, 1974.
5. In a news release issued on December 3, 1973 the
Regional Plan Association commented on the relationship
of the energy crisis to transportation [in the tri-state New
York urban region]: (Stip. 43-45) * * *
“ENE AGY FOR TRANSPORTATION
“Fuel for transportation has shown the second
largest absolute growth, following that for electricity
generation.
Passenger
“Passenger transportation consumption rose from
367 trillion Btu of gross input in 1950 to 904 trillion
Btu in 1970. This increase is attributable to five
PO BS, tS en ae
5558
Excerpts From Stipulation Among Coumsel
Dated December 20, 1974
“5 The increasing energy-intensity of each mode
of travel—more gasoline needed per mile—because
of higher performance, more air conditioning, ete.
explains 10 percent.
Energy Use of Modes of Travel
“Bus is the least energy-intensive mode, requiring
about 2,300 Btu per passenger mile of travel.
“Rail, combining both electric and diesel-electric
traction, uses 2,600 Btu of Gross input per passenger
mile but carries passengers more than three times
faster than a bus in return for the 15 percent higher
use of energy per passenger.
“Subways, with 3,100 Btu per passenger mile, are
more energy-intensive because of the stop-and-go
operation, which wastes much energy in braking.
factors: : New devices to eliminate some of this waste are
“1. Population growth accounts for 32 percent of : being tested by the Metropolitan Transportation
the increased consumption. Authority.
“2. More autos per capita and longer trips 2 “Auto, using 6,500 Btu per passenger mile in 1970,
(mostly A re ee ty more oy of travel per i was twice as intensive as the subway.
person, which explains reent of the increase in i ; .
fuel use. The ct ‘with which people make ; “Air, using 11,600 Btu per passenger mile, uses
trips increased somewhat, mostly due to wider auto- ; twice as much energy as the auto.
mobile ownership. The length of the average trip j “Tazi-cabs and private airplanes (general avia-
increased considerably mostly due to more trips to : tion) are most energy-intensive.” (Stip. 48-49) * * *
and from points outside the Region. “ a
“3. The shift away from buses and rail vehicles 6. The United States consumes 18 ——n re : od
toward more energy intensive modes, such as autos, petroleum a day, but produces only a meee , =
and airplanes, accounts for 20 percent of the increase. barrels from domestic sources. The difference is made up
i ’ idental Message to Congress on the En-
“4. Declining vehicle oocupancy—fewer persons by imports. Presiden ge
per car, per bus or rail car, accounts for 12 percent.
556a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
ergy Crisis, U.S. Code. Cong. and Admin. News, 93rd Cong.,
2d Sess. at 31, 32 (Feb. 21, 1974, monthly ed.)
7. President Nixon went on to say:
“We must also face the fact that when and if the
oil embargo ends, the United States will be faced
with a different but no less difficult problem. For-
eign oil prices have risen dramatically in recent
months. If we were to increase our purchase of
foreign oil, there would be a chronic balance of pay-
ments outflow which, over time, would create a severe
problem in international monetary relations.” ibid
at 36.
8. President Nixon also noted that the United States
would “continue to be vulnerable to interruptions of for-
eign imports.” ibid.
9. President Nixon further noted that Project Inde-
pendence had been put forward to phase out dependence
upon high priced foreign oil, with its attendant risk of
economic breakdown at the will of oil producers. Project
Independence entails three concurrent tasks: expansion of
domestic energy supplies; conservation; and new energy
research. On conservation, the President wrote, “We must
reduce demand by eliminating non essential energy use and
improving the efficiency of energy utilization.” ibid. Presi-
dent Nixon stated: “It is now widely recognized that the
development of better mass transit systems may be one of
the key solutions to both our energy and environmental
problems.” ibid at 42. (Stip. 50-51) * * *
12. According to figures compiled from Survey of Cur-
rent Business, and BP Statistical Review, automotive gaso-
line comprises roughly 40% of the total demand for oil.
.
dt Rae oe
Cnc ae a
557a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
C. Health and Environmental Factors
1. In 1950, pursuant to a resolution of the Senate and
General Assembly, a legislative commission was created to
study air pollution in New Jersey and to recommend legis-
lation. (House Concurrent Resolution No. 16; Senate Con-
current Resolution No. 9, 1951)
2. The commission referred to in the immediately pre-
ceding paragraph issued a report to the New Jersey State
Legislature in March, 1952 which included a review of air
pollution conditions and legislation in other states and rec-
ommendations for air pollution abatement legislation in
New Jersey. The 1952 report pointed out that air pollu-
tion was caused by a variety of activities and that industry
alone was not responsible for it (Report, p. 28). The 1952
report specifically noted that emissions from automobiles
contributed to air pollution. (See, for example, Report pp.
38, 67)
3. New Jersey enacted in 1953 The Smoke Control Code
of New Jersey, N.J. Rev. Stat. 26:3-69.6, which prohibits
emission of smoke of a certain density. The Smoke Con-
trol Code of New Jersey was subject to adoption by refer-
ence by local Boards of Health and was not enforceable
until adopted.
4. The New Jersey Bureau of Adult and Occupational
Health instituted in 1953 a comprehensive air sanitation
program. The three objectives of that program were to
assist in the establishment of local control of air pollution,
to conduct air sanitation research, and to provide technical
and scientific assistance in solving the problem of excessive
air pollution.
58a
Excerpts From Stipulation Among Counsel
Dated December 206, 1974
5. In 1954, the New Jersey Air Pollution Control Act
was enacted into law (Chapter 212, Laws of New Jersey
of 1954). Under its provisions, an Air Pollution Control
Commission was appointed by the Governor as an agency
of the State Department of Health. The Commission was
empowered to promulgate and amend codes to control and
prohibit air pollution in the State. The State Department
of Health had the responsibility of controlling air pollution
in accordance with any code, rule or regulation promul-
gated by the Commission.
6. President Dwight Eisenhower in 1955 noted in his
special health message:
“As a result of industrial growth and industrial
development, the atmosphere over some population
centers may be approaching the limit of its ability to
absorb air pollutants with safety to health.”
Congress enacted in the same year the Air Pollution Con-
trol—Research and Technical Assistance Act which autho-
rized the Department of Health, Education and Welfare,
through the United States Public Health Service, to utilize
the resources of the Federal Government and to cooperate
with State and local governments and educational institu-
tions in the preparation and execution of programs of
research into the problem of air pollution. Senate Report
No. 389, May 27, 1955 stated that one of the reasons for the
legislation was the serious nature of the air pollution prob-
lem. (Senate Report pp. 2457, 2559)
7. A study was conducted in the summer and fall of
1957 by the Interstate Sanitation Commission of smoke and
air pollution in certain areas of New York and New Jersey.
559a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
The study found, among other things, that, although there
were many sources of air pollution in Newark, the primary
source at the point sampled was traffic gases. The primary
source of air pollution in Manhattan was also found to be
motor vehicle traffic.
“A study of air pollution by the Interstate Sanita-
tion Commission in 1957 confirmed that there is con-
siderable transport of air contaminants across the
New York and New Jersey state boundaries in both
directions, depending on wind and weather condi-
tions.
“The prevailing wind direction is north-westerly.
This means that even if the New York City Depart-
ment of Air Pollution Control were to attain 100
per cent effectiveness in its work against local
sources of air pollution, New York City would still
have an air pollution problem of substantial magni-
tude, and one which will continue to grow.” (Stip.
52-56) °° ©
8. In the 1950’s New York State conducted several state-
wide surveys to assess New York’s air pollution problem.
One of these studies begun in 1952 by the Joint Legislative
Committee on Pollution Control culminated in the passage
of the Air Pollution Control Act in 1957 (Article 12-A,
Chapter 931, Laws of New York). This Act amended the
Public Health Law and was designed to safeguard the
State’s air resources by (a) detecting, controlling or abat-
ing existing air pollution and (b) preventing new air pol-
lution. Administration of the act was delegated to the
Air Pollution Control Board which was created within the
New York State Department of Health. The Board has
560a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
the power to adopt and enforce rules and regulations for
prevention and control of air pollution. Other important
board functions include provision of advisory technical con-
sultation services; development and conduct of demonstra-
tion programs in cooperation with communities; training
local personnel, and supervision of air pollution control
education.
9. In March 1960, the City Administrator of the City
of New York issued a report entitled “Air Pollution Con-
trol: Organization and Operation.” This report stated:
“We find ... there is little evidence of any absolute
decline in the amount of air pollution as a result of
the department’s activities. The best that can be
said is that the volume of pollutants would probably
have been greater if there had been no control pro-
orem...
. . *
15. The United States Clean Air Act, as amended in
1970, requires the Administrator of the Environmental
Protection Agency to establish national primary and sec-
ondary air quality standards for air pollutants. 42 U.S.C.
§1857C-4. Primary ambient air standards shall be such
as “are requisite to protect the public health.” 42 U.S.C.
§1857C-4(b)(1). Secondary ambient air quality standards
“shall specify a level of air quality the attainment and
maintenance of which . . . is requisite to protect the public
welfare from any known or anticipated adverse effects
associated with the presence of such air pollutant in the
ambient air.” 42 U.S.C. §1857-4(b) (2).
16. Pursuant to Section 107(b) of the Clean Air Act,
42 U.S.C. §§1857-1857(1), the Commissioner of the National
Air Pollution Administration has been delegated authority
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Dated December 20, 1974
to issue air quality criteria reports to facilitate formulation
of standards on the basis of up-to-date scientific knowledge
concerning the full range of effects of pollutants. The
National Air Pollution Control Administration issued its
reports, Air Quality Criteria For Carbon Monoxide, Publi-
eation No. AP-62 (1970) and Air Quality Criteria for
Hydrocarbons, Publication No. AP-64 (1970) pursuant to
that authority. The current levels of these pollutants in
the air of the New Jersey-New York-Connecticut metropol-
itan region are in excess of federally-mandated standards.
17. Air Quality Criteria for Carbon Monoxide, National
Air Pollution Control Administration Pub. No. AP-62
(1970), stated that “the largest single source of CO (car-
bon monoxide) is the exhaust of motor vehicles, both gaso-
line and diesel powered.” (AP-62 page 4-2). In the New
York Metropolitan area, an estimated 95.5% of all CO emis-
sions came from transportation. (Ibid. page 4-6). Air
Quality Criteria for Hydrocarbons, National Air Pollution
Control Administration Publication No. AP-64 (1970),
stated that, on average, 70 percent of hydrocarbon emitted
into the air came from transportation sources. (AP-64
page 2-14). (Stip. 58-60) * * *
20. The Federal report on carbon monoxide found that
low concentrations of COHb [earboxyhemoglobin] in the
blood of experimental subjects produced impairment in
time-interval discrimination, changes in visual acuity and
relative brightness threshold, and an impairment in capacity
to perform psychomotor tests. (AP-62 at pages 8-51, 8-52).
21. The Federal report on carbon monoxide found that
the following cardiovascular changes have been observed
at COHb levels above 5%:
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“Increased cardiac output, systemic arterio-venous
oxygen-content differences, systemic oxygen extrac-
tion ratios, myocardial arterio-venous oxygen-con-
tent difference, and coronary blood flow in patients
without coronary heart disease.” (AP-62 at page 8-
52).
22. The Federal report on carbon monoxide noted that
“the population group most susceptible to the ad-
verse effects of atmospheric CO can be predicted on
a physiological basis to include those persons most
sensitive to a decrease in oxygen supply: (1) people
with severe anemia due to the already limited supply
of oxygen-carrying hemoglobin; (2) those with
cardiovascular disease and the resultant impairment
of circulation; (3) those with abnormal metabolic
states such as thyrotoxicosis or fever, which result in
increased oxygen demands; (4) those with chronic
pulmonary disease; and (5) the developing foetus.”
(AP-62 at page 9-8).
23. The Administrator established national primary and
secondary ambient air standards for carbon monoxide
which he judged necessary to “protect the public health.” 40
CFR §50.2. The standards call for concentrations no
greater than 10 mg. per cubic meter (9 parts per million)
at a maximum eight hour concentration not to be exceeded
more than once a year, and 40 mg. per cubic meter (35 parts
per million) at a maximum one hour concentration not to be
exceeded more than once a vear. 40 CFR § 50.8.
24. The Federal report on carbon monoxide noted:
“No long-term human studies on experimental CO
exposures have been reported, although there are
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Dated December 20, 1974
data on occupational exposures. Brief exposures to
high levels of CO have produced effects on the central
nervous, vascular, and respiratory systems.” (AP-62
at pages 8-46)
“In many of the human studies, the brief exposures
to very high levels of CO make it difficult to relate
the observed effects to equilibrium COHb levels. For
long-ierm exposure to CO, certain effects such as
increased )iematocritis, hemoglobin levels, and blood
volume may be present, but the available data are
inadequate to draw firm conclusions concerning the
significance of all of these changes.” (AP-62 at
pages 8-51)
“Long-term experimental exposure of humans to
CO may produce certain adaptive effects such as in-
creased hemoglobin levels and hematocritis, but tle
available data are inadequate to draw firm conclu-
sions. Such effects have been observed in animals.
There is a definite need to further evaluate the effect
of cigarette smoking on the central nervous system
and cardiovascular system, as wel] as the possible
‘adaption’ of the cigarette smoker to CO.” (AP-62 at
pages 8-52)
“Research on the physiology of CO in the human
body has provided considerable information on both
endogenous CO production and on the effects of CO
at various cellular and microcellular levels. Our
knowledge of the effects of CO on enzyme systems
and tissue oxygenation, however, is far from com-
plete. In addition, mechanisms of CO catabolism in
the body remains undefined. The uptake of CO dur-
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
ing varying time periods and with changes in activ-
ity must be further demonstrated.
“Studies of the effects of CO on human behavior
and performance need both clarification and replica-
tion. Definition and sophistication of parameters
sensitive to changes in blood hemoglobin merit con-
siderable attention as a prerequisite to better defin-
ing the influence of CO on human performance.”
(AP-62 at page 10-5)
25. The federal report on hydrocarbons, National Air
Pollution Control Administration Publication No. AP-64,
covers “the class of hydrocarbons . . . which exist in the
atmosphere in the gas phase.” The report notes that
“[mjany of these compounds may enter into atmospheric
photochemical reaction processes leading to the products
and manifestations associated with photochemical air pol-
lution.” (AP-64 at page 2-1). Motor vehicles are respon-
sible for 49 percent of hydrocarbon emissions. (AP-64 at
page 2-12).
26. The hydroearbon report notes that “health effects
(including eve irritation), vegetation damage, material
damage, and visibility reducton have all been associated
with the products that result from the interaction of hydro-
carbons within the nitrogen dioxide atmospheric photolytic
evele.” (AP-64 at page 5-1). (Stip. 61-64) ***
28. The Administrator of the Environmental Protection
Agency set national primary and secondary ambient air
. quality standards for hydrocarbons which he judged neces-
sary to “protect the public health”. 40 CFR § 50.2 et seq.
These standards call for maximum concentrations of 160
mg. per cubic meter (0.24 ppm) for a three hour concen-
tr eee
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Dated December 20, 1974
tration (6-9 A.M.) not to be exceeded more than once a year.
40 CFR § 50.10. Implementation of this standard is neces-
sary to achieve the national standards for photochemical
oxidants, which are produced by reactions with hydrocar-
bons. The national primary and secondary air quality
standards for photochemical oxidants call for concentra-
tions of 160 mg. per cubic meter (0.08 ppm) maximum one
hour concentration, not to be exceeded more than once per
year. 40 CFR $50.9. (Stip. 65)* * *
The [hydrocarbon] report concluded that:
“Our present state of knowledge does not demon-
strate any direct health effects of the gaseous hydro-
carbons in the ambient air on populations, although
many of the effects attributed to photochemical smog
are indirectly related to ambient levels of these
hydrocarbons.” (AP-64 at page 8-4&5)
“« .. it has been demonstrated that ambient levels
of photochemical oxidants which do have adverse
effects on health, are a direct function of gaseous
hydrocarbon concentrations; and when promulgating
air quality standards for hydrocarbons, their contri-
bution to the formation of oxidants should be taken
into account.” (AP. 64 at page 8-5).
30. Pursuant to section 107(a) of the Clean Air Act, as
amended, the Administrator of the Environmental Protec-
tion Agency is required to “designate as an air quality con-
trol region any interstate area or major intrastate area
which he deems necessary or appropriate for the attain-
ment or maintenance of ambient air quality standards.” 42
U.S.C. § 1857C-2(e).
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Dated December 20, 1974
31. Exercising his administrative authority, the Admin-
istrator has designated the New Jersey-New York-
Connecticut Interstate Air Quality Control Region. The
region comprehends most of the Port District, including
Bergen, Essex, Hudson, Middlesex, Monmouth, Morris,
Passaic, Somerset and Union Counties as well as extensive
sections of Connecticut and New York State. 40 CFR
§ 81.13.
32. Section 107(a) of the Clean Air Act, as amended,
provides that “each State shall have the primary responsi-
bility for assuring air quality within the entire geographic
area comprising such State by submitting an implementa-
tion plan for each State which will specify the manner in
which national primary and secondary ambient air quality
standards will be achieved and maintained within each air
quality control region in such State.” 42 U.S.C. § 1857C-2
(a).
33. Pursuant to Section 107 of the Clean Air Act, as
amended, the Administrator shall, if a State does not sub-
mit an implementation plan, or submits an inadequate plan,
and subject to certain opportunities for extension,
formulate his own implementation plan to achieve the
national ambient air quality standards in the affected part
of the air quality control region. 42 U.S.C. § 1857C-5(c).
34. The State of New Jersey has not formulated a plan,
satisfactory to the Administrator, to achieve compliance
with the federally mandated national ambient air quality
standards for carbon monoxide or photochemical oxidants
(hydrocarbons) within its portion of the New Jersey-New
York-Connecticut Air Quality Control Region.
35. The Environmental Protection Agency on November
13, 1973 promulgated implementation plans for New Jersey
567a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
dealing with carbon monoxide and hydrocarbons as set
forth in 38 Federal Register 31388 to 31400. Since that
date many changes have been made, most of them post-
poning dates of compliance. Negotiation between the
Federal Environmental Protection Agency and the Depart-
‘ment of Environmental Protection is going on to determine
whether other changes are to be made. Judicial notice may
be taken of the Plan and related materials in the Code of
Federal Regulations and the Federal Register.
The State has openly opposed many of the provisions of
the proposed plan. There does not appear to be a present
intention on the part of the New Jersey authorities charged
with air quality control to submit an alternative plan.
36. Since February 1, 1974, when the New Jersey man-
datory auto emission testing program went into effect there
has been a 20% reduction in carbon monoxide concentra-
tion in New Jersey’s air. Reporting on this accomplish-
ment, Russell E. Train, Environmental Protection Agency
Administrator, praised New Jersey as a national leader in
air pollution control. A spokesman for the State Bureau
of Air Pollution Control stated that the 20% reduction in
carbon monoxide levels brought the content of the con-
taminant from four parts per million in the first six months
of 1973 down to 3.3 parts per million in the first six months
of this year. The spokesman said that the improvement in
air quality is bringing the State closer to the standards the
federal government has told New Jersey to meet by 1977.
However, he noted that the State may have to take further
steps to reduce air pollution caused by auto emissions to
meet the stringent requirement.
There was a similar decline in carbon monoxide concen-
tration in New York City, which does not have an automo-
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
tive emission testing program. At the Queensboro Bridge,
carbon monoxide concentrations were 20.8 parts per million :
in June 19/3 and 15.5 parts per million in June 1974, a 25 !
per cent improvement. In February 1973, the figure was 15.9, |
while in February 1974 it was 13.5. On Canal Street, the
—earbon monoxide reading in January 1973 -was-9:6-and in 7
January 1974 it was 7.1. In June 1973 the concentration was
9.3 and in June 1974 the concentration was 10.1. Accord-
ing to an article appearing in the December 3, 1974 issue
of The Star Ledger, New York Environmental Protection
“officials confirmed that auto pollution was less during the
period of the gas shortage.” The article also stated:
“Having only 10 months’ experience with manda-
tory emission control testing, and this coinciding with
a period of generally curtailed driving because of an
energy crisis, neither federal EPA nor [New Jersey ]
DEP officials can make a convincing case for the
experimental program.”
III. History or Rapw Transit in THE Port District.
A. Prior to 1962.
1. Chapter 591 of the Laws of New York of 1921 created
a commission to prepare “a preliminary plan and report,
including estimates, for the combination, improvement and
extension of existing rapid transit railroads, street surface
railroads, and * * * omnibus lines and any railroad used
for local service, operating between a point or points with-
in the city of New York and a point or points within the
county of Westchester, * * * and for otherwise improving,
by new construction or otherwise, the transportation facil-
ities between the city of New York and the county of West-
chester.”
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
2. Chapter 104 of the Laws of New Jersey of 1922
established a commission to study and report upon plans
for providing a comprehensive scheme of rapid transit
between various communities in northern New Jersey and
the City of New York. The preamble to the aforesaid act
eontained legislative findings as follows:
“Whereas, By act of the Legislature entitled ‘An
act to authorize a commission to enter into compact
or agreement with the State of New York for the
development of the port of New York,’ passed April
seventh, one thousand nine hundred and twenty-one,
a commission now exists for the development of a
comprehensive plan for the development of said
port; and
“Whereas, Said comprehensive plan in its con-
sideration of transportation problems does not
include the problem of passenger traffic in the terri-
tory covered by said port development plan; and
“Whereas, S.'d problem of passenger traffic
should be considered in co-operation with the port
development commission so as to develop an effi-
cient system of rapid passenger transit between the
New Jersey municipalities lying within the territory
covered by said port development plan and between
said respective municipalities and the city of New
York.”
3. Pursuant to the aforesaid statute and subsequent
joint resolutions passed by the New Jersey Legislature, a
North Jersey Transit Commission undertook a compre-
hensive study of the rapid transit needs of a nine county
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
area of New Jersey. The 1925 report of the Commission
stated:
“cc
- New Jersey must give immediate and thought-
ful cons deration to its transit problem in order that
its growth and prosperity shall be continued and in
order that its natural development may not be
retarded.
‘ ; ,
‘Already the nine northern counties of New
Jersey are confronted with a serious situation and
that situation is growing more serious each year.
“If the solution of the transit problem is delayed
longer . . . (t)he result would be disastrous to New
Jersey.
“This transit problem is one of great magnitude
and many complexities. Its solution lies almost as
much on the New York side of the river as in New
Jersey.
“The State of New Jersey must change the present
inharmonious, inefficient and almost impossible
transit chaos to a comprehensive, efficient and work-
able whole that will adequately serve commuters
to New York as well as properly build up this sec-
tion of the State.”
The report favorably considered the establishment of a
double loop system connecting all the railroads of North
Jersey to a direct New York City system running from
lower Manhattan to 59th Street.
4. On January 15, 1926, the North Jersey Transit Com-
mission presented a comprehensive plan to meet the mass
end
Pe ae
57la
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
transit crisis of northern New Jersey. The 1926 report
stated that:
“Northern New Jersey has an acute transit
problem.
“The need fur relief is so urgent that temporary
measures must be resorted to at once if permanent
and more comprehensive plans cannot be carried
out in the very near future.”
The 1926 report recommended an Inter-State Loop Line,
a Meadows Transfer Station, direct rapid transit access to
New York City, Hudson and Manhattan Railroad exten-
sions in New Jersey and the extension of New York rapid
transit service to New Jersey. (Stip. 66-73)
7. In 1927 the New Jersey Legislature, stating that it
was acting “under and pursuant to the provisions of the
[Port Authority] compact,” “authorized and directed” the
Port Authority “to make such plans for the development
of said district supplementary to or amendatory of the
comprehensive plan heretofore adopted by the Legislatures
of the two States ... as will provide adequate interstate
and suburban transportation facilities for passengers trav-
eling to and from one State to the other within the said
district, and from one part of the said district to another,
sometimes referred to as commuter or suburban passenger
traffic, to the end that travel between the various parts of
the port district may be made more convenient, practicable
and economical for those residing in one region in the
port district and doing business in another region thereof.”
The Port Authority was also directed to “submit, as a part
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
of its report, a legal plan for the financing of the said im-
provements through the Port of New York Authority as
the corporate municipal instrumentality of the two States
or otherwise.” This legislation, which became Chapter 277
of the Laws of New Jersey 1927, was signed by Governor
Moore of Jersey and was approved in 1928 by the New
York Legislature but was vetoed by Governor Alfred E.
Smith, who issued the following statement in support of his
veto:
“Not APPROVED.
“This bill aims to authorize and direct the Port
of New York Authority to study the interstate sub-
urban passenger problem of the metropolitan dis-
trict with a view to enlarging the comprehensive
port plan so as to comprehend suburban traffic
relief.
“There can be no question as to the urgent need
of working out a solution of the suburban passenger
traffic problem in the metropolitan district. The
present railroad stations and traffic facilities in New
York City, so far as suburban transportation is con-
cerned are already hopelessy inadequate and no
hope for the future lies in the efforts to expand
these facilities. On the other hand, I am satisfied
that no solution can be found by merely dumping
suburban passengers at the out'ying parts of the
city and forcing them into the already overcrowded
city subway and elevated systems. Some solution
must be found along the lines of an entirely new sub-
urban subway system through which suburban
trains can be operated connecting New Jersey,
Westchester and Long Island with New York City
ee ee ee
MO cy te Ne tS Me eh a
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:
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Dated December 20, 1974
and with each other. Various attempts to solve this
problem have been made through special legislative
commissions and through private agencies and or-
ganizations. The solution now proposed is that the
Port of New York Authority finance these facilities
through the issuance of bonds similar to the bonds
issued to finance the various Hudson River and
Staten Island bridges.
“No one can question my interest in and support
of the Port of New York Authority. I was a mem-
ber of this authority by appointment of Governor
Miller between my first and second terms as Gov-
ernor and represented the authority at Aibany when
the comprehensive plan for port development was
adopted by our State Legislature. I have been and
am vitally interested in carrying out this compre-
hensive plan. It has been a source of great satisfac-
tion to me to see the soundness of the financial prin-
ciples back of the Port Authority demonstrated in
the building of the great bridges which are now un-
der way. On the other hand, it has been a great dis-
appointment to me to find that the opposition of the
railroads has prevented to date the making of real
progress in working out the program of freight
distribution in the port which always has been the
main object and purpose of the Port of New York
Authority. I am satisfied that the Port Authority
should stick to this program and I am entirely un-
willing to give my approval to any measure which
at the expense of the solution of the great freight
distribution problem will set the Port Authority off
574a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
on an entirely new line of problem connected with
the solution of the suburban passenger problem.
“For the above reasons, the bill is disapproved.
(Signed) ALrrep FE. Smrrn”
The Port Authority’s 1928 Annual Report stated:
“In its last annual report, the Port Authority ad-
vised that creation of the Suburban Transit Engi-
neering Board had resulted in wholehearted coop-
eration between the various public agencies of the
Port District and the railroads concerned with the
problem, and recommended that the cooperative
efforts of these associated interests being devoted
to a solution of this difficult problem, be fostered and
encouraged, and further suggested as a helpful
measure to this end, the passage of legislation by the
State of New York concurring with New Jersey in
its direction to the Port Authority, as contained in
Chapter 277, Laws of 1927.
“An appropriate bill to this end was passed by the
New York Legislature at the 1928 session but met
with the Governor’s veto. This failure of this legis-
lation resulted in no funds being made available to
the Port Authority for specific purposes of suburban
rapid transit.
“However, upon mature consideration, the Com-
missioners of the Port Authority resolved to con-
tinue the Suburban Transit Engineering Board and
its support thereof to the extent funds available
might permit. The reasons therefor are contained
in the following resolution adopted at a meeting of
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Dated December 20, 1974
the Commissioners, June 11, 1928, which provided
in part:
“Since the adoption in 1922 of the statutory Com-
prehensive Plan by the two states, dealing with the
transportation of freight, the States of New York
and New Jersey have, by various acts, added to the
said Plan the building and operation by the Port
Authority of four bridges over which passengers are
to be carried by vehicles and/or rail;
“The Commissioners of the Port Authority have
found in their studies that no adequate or effective
interstate transportation development can take place
without taking full account of transportation of pas-
sengers as well as of freight throughout the Port
District;
“At many points in the statutory Comprehensive
Plan, problems arise as to which rail or bridge facil-
ities shall be used primarily for freight or primarily
for passenger service, and which for both.” (Stip.
75-78) ° * °
10. On February 27, 1928, the North Jersey Transit
Commission issued its annual report for the year 1927. The
report recognized :
“. . the growing impatience of the public with
the discomforts, indecencies, delays and money
losses caused by present means of travel .. . and is
prosecuting its work with due regard to the urgency
of the problem.
576a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“Better transportation for some 350,000 daily com-
muters between their homes in this state and their
work in New York... is an acute present problem,
the solution of which is vital to the welfare of an
army of our citizens.”
The report noted “with keen satisfaction ... a significant
achievement during the past year in respect to the com-
muter problem”—during a conference between the North
Jersey Transit Commission and the Commissioners of the
Port Authority, “decision [was] reached that the bi-state
character of the Port of New York Authority enabled it to
function admirably as a co-ordinating agency between the
various official bodies severally engaged in the study of
the commuter problem in different parts of the Metropoli-
tan District of New York and New Jersey.” The report
announced the formation of the Suburban Transit Engi-
neering Board (including the Port Authority) to act as a
central agency of transit commissions, railroads, and allied
state bodies concerned with the problem of commuter trans-
portation. Negotiation between the North Jersey Transit
Commission and the Port Authority brought about a con-
tract between the two agencies under the terms of which
financial support was jointly provided for the Suburban
Transit Engineering Board. The formation of the latter
Board permitted the North Jersey Transit Commission to
devote its entire effort toward the development of a New
Jersey system leaving the interstate problem to the Subur-
ban Board, which included the Port Authority. ( Stip. 79-
80) . ° *
23. Ina 1951 report [submitted to Governor Driscoll, L.
Alfred Jenny, consulting engineer] traced the history of
previous plans to develop rapid transit facilities commenc-
ee oe
tN a pal PONT RY Fe oe,
i ly Kae eee
577a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
ing in the 1890’s. Mr. Jenny listed 16 separate plans,
including six of his own between 1921 and 1951. Mr. Jenny
noted that the 1920 Plan of the New York-New Jersey Port
and Harbor Development Commission (the “Red Book”)
had stated, “Our Port problem is primarily a railroad prob-
lem... therefor, the comprehensive plan to evolve which
this Commission was created is essentially a railroad plan.
... A complete reorganization of the railroad terminal sys-
tem is the most fundamental physical need of the Port of
New York. ... The most pressing element of the entire
port problem is that of railroad service to and from Man-
hattan.” Mr. Jenny further noted that “although 30 years
have elapsed since, and our problem has grown very much
worse, we still have done nothing to solve it.” Noting that
the Port Authority’s March 1, 1937 report had stressed the
desirability of the development of rapid transit facilities
for northern New Jersey, Mr. Jenny stated: “This sound
advice was given a decade and a half ago, yet no one has
paid any attention to it, not even the Port Authority itself.
On the contrary, it has actually worked for more highway
traffic, which it had admitted would never solve our prob-
lem, and even today, it is talking of building more vehicular
facilities instead of endeavoring to do the railroad job it
was created to do over three decades ago.” Mr. Jenny
also noted that on December 1, 1950, a commuter organiza-
tion of passengers of the Central Railroad had issued a
report, following a conference with Port Authority officials,
which stated, “The general aim of the Port Authority
seemed to be that of avoiding transit problems.” In refer-
ence to the existing situation he stated:
“For three decades we have been making plans,
and spending money in an effort to solve this prob-
578a
Excerpts From Stipulation Am
ong Counsel
Dated December 20, 1974
lem. All we have to show for this effort is a series
of partial and ineffective and expensive solutions,
and a few overall and coordinated plans. However
none of these have even been accepted as the sla.
tion, to say nothing of having any part of these plans
effectuated. We are, therefore, no better off today
than we were 30 years ago when the two states
decided that the problem was so serious as to war-
rant the creation of an Authority to solve it.
“Today the situation is very much worse than it
was 20, or even 10 years ago. Some railroad tracks
have been taken up, many trains have been elimi-
nated and in some cases as many as 50% fewer trains
are being run than was the case 3 decades ago, while
in some instances we only have about 10% as many.
or even fewer, trains than we had then. Fares hove
more than doubled in the meantime, and train speeds
have been reduced. Anyone with the understanding
of the economic need of these regions must agree
that w° can not tolerate this condition any longer
We must take positive and effective action.
“ . . We must stop trying to solve this vast and
serious problem by introducing ineffective and poorly
conceived half-way measures, and which always
showed a large deficit, and we must undertake the
task of solving it in the only and proper manner in
which it can be solved. We must provide an overall
solution, throughly coordinated, and include therein
all possible revenue producing features and arrange
the facilities in such a manner that the best possible
and maximum use can be made. We must also stop
using the poorly conceived projects as a base for
Bi! oi ie eS
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;
579a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
discussion, as has too often been done, and then
simply say, it cannot be done. That is a very poor
excuse for the past failure to produce the proper
facilities.” (Stip. 93-95) * * *
36. In the 1958 session of the New Jersey State Legis-
lature, Assembly Bill No. 16 was introduced which provided
that the Port Authority would take over and financially
develop, improve and operate the interstate rapid rail
transportation of passenger traffic between New Jersey and
New York. In response to this bill, the Port Authority sub-
mitted a statement by its Commissioners on November 24,
1958. In a letter accompanying its statement, the Port
Authority summarized its position:
“At the outset we must state, as we have stated
repeatedly in the past, that we are unanimously op-
posed to the adoption of Assembly No. 16 or any
legislation which would attempt to involve the Port
Authority in any way in the deficits of rail rapid
transit.
“Our letters of May 29 and September 11 and the
attached statement, all contain detailed facts and
figures that completely refute the unsound, impracti-
cable and legally impossible recommendations of
Assembly No. 16, which would attempt to direct the
Port Authority to take over, finance, develop, im-
prove and operate ‘rapid rail transportation of pas-
senger traffic’ in the Port of New York District.
es @ e
“In our judgment, any involvment of the Port Au-
thority in rapid transit would have disastrous con-
sequences for the people of the two States and for
580a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
their joint heritage,—the Port District of New J ersey
and New York. Such involvement would cause the
Port Authority to default on contractual commit-
ments which the Port Authority must honor for the
continued development of the public facilities of the
Port District-—land, sea and air—which will require
the Authority to borrow over $700,000,000 of capital
funds during the next five years. These contractual
commitments, made with the express authorization
of the two States, involve the following of our
facilities :
Elizabeth-Port Authority Piers
Brooklyn-Port Authority Piers
Port Newark
George Washington Bridge
(second level, plaza improvements and
approaches)
Washington Heights Bus Passenger Facility
Bergen County Expressway
New York International Airport
Newark Airport
La Guardia Airport
Narrows Bridge
Erie Basin-Port Authority Piers
“Tn addition, any involvement of the Port Author-
ity in rapid transit could well lead to the destruction
of the Port Authority as a useful agency of the two
States for the continued development of essential
facilities on a self-supporting basis and without
burden to the general taxpayer.
“Tt has been suggested: (1) that the heavy deficits
of the New Jersey commuter railroads and the cost
HAE Al el
i
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:
:
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58la
Excerpts From Stipulation Among Counsel
. Dated December 20, 1974
of developing a new and comprehensive rapid transit
system should be assumed by the Port Authority,
which could absorb these deficits by use of revenues
from its present operations; and (2) that if these
rail transit deficits—present and future—proved to
be more than the Port Authority’s overall revenues
could absorb, they could be ‘made up’ by increasing
the existing Hudson River tolls and discontinuing the
present commutation rates across the George Wash-
ington Bridge and through the Holland and Lincoln
Tunnels. It also has been suggested that such deficits
could be made up by increasing the charges at Port
Authority terminal facilities. Another suggestion
calls for a bi-State (New Jersey, New York and Con-
necticut) subsidy to the Port Authority to make up
the operational and capital deficits of rail transit.
“By way of summary of our previous communica-
tions and our current statement, we must respectfully
submit to your Committees again that:
“1. It is legally, financially and contractually impos-
sible for the Port Authority to assume the rail-
roads’ increasingly heavy deficits from all or
part of commuter operations, or the cost of
developing a new and comprehensive interstate
rail rapid transit system.
“2. Kiven if it were legally and contractually pos-
sible, very quickly the assumption of rail transit
deficits by the Port Authority, the self-support-
ing agency of the two States, would cripple and
destroy the Authority’s credit. It would thereby
bring to a halt the program now being carried
out by the Port Authority on behalf of the two
582a
Excerpts From Stipwation Among Counsel
63.
4.
as
Dated December 20, 1974
States for the continued development of their
essential public marine and inland terminal facil-
ities, airports and interstate arterial systems.
The imposition of the deficit financing of rail
transit upon motorists would constitute an un-
fair tax upon a particular group of citizens. A
toll increase to 75 cents for all automobiles,
including those of regular commuters, and a cor-
responding increase for all other users of the
Hudson River crossings would be required just
to meet the 1957 deficits of the New Jersey com-
muter -railroads. If these deficits were to be
viewed realistically to include the financing of
rapid transit deficits in New Jersey, New York
and, as has been suggested, in Connecticut, the
users of the Hudson River crossings, and we
presume, other river crossings and turnpikes in
the tri-State area, would have to pay a bill for
railroad and transit deficits amounting to a sum
that might reach as high as $150 million a year.
It is impossible, as has been suggested, for the
Port Authority to alter existing contracts for
charges to users of Port Authority airports,
truck terminals, bus terminals, and marine
terminals, in any attempt to impose upon them
a part of the rail transit deficits. These charges
have been established by leases and agreements
which may not be altered unilaterally.
A New Jersey subsidy of the Port Authority
for rail rapid transit purposes is a proposal
that commuter deficits be paid by the taxpayers.
eT eb ee ee
583a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
We find it difficult to believe that this Legisla-
ture would support a bill that proposed that the
taxpayers of the State of New Jersey should
subsidize Port Authority operation to the extent
of from $12 million to $20 million or more a
year. Furthermore, the Port Authority would
cease to be an effective instrumentality of the
two States if it were to become a subsidized
agency.
“In the attached statement we set forth our de-
tailed reasons for these conclusions and describe how
the Port Authority finances its projects, the way in
which the market for its revenue ponds operates,
and the projects to which it is committed over the
next five years. Our statement also demonstrates
the legal and financial impossibility of the assump-
tion by the Port Authority of any or all of the rail
transit deficits, and reviews how and why the
assumption of such deficits would destroy Port
Authority credit.
“To finance Port Authority projects we must sell
“revenue bonds. The security for such bonds is
limited to the revenues which the Port Authority de-
velops and receives from its public projects and from
the reserves established from those revenues in ac-
cordance with the statutes and our contracts with
our bondholders. People will buy Port Authority
bonds only so long as they have confidence that our
revenues will be sufficient to pay interest and prin-
cipal on such bonds and create sufficient reserves for
protection against contingencies and adverse devel-
584a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
opments that might impair the security of the
Authority’s bonds.
“Under our contracts with our bondholders, the
Port Authority’s reserves and the revenues from
present facilities are pledged and committed. They
cannot, as a matter of law and contract, be diverted
to the development of a deficit rail transit system or
for the underwriting of deficits of the New Jersey
commuter railroads.”
“Two results would flow from such continuing sub-
sidy, possibly unanticipated by their proponents, but
certainly destructive to the continued usefulness of
the Port Authority.
“First of all, prospective investors of Port
Authority obligations would conclude that the sub-
sidized Port Authority operation was only a first
step in a process of involvement, and that an attempt
to divert the reserves and revenues of the Authority
would be certain to follow. No investment counsellor
who has heretofore advised his clients to purchase
Port Authority bonds on the basis of its record of
self-support could so counsel them again in the face
of this threat. Port Authority interest rates would
be forced up at once and at the very minimum cer-
tain public facilities, for which commitments have
been made with the authorization of the two States,
would have to be abandoned becazse the increased
cost of borrowing would put them beyond the possi-
bility of self-support.
“Your Committees well know that the essence of
the Port Authority has been its long tradition of non-
4
g
s.
585a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
political corporate management guided by sound
business principles in the operation of public facili-
ties which have been placed on a self-supporting
basis. This tradition has been respected by succes-
sive administrations of the two States over the past
37 years.
“The Port Authority concept is completely incom-
patible with a power in the Authority to spend tax
monies for the raising of which it would have no
fiscal or political responsibility. In the case of tax-
supported public facilities, the determination of the
many considerations which are involved in their
operation properly lie with the taxpayers who pay
that operation. The Port Authority mechanism,
while dependent on legislative authorization and
gubernatorial control, must weigh operating deci-
sions against their legal, financial and economic im-
plications to the Authority. That mechanism,
therefore, cannot at the same time fit both a sub-
sidized railroad operation and the operations of
self-supporting port facilities. The Authority could
not possibly observe two standards of management
with respect to its operations. The non-business
considerations which are completely correct for set-
ting policy for a tax-subsidized railroad operation
could in no event be kept out of the agency’s other
operations, which would be managed by the same
Commissioners and the same administrative staff.
Thus, the ultimate result of a subsidy would be to
destroy not only the self-supporting financial man-
agement of the Authority but also its managerial
efficiency.”
586a 587a
Excerpts From Stipulation Among Counsel Excerpts From Stimdation Among Counsel
Dated December 20, 1974 Dated December 20, 1974
37. The following is an excerpt from the statement by Funds for purposes relating only to those of its
the Commissioners of the Port of New York Authority bonds secured by a pledge of the General Reserve
dated November 24, 1958: Fund, including purposes relating to facilities
“The Commissioners of the Port Authority are
unanimously opposed to Assembly No. 16 and to any
other legislation which would attempt to involve the
Port Authority in any way in responsibility for
rapid transit.
Port AuTHority AssuMPTION oF Transit DeEFIcrITs
Is LeGaALLy AND FrNaNncIALLy IMPOSSIBLE
“This opposition is based on the conclusion of the
Commissioners that: (1) It is legally, financially and
contractually impossible for the Port Authority to
assume the railroads’ increasingly heavy deficits
from commuter operations or the cost of developing
a new and comprehensive rail rapid transit system;
and (2) The assumption of rail transit deficits by the
Port Authority, the self-supporting agency of the
two States, would immediately cripple and very
quickly destroy the program of the two States now
under way for the continued development of their
essential public port and harbor facilities, airports,
and interstate arterial systems.
“In addition to the General Reserve Fund, various
special reserve funds have been created as a result
of contractual commitments with bondholders in sup-
port of the various issues of Port Authority bonds.
As in the case of the General Reserve Fund, the
Authority may apply moneys in the Special Reserve
financed by such General Reserve Fund Bonds.
“All Port Authority revenues not applied to opera-
tion and maintenance and debt service must be paid
into one or another of these reserve funds. There
are no excess revenues which are free of this con-
tractual commitment to bondholders.
“Generically, Port Authority bonds may be classi-
fied as ‘municipal bonds’. However, the vast major-
ity of municipal bonds are general obligation bonds
secured by the tax levies of the particular unit issu-
ing such bonds. The marketability of such bonds
has little to do with the specific purpose of the partic-
ular issue but rests primarily upon the tax record
and future prospects of the entire community within
the taxing jurisdiction. Unlike tax-supported obli-
gations, however, the marketability of the Port Au-
thority bonds has a very direct relationship to the
facilities for which the borrowing is made.
“Moreover, in addition to the revenue prospects
of the facility itself, the prospective Port Authority
bondholder weighs the financial strength of the Port
Authority by an examination of its record of meet-
ing required and anticipated debt retirement, the
Authority’s reputation for financial management and
its record of administration with respect to the ratios
of expenses to revenues.
“The factors enumerated above can be determined
by examination of the record and simple calculation.
088a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
Not so readily determined and identified, however,
is the ‘confidence’ that the holders of Port Authority
bonds have historically demonstrated. Three fac-
tors have contributed to this confidence. First, all
groups of facilities, including those that were ini-
tially deficit facilities, have been brought into the
area of complete self-support. Second, the Port
Authority has always honored both its express and
implied, obligations to its bondholders. Third, its
management has been characterized by stability and
continuity and its financial policies have earned the
respect of investors.
“Late in 1951 the Commissioners of the Port Au-
thority met again with Governor Driscoll of New
Jersey to discuss a suggestion which had been ad-
vanced that the Port Authority might undertake the
financing of an electrified rail transit system between
New York and New Jersey. The Commissioners
noted the facts developed in the many studies which
had been undertaken, including the conclusions of
the New Jersey Legislative Committee of 1941, and
expressed the conviction that any suggestion that
the Port Authority was about to take over or to be
asked to take over the interstate rapid transit serv-
ice would have a most serious effect on its credit.
“The Port Authority Commissioners pointed out
that the principle of self-support is the whole
strength of the Port Authority’s ability to carry
forward the programs of terminal and transporta-
tion development entrusted to it by the two States
on a revenue bond basis; that the Port Authority’s
—-589a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
credit structure would be seriously impaired if there
was any implication that the Port Authority was
even considering the financing of rail transit; that
any amendments to the Port Compact under which
the Port Authority would have recourse to public
subsidy from tax levying sources in support of its
projects would destroy the entire concept and char-
acter of the Authority.
“Disastrous Errect Upon Port AutTHority CREDIT
“Even if it were possible to ignore the legal and
financial impossibility of the Port Authority assum-
ing responsibility for commuter rail deficits as de-
scribed above, such involvement would have a disas-
trous effect on Port Authority credit. This state-
ment represents not only the considered judgment
of the Commissioners of the Port Authority, but it
is supported by views expressed by other responsible
persons in the investment and banking field, who as
a practical matter, are the controlling influence upon
the receptivity of bondholders to Port Authority
investment. Their views are uniform that the intro-
duction of rapid transit deficits into the Port
Authority’s overall financial responsibility would
have the effect of seriously impairing the Port
Authority’s credit standing.
“For instance, Mr. E. B. Rockwell of Halsey,
Stuart and Company (co-managers of an investment
banking syndicate which consistently bids on Port
Authority bonds) wrote to the Treasurer of the Port
Authority on July 23, 1958 as follows:
590a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
‘In our opinion any assumption of responsibility
on your part for rail rapid transit in the New York
area would, on almost any conceivable terms, be
harmful to the present investment standing of the
Port bonds and would adversely affect the ability
of the Port Authority to finance in the future on
terms as favorable as hitherto. In our opinion,
it is most essential for the preservation of The
Port of New York Authority to be completely free
of any responsibility whatsoever for rail rapid
transit in this area.’
“Mr. Reginald M. Schmidt of Blyth and Company
(co-managers of another syndicate which consist-
ently bids on Port Authority bonds) also wrote to
our Treasurer on July 16, 1958 in part as follows:
‘If the Port of New York Authority is to continue
expanding its present facilitie’ and other facilities
that lend themselves economically to sound revenue
bond financing, it would be fatal to the Port’s
credit if they undertook to finance transit systems
by pledging its surplus revenues and general re-
serve fund.’
“In support of the statements made by these
municipal bond experts who both underwrite and
purchase our bonds, we quote in part from an edi-
torial from the June 30, 1958 edition of ‘The Daily
Bond Buyer,’ which is the trade paper for municipal
dealers all over the country. This editorial stresses
the serious effect which transit responsibility would
have on the Port Authority’s credit.
‘One of the few real efforts toward a solution of
the mass transportation problem of the New York-
59la
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
New Jersey Metropolitan Region has been delayed
because the New Jersey Legislature has adjourned
until next November, without completing action on
the proposed formation of the Metropolitan Tran-
sit District. An identical bill was adopted by the
New York Legislature early this year and signed
by Governor Harriman, but it will take effect only
if New Jersey also acts. The measure squeaked by
the New Jersey Senate, but the chances of approv-
al by the Assembly are believed to be dim.
‘It is regrettable that formation of such a bi-state
agency, comparable in some ways to the Port of
New Yer Authority, will be delayed and perhaps
defeated in the end. Mass transportation is the
universal problem of the “exploding cities” of the
United States and many other countries. In the
United States it is more formidable than any-
where else. Ever more penetrating studies show
that it has some general aspects, but also many
that are peculiar to each separate Metropolitan
Region.
‘The Port of New York Authority has often been
assailed for its aloofness, but the Port Authority
has excellent reasons and spelled them out plainly
early this month in a series of analyses of com-
muter railroad deficits, the experience of transit
systems in other Metropolitan Areas, and the
effect on its own credit and activities of any at-
tempt to participate. As to the latter, there are
impassable legal obstacles and the financial results
would be ruinous. The Port Authority therefore
frankly declared that creation of the proposed
592a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
Transit District is the only action that can assure
progress this year on the New York-New Jersey
transit problem.’
“These statements were made by responsible in-
vestment banking leaders. For all practical pur-
poses they are the controlling influences of our
credit. We can sell Authority bonds only through
these syndicates and on such terms as the syndicates
believe are required to make them marketable.
“Obviously, these market analysts would regard
any Port Authority involvement in rapid transit as
a financial disaster. If the Port Authority can be
compelled to assume a deficit operation of any sort,
even one not approaching the rail transit deficit in
size, investors would have a right to assume that
the Authority was becoming the dumping ground for
deficit operations of all types. The Authority’s
eredit could not survive such a breach of its inves-
tors’ present confidence that the Port Authority will
restrict its operations to facilities which it believes
can eventually be made self-supporting. The impor-
tance of this lies in the fact that it transcends argu-
ments as to the size of the present transit deficit. To
investors it would make no difference whether the
proposal was to force a $2,000,000 or a $12,000,000 or
a $20,000,000 annual deficit on the Port Authority.
Confidence is the essence of credit and it would be
gone.
“Flattering though they may be, suggestions that
the Port Authority’s ‘technical know-how and mana-
gerial experience’ would somehow dissipate rail tran-
593a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
sit deficits will not stand serious examination. Nor
would prospective purchasers of Port Authority
obligations be lulled into disregarding the uniform
record of large and increasing rail transit deficits by
the mere fact that the Port Authority’s ‘managerial
experience’ had been brought into the picture.
“The impact of a loss of credit would not be limi-
ted to the Port Authority’s future financing. Out-
standing bonds would immediately sell at a discount
and the holders of the $500 million of outstanding
Port Authority bonds, who purchased them on the
assumption that only those facilities would be under-
taken which are self-supporting or capable of self-
support, would suffer serious losses. At the very
minimum this involves a breach of the Authority’s
moral obligation to these bondholders and one which
the Legislatures will want to consider.”
38. On January 9, 1959, a joint report on the proposed
Metropolitan Rapid Transit District and Port Authority
statutes was issued by the New Jersey Assembly Commit-
tees on Highways, Transportation and Public Utilities and
on Federal and Interstate Relations. The report noted
that the MRTC bill did not specifically mention the Port
Authority by name as it did other agencies, such as the
New York Transit Authority; that the implicit proposal of
the Metropolitan Rapid Transit Commission bill to use local
property taxes as the primary method of financing “was a
wholly unrealistic proposal [as] the municipalities and
counties comprising the district . . . are now involved in a
substantial effort to find a way to reduce the tax burden on
real estate”; the proposed organizational structure of the
094a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
Metropolitan Rapid Transit District was “most disturbing”
and “provided less control over the Board than exists in the
hands of stockholders in a private corporation”; and that
supporters of the Metropolitan Rapid Transit Commission
plan had come to recognize the many serious defects in the
_ structure of the agency and otherwise. The report also
stated that many of those who originally felt that the Port
Authority should ‘undertake the entire mass transit obliga-
tion had come to realize that in light of all the circumstances
that could not be justified at that time. The report further
stated:
“There can be no question that the carrying on
of a transit function was well within the Port Author-
ity Compact terms and well within the present
powers. However, two extremely important factors
mitigate against any present assignment of the task
to the Port Authority by law. First, as of now no
one can say with certainty what the size of an operat-
inp deficit would be. While the Port Authority no
doubt could undertake an activity which would
involve a deficit—even a permanent one—it could
only do so if there were real assurance that the size
of the deficit would be such that there could be no
doubt of its ability to absorb it. As pointed out by
the Supreme Court in the Weehawken case, 14 N.J.
570, the design of the Port Authority rests on two
concepts : that by a pooling of facilities in one agency,
activities which by themselves could not succeed
financially could be undertaken, and that the aggre-
gate pooled operation of all facilities should be self-
supporting. It is this last factor that mitigates
against A-16. If there were sufficient assurance that
itera iain. == anette eco buen he CRnNNiaReatanaaaeicnaaaceaneneee ante
595a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
the aggregate operation would continue to be self-
supporting, and sufficiently so as not to tend to impair
or adversely affect the efficiency or credit of the
Port of New York Authority, it would be a question
of policy for the Legislature to decide whether to
assign to the Port of New York Authority a function
that would make it more expensive to borrow money.
The committees are satisfied that this is the context
in which Mr. Tobin’s testimony that the Port Author-
ity could not, legally or financially, undertake com-
muter operations, must be read. The same comment
is to be applied to the Memorandum of Understand-
ing between MRTC and the Port of New York
Authority. There can be no doubt of the propriety
of assigning a transit function to the Port Authority
if there were proof of an adequately clear and con-
vineing nature by competent estimates that the pre-
dictable deficits of the transit operations would be
sufficiently less than predictable net revenues from
other operations as not to impair existing contract-
ual obligations with bondholders or the overall abil-
ity, eredit and efficiency of the Port of New York
Authority. Evidence of this kind was not presented,
nor can it be until there is formulated a general plan
with sufficient detail. At that time, reasonably reli-
able estimates will be possible, and the Legislature can
then determine whether and to what extent the Port
of New York Authority should be directed to under-
take a major operating or financial role in its effec-
tuation. The concept of a transit district agency
was accordingly agreed upon as the most suitable
one to accomplish the task.
596a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“At the same time, it was felt that the Port
Authority should give the district every conceivable
aid that might advance its work, and the substitute
bill expressly so provides. We have no doubt that
the Port Authority can be of tremendous aid and it
is in the public interest, as well as in the proper dis-
charge of its own duties that it will provide it whole-
heartedly. In addition, it is conceivable that some
kind of Port Authority participation in some part
or parts of the plan is desirable and feasible without
requiring it to assume the entire deficit. This is
most likely to take the form of planning, construct-
ing and financing some of the essential facilities.
Some of them may even be modest deficit operations
of a predictable nature, such as parking facilities at
junction or transfer points, at rail line stations, or
more substantial ones such as stations, interconnec-
tions, bridges, tunnels and the like, with the assur-
ance, however, that Port Authority contractual obli-
gations to bondholders and overall efficiency and
credit would not be impaired. It may even be able,
at the start, to provide office space for the district
so that it may get quickly under way.
“At the emergency and interim stages, it is clear
that implementation, in the sense of actual operation,
should continue to be by the railroads and other car-
riers. The district will serve as a focal point or
integrating device through which all arrangements
may be made. Conceivably, it could arrange for
issuance of the passenger tickets for use on the com-
mu’er network, if that should offer any cost-saving
advantage. Beyond these two stages, however, no
one can predict what assignments should be made.
597a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
Implementation of the more permanent general plan
will need to await the experience obtained from the
interim plan and the design of the general plan itself.
The substitute bill is drawn to provide all needed
flexibility.”
39. By Chapter 13 of the Laws of New Jersey of 1959 and
Chapter 420 of the Laws of New York of 1959, the States of
New Jersey and New York entered into a compact with the
consent of Congress. Public Law 86-302; 73 Stat. 575
(1959). The compact created the New York-New J ersey
Transportation Agency as a body “corporate and politic”
which would “serve as a public agency of the states of New*--—~
York and New Jersey in dealing with matters affecting
public mass transit within and between the two states.”
§3.1. In entering into this compact, the Legislatures spe-
cifically found:
“Provision for efficient and proper transportation of
commuters and other persons by public transit
methods within the New York-New Jersey metro-
politan area is essential in the public interest.
“Recent trends toward decay of existing systems,
particularly in respect to transportation services
crossing the Hudson river, have created a condition
of impending emergency requiring prompt action on
an interim basis for the establishment of an operat-
ing system designed mainly on . » best use of exist-
ing facilities and equipment at the least financial
hardship upon the operators thereof consistent with
publi ds, pending the development of a proper
and acceptable general plan.
598a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“Present uncertainties as to the nature and extent
of any acceptable and feasible general plan, as well as
to the capital and operating cost of the same, require
that such questions be inquired into upon the basis
of experience accumulated in the operation of an in-
terim plan. The preparation and execution of an
interim plan as well as the preparation of a general
plan can and should be accomplished by a metropoli-
tan transit district to serve as a regional agency of
the States and to have the full assistance, support,
co-operation and participation by all persons and
agencies, private and public, of any 1 or more of the
States within the proper limits of its own functions
and duties.” (Stip. 110-126) * * *
40. On September 21, 1959 by Public Law 86-302, 73
Stat. 575, Congress, pursuant to a joint resolution, con-
sented to the Compact entered into between the State of
New York and the State of New Jersey for the creation of
the New York-New Jersey Transportation Agency. The
congressional consent provided:
(a) The right to alter, amend, or repeal the joint resolu-
tion was expressly reserved.
(b) Any long-range plan, when adopted by concurrent
legislation of the compacting states, shall be submitted to
Congress for its consent before such long-range plan be-
comes effective. (Stip. 127) * * *
The Compact provided that the agency was to continue
in existence until June 13, 1961, but that its existence could
continue thereafter as concurrent legislation might provide
_ (Article 4, §4.6). In 1961 the Legislatures of both States
599a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
extended the agency’s duration to June 30, 1966. Ch. 55,
Laws of N.J. 1961; Ch. 273, Laws of N.Y. 1961. There was
no subsequent legislation extending the existence of the
agency beyond 1966.
41. By Chapter 25 of the Laws of New Jersey of 1959
and Chapter 638 of the Laws of New York of 1959 the
Legislatures of the two States provided that “upon the
election by either State ... the Port Authority shall be
authorized and empowered” to purchase and own railroad
ears for the purpose of leasing them to commuter railroads
within the electing State. The statutes expressly prohibit
the Authority from borrowing money for the purchase of
such cars until the electing State has guaranteed payment
of both principal and interest on the obligations issued for
that purpose.
New York immediately chose to have the Port Authority
proceed on its behalf to purchase railroad cars for lease
to the commuter railroads of that State. Ch. 639, Laws of
New York of 1959. Pursuant to this program, as later
implemented by a 1961 New York constitutional amend-
ment, the Port Authority has presently outstanding over
_ $90 million in New York State-guaranteed railroad car
bonds and has purchased for lease to commuter railroads
within the State 467 air conditioned passenger cars and 8
locomotives. 1972 Port Authority Annual Report, 15. The
State of New Jersey has not taken legislative action to
participate in this commuter car program.
42. By Chapter 14 of the Laws of New Jersey of 1959,
a Division of Railroad Transportation was created and
established as a part of the State Highway Department in
order to improve rail transportation in the State. The
Legislature found:
600a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“(a) Many of the railroads serving this State are
seeking to curtail or eliminate much of their com-
muter and passenger railroad service.
“(b) Railroad transportation is the most efficient
means of moving large groups of people in a short
space of time such as is necessary, particularly, dur-
ing the rush hours at the commencement and close of
each working day.
“(c) Adequate commuter and passenger railroad
service throughout the State is essential for the wel-
fare and prosperity of the people of the State.
“(c) It is therefore imperative that the State lend
its assistance in seeking a solution to the problems
confronting the railroads in connection with com-
muter and passenger service and to insure continued
operation of adequate commuter and passenger rail-
road services,” (Stip. 128-130) ***
47. In 1960 the New York City Transit System had an
operating deficit in excess of $20 million, exclusive of
annual debt charges of $87 million which was subsidized by
the taxpayers of New York City. The aggregate deficit
from commuter operations of the New York Central, New
Haven, Long Island Railroads and Staten Island Rapid
Transit Railway was estimated at between $10 million and
$15 million annually for the year. New York City tax-
payers’ subsidies of the Staten Island Ferry operations
were approximately $6 million, Thus, in 1960, the total of
commuter railroad and rail transit deficits in the New
York-Nev Jersey area approached $128 million of which
$87 million was for capital debt charges.
601a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
48. On January 1, 1962 the Division of Railroad Trans-
portation, New Jersey State Highway Department, issued
its Second Annual Report and Recommendations entitled
“Will We Emerge?”
“The rail carriers’ ‘illness’ has become a progressive
one, reaching a crisis in the last decade, In our own
State, as in some other sections of the country, rail-
roads were caught in a squeeze between rising costs
and declining income. The State and the munici-
palities have been reluctant to allow the railroads to
be relieved of property taxes. Grandiose plans
developed by worried officials, numerous traffic con-
sultants and private groups have also been ineffec-
tive. The Public simply was not convinced that the
situation was serious enough to warrant the expendi-
ture of the hundreds of millions of dollars most of
the transit plans required.”
Ten ann Now
“The Publie’s attitude appeared to be ‘Why worry?’
It was easier and more ‘entertaining’ to complain
about transit deficiencies than to do something about
them before they became a serious menace.
“New Jersey railroads grasped at a ‘last, drastic
remedy’ for survival. In an attempt to avail them-
selves of the advantages of the Federal Transporta-
tion Act of 1958, some lines applied to be relieved of
passenger operations, specifically commuter service.
Unless this could be accomplished, they warned, they
would have to go out of business.
“Realizing that loss of rail commuter service would
be a blow to our State’s economy far more serious
602a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
than any natural catastrophe yet experienced, our
State Administration determined to do something
about assisting the railroads. Prior attempts had
met with general public apathy, and even antagonism
in some quarters, The ‘sins of the father’—dating
back to some of the early railroad promoter tycoons
—had left their imprint on the publie mind.
TRANSPORTATION Division
“Accordingly, a Division of Railroad Transportation
was created within the Highway Department and
given a two-fold task—to preserve essential rail serv-
ice and to improve it where possible. The New
Jersey commuter crisis of 1958-59 created a problem
which could not be ‘put on the shelf’ as had been the
practice over the years, The New Jersey Highway
Department, possessing a background of experience
with transportation in its broadest sense, knew full
well the futility of even attempting to accommodate
the tremendous volume of this ‘Corridor State’ on its
existing highway system.
“The first stage of the project—a ‘stop-gap’ action
only—has been accomplished. The State contracted
with the carriers for continuation of essential pas-
senger service for the fiscal year 1960-61 and again,
without any appreciable fare increase, until
> oe , until August
Service Assurep
“Rail transportation for our citizens has thus been
assured by contract payments—subsidies, if you will.
A definition of subsidy reads: ‘A government grant
603a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
to a private enterprise considered of benefit to the
public.’ The action taken and the incentive could not
be better expressed.
“The Highway Department, cognizant of its respon-
sibility for the movement of people and of goods by
all available means of land transportation, has to
date furnished some twelve million dollars from
road construction funds for this purpose.
“Had the Department not made this sacrifice of the
equivalent of two miles of highway (average cost of
N.J. modern highways is $6,250,000 per mi.), it
would have been faced with a shut-down of rail pas-
senger service and the impossible task of making
immediately available adequate highways to accom-
modate an additional 266,000 passenger trips daily.
This just couldn’t be done, either from the stand-
point of funds or time.
“After a considerable period of successfully avoiding
all attempts to involve it in rail transit, the Port of
New York Authority was finally persuaded by our
Division of Railroad Transportation to assume the
acquisition, rehabilitation and operation of the H &
M, even though the revitalized line might fail to ree-
ord a profit. The Authority still resisted extending
its operations beyond H & M’s main stem necessita-
ting further forceful negotiations before extensions
and rail transfer stations were included.
“Rehabilitation of this vital interstate commuter
facility must be assured before other programs out-
lined herein can be initiated. It would be the height
604a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
of folly to proceed with such improvements without
first taking this essential step.
“The Port of New York Authority, its fiscal struc-
ture maintained by income from tax-free vehicular
crossings of the Hudson River largely at the ‘ex-
pense’ of rail transportation, is the proper agency to
rehabilitate the H & M and provide suitable exten-
sions to connect it with other North Jersey commuter
railroads. The Division is negotiating terms of
necessary legislation with the State of New York and
the Port of New York Authority to accomplish this.”
B. Aequisition of the Hudson and Manhattan Railroad
Company by the Port Authority
1. In 1908, the Hudson and Manhattan Railroad Com-
pany, a privately-owned concern, began operating a rail-
road facility between Hoboken and Manhattan. Service
between Hudson Terminal and Jersey City commenced in
1909 and the service was extended to Newark in 1911, The
Railroad was in financial difficulty for many years, and al-
though formal bankruptcy proceedings against it did not
commence until 1954, the Railroad was insolvent from the
early 1930's.
2. In 1959 the United States District Court for the
Southern District of New York approved a reorganization
plan which left the company with enough cash to continue
operations for two years but without funds to provide
needed capital improvements, Jn re Hudson & Manhattan
R.R., 174 F. Supp. 148 (S.D.N.Y. 1959), affirmed sub. nom.
Spitzer v, Stichman, 278 F.2d 402 (2d Cir, 1960). (Stip, 136-
140), *ee
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Excerpts From Stipulation Among Counsel
Dated December 20, 1974
3. In 1960, the New Jersey Senate created a bi-partisan
committee under the chairmanship of Senator Frank 8,
Farley (the “Farley Committee”) to conduct “a full and
unlimited investigation” of the Port Authority, The Com-
mittee was authorized and directed to study “the entire
financial structure and operations” of the Authority and
to determine “whether or not the said Port of New York
Authority is fulfilling its statutory duties and obligations.”
(Senate Resolution No. 2, 1960; Senate Resolution No. 7,
1961)
4. During the Farley Committee hearings, Dwight R. G.
Palmer, New Jersey State Highway Commissioner, testified
on January 26, 1961 in part as follows: (Stip. 141-42)
“There has been a multiplicity of studies, countless
commissions and associations engaged in surveys of
our metropolitan areas, A perusal of these reports
impresses one with the great detail and statistics of
the majority of the reports, The supervisors of such
compilations undoubtedly were sincere and felt they
were pursuing the proper course and yet, years after
all these facts were presented, we find ourselves about
to go ‘down the drain’ traffiewise.
“Most of these plans proposed expenditures that
staggered the imagination. The likelihood of ever
converting such plans into ‘pay dirt’ and a practical
solution had about as much chance as would the fi-
nancing of Captain Stormfield’s visit to Heaven, as
described by Mark Twain.
“So, gentleman, in 1959 our commuter problem was
brought into sharper focus by the action of the US.
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Lacerpts F'rom Stipulation Among Counsel
Dated December 20, 1974
Supreme Court permitting the New York Central
Railroad to discontinue ferry service from Wee-
hawken to Manhattan. This same year a rush of
service curtailments and fare inerease petitions
flooded our regulatory agencies and one of our
busiest New Jersey commuter railroads posted notice
that all service would be discontinued.
“Governor Meyner then assigned the problem to
me, first directing my associates and me to provide
vehicles of transportation for those 3,000 odd eom-
muters that otherwise would have been stranded
when the Weehawken ferry shut down, Within a few
months our Legislature responded by establishing
the Division of Railroad Transportation. We had
adopted a new philosophy; that the job of the High-
way Department was one of moving people and goods
—not just providing highway alignments for vehicles
to travel, This concept was the keystone of the inte-
gration of transport facilities in New Jersey, for we
recognized that the suburban railroads were essential
allies of the Highway Department in meeting the
daily peak travel demands of our citizens. We had
not worked long with the problem before we realized
that the essential ingredient needed to aid in th eolu-
tion of our problem was money, Conscious «° the
general rejection of the Metropolitan Rapid Ty. «it
Commission plan to tax real estate to meet deficits
in its proposals, we developed a different approach,
An examination of the opgration of the New Jersey
Turnpike indicated the availability of sufficient sur-
plus funds to take care of rail transportation diffieul-
ties as well as other transport needs, and do this
after meeting commitments to all holders of Turnpike
607a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
securities. However, the public decreed otherwise
and denied to us the use of these funds. After the
defeat of the referendum we reviewed our studies of
the rail passenger situation. The results of these
studies were set forth in detail in our report to the
Governor and Legislature dated April 4, 1960. This
report recommended that in order to forestall a com-
plete breakdown of rail services that the carriers be
placed under contracts to operate specified trains at
established rates. The contracts, we hoped, would
assure a continuity of service for our citizens even
though they were considered a ‘temporary expedi-
ent’ to be pursued, say, for » period of three to five
years, during which time a long range improvement
plan could be put into effect.
“Legislation enabling such contracts was intro-
duced in the Senate in May of 1960. It was passed
with dispatch in both houses, the legislature exhibit-
ing a keen understanding of the problems and the
seriousness of the consequences should the State fail
to take action to ease the financial burdens of the
rail carriers.
“In the north metropolitan area our recommenda-
tions included consolidation of the Jersey Central
and the Pennsylvania passenger services over the
New York and Long Branch operating the trains
through to Pennsylvania Station, Manhattan and a
rerouting of all the main line service of the Jersey
Central to Penn Station in Newark. Certain of these
suggestions are still under study. We also recom-
mended that the Port Authority play a significant
part in improving the facilities for the interstate
608a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
movement of our citizens. In this regard I am fully
aware that there are those who suggest that the Port
Authority should take over the financial responsibil-
ity and deficits of all commuter railroads in New
Jersey and New York even at the risk of jeopardizing
the Authority’s credit standing and depleting its
reserves below levels set by indenture agreements.
“Considerable time has been devoted to reviewing
the Port Authority’s capabilities, as well as respon-
sibilities, insofar as commuter rail transit is con-
cerned. Our conclusion as stated in the April [1960]
report was that:
‘The Port of New York Authority should not, in
our opinion, be handed New Jersey’s rail prob-
lem, nor should it become responsible for the New
York subway system or for rail transportation for
Westchester or Long Island. We are certain
however, that the interstate aspects of the rail
movement of persons and goods such as purchase
and lease of new Hudson and Manhattan com-
muter cars and the purchase of the existing inter-
state railroad ferry boats, do come within their
obligations. The foregoing fully recognizes the
importance of maintaining the Port of New York
Authority’s commitments and credit requirements.’
“In other words, we became convinced that the
Port Authority’s responsibility in the rail transit
field should be concerned principally with the inter-
state aspects of the problem as the Authority is an
interstate or bi-state agency. Our recommmenda-
tions were consistent with that philosophy.
609a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“T arrived at this conclusion relying on years of
experience in private enterprise. My career has
been one of a business man in the industrial field
where the courageous survived—where the com-
placent were left behind and where competition
took care of the rest. I have had responsibilities of
meeting a payroll—a payroll that each year
sought to improve the standards for our workers—
and to satisfy the demands of shareholders also.
The Port Authority in my opinion must make money
and accumulate reserves for the rainy day if it is to
be equipped to meet the needs of our two states of
New York and New Jersey. It does not have gen-
eral taxing powers. Its only taxes are the tolls it
collects from the users of its facilities. Its share-
holders are the public, you and I, and the institu-
tions that buy the bonds. Since the cost of financing
often determines the feasibility of a project it stands
to reason that you and I get more for our toll dollar
in the way of modern and safe facilities if we make
certain that the credit rating of the Authority re-
mains intact. Now let’s talk spevifies for a momert.
The Authority has sizeable revenues and reserves to-
day. While I don’t have the 1960 figures, reports are
that gross revenues in 1959 totaled $105 million and
the several reserve funds totaled $71 million. Now as
soon as ‘reserve funds’ are mentioned it is assumed
by some that such reserves are ‘available’ or uncom-
mitted. Such is not the case. These revenues and
reserves are pledged and committed by contract to
the investors in Port Authority bonds as security
for the re-payment of those bonds and for con-
tingent liability in connection therewith and they
610a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
may not legally be diverted. For instance, to
strengthen its credit position the Commissioners of
the Authority have adopted a policy to commit re-
tention of reserves in an amoun: equal to two year’s
debt service. The $71 million in all Port Authority
reserve funds at the end of 1959 was just about
equal to the following two year’s debt service on all
bonds. The Authority is required to hold in re-
serves 10% of its outstanding indebtedness—this
amount at the end of 1959 was $57 million. Such
revenues and reserves cannot be regarded as un-
committed funds. Diversion of these funds more-
over might jeopardize the carrying out of future
work authorized by the Legislatures of New Jersey
and New York by inviting higher financing costs.
Certainly the consequences of such an effect, from
the standpoint of the growth and prosperity of this
area, must be carefully considered.
“The matter of the pooling of net revenues from
all the Port Authority’s facilities, as authorized by
the Senate in 1931, has received some attention of
late. By pooling the revenues, a credit base was
established to facilitate financing of projects like the
bus terminal serving New Jersey commuters, the
third tube of the Lincoln Tunnel, the Hoboken Piers
Port Newark, Port Elizabeth and Washington
Heights Bus Terminal which will principally serve
New Jersey commuters. Indeed, it is the pooling
of such revenues, as I see it, that will permit financ-
ing the purchase and rehabilitation of the H & M
Railroad. It is clear to me that the action of the
New Jersey and New York Legislatures in author.
6lla
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
izing the pooling of Port Authority revenues and
the creation of reserves has made it possible to pro-
vide many public transportation facilities that we
may not have had otherwise. With the needs for
expanded and additional transport projects rearing
up in every direction it seems that the principles
which enabled the Authority to accomplish so much
in so short a time and so efficiently should prevail.
“Now most of us realize that the matter of credit
is not an exact science. The credit of an organiza-
tion depends on quite a few factors; past perform-
ance, efficient management and caliber of personnel
and markets for the product the institution has to
sell; and last but not least—what investors think of
the operation as a financial risk. It is, in the final
analysis, the practical assessment of being repaid
money that they lend to it. This latter reason, I
am certain, is why the Port Authority last Septem-
ber, in presenting to this Committee the plan to
acquire the Hudson and Manhattan Railroad, talked
in terms of what might be done rather than to state
positively what would be done. You will remember
that they said the Port Authority might be able to
sell bonds for the acquisition and modernization of
the Hudson and Manhattan Railroad and at the
same time continue the financing of the States’ vital
port development programs, provided investors
could be given assurance that investments in rail
transit matters would be limited. The Authority
also wanted assurance that the key recommendations
in our April report would materialize and pointed
out that fair financial terms for both the purchase of
612a
Excerpis From Stipulation Among Counsel
Dated December 20, 1974
the H & M properties and the Pennsylvania Rail-
road operating agreements must be obtained. As I
see it from my personal point of view acquisition of
the H & M is a must. All our plans hinge on it. To
insist on terms unacceptable to investors or terms
that invite high interest costs might cause delays
that will render our efforts ‘too little and too late.’
It gets down to how badly we need the H & M—do
we want it on the investors terms or not at all—it
seems to me it is almost as simple as that.
“The H & M railroad provides a vital link in our
interstate transport network. It is essential to both
states that it not only continue but that it be re-
habilitated to more conveniently serve our citizens.
The cost of purchase, renovation and a new fleet of
ears may be over $80,000,000. The H & M is in the
last phase of reorganization, that when accom-
plished, will separate the Manhattan Real Estate
from the Railroad properties. The reorganization
document now before the I.C.C. provides that suffi-
cient cash be transferred to the separated Railroad
Company to permit normal operation for a period
of only two years. Extraordinary demands on its
resources such as a prolonged strike, would substan-
tially shorten the period it could operate without
public assistance. We did not include the H & M in
our contract program because of its interstate
nature. We have insisted that it be put under
bi-state regulation and that its rehabilitation be a
bi-state venture. The Port Authority is the logical
agency to do this—it has agreed, as just outlined.
613a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“T feel certain that you genti:cmen of the Legisla-
ture have been and will be increasingly in touch with
our transportation needs. I am also convinced that
the Port Authority’s responsibilities will be better
met by preserving a sound credit base. (Stip. 142-
48) ees
“Q. By Senator Fartey: And taking a hypotheti-
cal case—if perchance the Port were in a position
financially to handle the commuter service, what
would happen to the railroads involving passenger
and freight service in this particular area of north-
ern New Jersey? Would they go bankrupt?
“A. Well, the Port Authority has gone on record
as feeling that mass transportation’s maintenance
is absolutely essential. That is contrary to some of
the references that I have seen recorded. The "ort
Authority in itself, with its bridges and its tunnels,
and its H & M could, under no circumstances in our
considered opinion—although we are not experts, sir
—meet the needs of our State insofar as transporta-
tion is concerned, and in our opinion their efforts
should be confined to the bi-state, interstate aspects,
and we, with the carriers themselves, energizing the
assistance in each state, would not certainly from
our state interest in the Port Authority wish to see
them engage in taking over the Long Island Rail-
road, the New Haven that comes into Manhattan,
and the New York Central with all the extentuating
circumstances. (Stip. 149-50) * * °
“Q. By Senator DuMont: Commissioner, when
the Port Authority made its proposal in September,
6l4a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
at our hearings then, to take over the Hudson &
Manhattan Tubes, they surrounded their proposal
with certain restrictions which, so far as I could
tell, were designed to eliminate any real obligation
on the part of the Port Authority beyond taking
over the Hudson & Manhattan Tubes, at least so far
as the railroad field was concerned. Do you consider
those restrictions that they surrounded this proposal
with as reasonable ones?
“A, Yes, I do. And T have so stated in my pro-
posal and I do it purely on the basis of what experi-
ence I may have had in the field of finance and
industry, and of what we are hoping to obtain and
acquire in the future in the expansion of facilities
that the Port can supply.
“Q. So that you feel if they were to carry out
this proposal and purchase the Hudson & Manhattan
and do all the rehabilitation that’s necessary, they
would be doing a, shall we say, satisfactory job, at
least in your opinion so far as carrying out their
obligation in the railroad field?
“A. I would say this: 1. That they would be
doing a fabulous job and accomplishing something
that has been talked about for 40 years and which no
one as yet has had the courage to tackle and which
now is within our grasp. My feeling also is this, in
talking with various Commissioners and talking with
people in the financial district, that this is not a
decision of the Port Authority as such, of a rebellion
against going further into transportation, but of the
investor, you and I if you will, although we are not
615a
Excerpts From Stipulation Among Cownsel
Dated December 20, 1974
investing this morning whether or not we are willing
to loan money to finance obligations that have such
distressing characteristics as the present situation.
And even the Hudson & Manhattan, which some
believe can be brought into a position of profit,
which with what little I know I greatly doubt,—it
is presently contemplated that there will be a loss
of at least some $5 million a year in that operation,
and probably e total laying in of risk capital of
some $80 million. And it seems impossible, from all
of my direct—and not through any other channels
—<ireet contacts, to observe that money could be
loaned for even the acquisition of thy H & M in the
event there was not some assurance that this just
wasn't one bite of the cherry and that further trans-
portation business was all to be pulled together. I
think it’s simply a question of whether the investor
says yes or no and at the present time my observa-
tion is that the investor says no unless he has that
limitation.
“T think, so far as the Port Authority is con-
cerned, that [if] the State felt that they wanted to
guarantee the bonds, the investor’s bond, then the
investor, of course, would be tickled to death to do
it. And I think that their capabilities and efficiency
are perfectly adequate to even tackle such an
encumbrance as this whole transit situation.”
5. The following is an excerpt from the testimony before
the Farley Committee on January 26, 1961 of E. T. Moore,
then President of the Central Railroad of New Jersey:
616a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
“The Port Authority should be just as willing to
promote and help to retain essential freight and
passenger rail transportation as they are to promote
highway and air transportation. The Port Author-
ity is currently sponsoring a study, with the coop-
eration of railroads, for the consolidation of the
railroad marine operations and if this study indi-
cates that such a consolidation is economically sound
and in the public interest, the Port Authority
should assist in bringing it about. I believe, how-
ever, it would be most unwise to expect the Port
Authority to take over the whole burden of mass
transportation in the New York metropolitan
bi-state area.
“The Port Authority, historically, has had the
obligation of providing bridges and tunnels for a
convenient crossing of the Hudson River. Their
extensive facilities have syphoned the profitable por-
tion of this trans-Hudson traffic from the railroads
who originally provided the sole means of the river
crossing. They should now take the unprofitable with
the profitable and assume their full obligation of pro-
viding whatever facilities might be essential in the
public interest to transport people and vehicles across
the Hudson between New Jersey and New York in
the metropolitan area, The Port Authority should
unquestionably acquire and rehabilitate the Hudson
& Manhattan Railroad, which would eliminate the
need for antiquated ferry service which is expensive
to operate and does not meet present-day transpor-
tation needs.”
617a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
6. Port Authority Commissioner James C, Kellogg testi-
fied at the Farley Committee hearings at the request of
and on behalf of all of his fellow Commissioners, The fol-
lowing is an excerpt from his testimony on January 27,
1961;
“On November 24, 1958, the Commissioners,
appearing before a joint hearing of two Committees
of the New Jersey General Assembly, submitted a
rather complete outline of our views of the rail com-
muter transit problem and transit deficits. We
reviewed the Port Authority’s continuing studies of
the rapid transit problem in this bi-State metropoli-
tan area over the past thirty years and we submitted
a summary of the experience of other metropolitan
areas in dealing with their own transit problems.
Our report also reviewed the reasons why the Com-
missioners had no choice but to be unanimously
opposed to the adoption of any legislation which
would have attempted to involve the Port Authority
in the deficits of commuter railroads and rapid
transit without limitation or other assurances.
“At the outset, I would like to re-affirm our view
that both rail and highway transportation are essen-
tial to the economic welfare of the people of the New
Jersey-New York metropolitan region. It was for
this reason that the Port Authority made $800,000
available to the Metropolitan Rapid Transit Corn-
mission to undertake a comprehensive interstate
transit survey. We do not now, nor have we ever
regarded arterial highway or our own bus terminal
services for the accommodation of New Jersey com-
muters as substitutes for a program of maintaining
618a
Excerpts From Stipulation Among Counsel
Dated December 20, 1974
and improving rail passenger facilities between New
Jersey and Manhattan and throughout the Port
District.
“No single one of these programs is a substitute
for any of the others since each is important in hand-
ling various types of passenger tr-fic at different
times of the day and of the week. An analysis of the
relative numbers of passengers using the various
modes of trans-Hudson transportation clearly
illustrates this point. The automobile plays a signifi-
cant role in the handling of trans-Hudson passengers
on week ends and in non-commuting hours, as it does
throughout the nation. The great importance of the
common carriers in trans-Hudson commuter trans-
portation becomes apparent, however, from an
examination of the relative passenger volumes dur-
ing the rush hour each weekday. In that hour only
15 per cent of all trans-Hudson passenger movement
to Manhattan is by automobile, and more than half
of these automobiles are destined for points other
than the central business district of Manhattan south
of 59th Street. The balance of this peak-hour traffic
into Manhattan, 85 per cent, is handled by mass
transit—that means railroads and buses, with 46 per
cent of the passengers served by rail and 39 per cent
by bus.
“Thus, there is no question that rail services are
of extreme importance in terms of commuter travel.
At the same time, as we suggested to the Legislature
in 1958, an attempt to solve the problem of improving
commuter rail facilities would be of no value if it
were to result in the destruction of the ability of the
619a
Eacerpts From Stipulation Among Counsel
Dated December 20, 1974
Port Authority to continue its comprehensive pro-
gram of providing, on a self-supporting basis, the
indispensable modern port, transportation and ter-
minal facilities, For without these essential facil-
ities, the Port of New Jersey-New York could not
continue its predominant position and assure the
future prosperity of its people.
“For more than thirty years, the Port Authority
has been engaged in studies of all aspects of terminal
and transportation facilities and services within the
New Jersey-New York metropolitan area, We have
continuously searched for solutions to the commuter
railroad problem in the form of physical plans which
could adequately serve the commuting public and
which, at the same time, could be developed on a
self-supporting basis. These studies and our con-
clusions have been submitted to the Legislatures of
the two States. No formula for making commuter
railroads self-supporting in this area or in any other
metropolitan area throughout the country, has ever
heen found either by the Port Authority, any other
publie agency or the railroads themselves. All of
these studies of rail transit inevitably have concluded
that their operation and improvement involve large
deficits and that public financial assistance or sub-
sidy is the only method of continuing these critical
public services.
“There is universal agreement that essential com-
muter railroad services must
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