# Brief for Appellee — United States Trust Co. of NY v. New Jersey > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2399%3A10 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for Appellee - **Published:** January 1, 1977 - **Citation:** 431 U.S. 1 ## Text Supreme Court, U: 8. FILED SEP 10 1976 MICHAEL RODAK, JR..CLERK | IN THE 7 - ed Supreme Court of the Unitet States Octosper Term, 1975 No. 75-1687 Unitep States Trust Company or New York, as Trustee for The Port 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 Jersey, Brenpan T. Byrne, Governor of the State of New Jersey, and Wiiu1mMm F. Hywanp, Attorney General of the State of New Jersey, Appellees. ON APPEAL FROM THE SUPREME COURT OF NEW JERSEY BRIEF FOR APPELLEES WuuumM F. Hyrtanp Attorney General of the State of New Jersey. Attorney for Appellees. By Special Counsel: MicwHackEt I, Sovern Murray J. LavLicut Harotp 8S. H. Enear 435 West 116th Street, New York, New York 10027. Dated: September 11, 1976 Ore ene -~ INDEX Counter-Statement of the Case ..... Introductory Statement A. The Early Years: A Port Authority That Was Not Self-Sustaining, the Arrangements That Enabled It to Carry Deficits and the Failure of Legislative Efforts to Have the Authority Assume Responsibility for Passenger Railroads Bb. The Port Authority Seeks Immunity From the “Disease” of Commuter Railroads 1. The Metropolitan Rapid Transit Commis- sion Study 2. The new bond provision—Section 7 certifica- STINE deiisinteaticieniiithanatihiibinaciptniniamiiedmainiieimmesidisiinies 3. The New York commuter car episode .......... 4. Opposing New Jersey legislation in 1958 .... C. Legislative History of the 1962 Covenant .......... D. The 1962 Covenant E. The Unimportance of the 1962 Covenant to Bondholder Security .. om 1. Bondholders are fully protecte a. The objective protections .......................-.. b. Appellant’s analysis of the objective pro- ARE MELAS SE Ac ee a ae OO OO ce. The subjective fears 2. The Authority’s consistently high credit rating demonstrates the unimportance of the covenant and repeal 3. The unimportance of the covenant and repeal in the secondary market PAGE il F. Legislative History of the Repeal of the 1962 Covenant .... 1. The energy crisis ...... cocnnsiociiauamnsaaaal 2. Health and environmental factors ................ 3. The Port District’s public transportation requirements Summary of Argument PEGE cccircciniititenn I. The 1962 Covenant Is Subject to the Reasonable Exercise of the States’ Never Abdicated Police POWCE cecccnccessenssnmsemmemne A. The History of Contract Clause Jurispru- dence Shows That All Contracts, Especially State’ Contracts, Are Subject to the State’s Police Power B. Bondholders Could Not Reasonably Have Assumed That the 1962 Covenant Was Immune From Action Pursuant to the Police Power ..... C. Though Municipal Bonds Are Subject to the Police Power, They are Readily Marketable D. ithe 1974 Repeal Legislation Constituted an Exercise of the States’ Police Power .............. E. Repeal Constituted a Reasonable Exercise of the States’ Police Power 1. The Blaisdell case ...... 2. The Het POSS CRBD cece 3. Appellant’s claim that the price pur- chasers were willing to pay for bonds was affected by the covenant is unsupported by the record and immaterial as a matter of law PAGE 45 46 50 53 62 77 81 4. Repeal deprived bondholders of an inter- est of little or no value to further ends of large importance 92 a. The bondholders’ interest - 92 b. The public ends 95 e. The insufficiency of other means ........ 96 II. Repeal of the 1962 Covenant Did Not Constitute a l'aking of Property in Violation of the Fifth and Fourteenth Amendments to the United States Constitution . 101 11I. The 1962 Covenant Was Voidable Under the Interstate Compact Clause ....... . 102 A. Federal Law Governs the Interpretation of a Congressionally Approved Interstate Com- I itil ceiansciceenesenaitanpsailtensnnsidincencesnassenseses 104 B. The 1962 Covenant Is Not Authorized by The Port Authority Compact or Comprehen- sive Plan Legislation ..........................-...-.sse0-«-+- 106 IV. The Covenant Became Inconsistent With Super- AT 112 ce ccrnenradncacintiapengnationssenneagnennatace 119 Cases Cited: Albigese v. City of Jersey City, 127 N.J. Super. 101 (Law Div.), aff’d, 129 N.J. Super. 567 (App. Div. EE a eT 88, 93 American Toll Bridge Co. v. Railroad Comm’n, 307 a ian insaeeeneaeinmeeeeneremmtinnensemanceameasee 103 Barron v. Baltimore, 32 U.S. (7 Pet.) 243 (1833) ....... 66 Beaumont v. Faubus, 239 Ark. 801, 394 S.W.2d 478 ETE EEE eee TEE 93 Blanchette v. Connecticut Gen. Ins. Co., 419 U.S. 102 (1974) ... _ ieieiiieseniaeiiibites 55 iv Bronson v. Kinzie, 42 U.S. (1 How.) 311 (1848) —...... 83 Bucsi v. Longworth Bldg. & Loan Ass’n, 119 N.J.L. 120 (KE. & A. 1937), appeal dismissed, 305 U.S. 665 SUUUUETEED sccalecsinstiilinnudshabinndaiacaiasstiiedeinieiianadaaiiecamamasientiielduaalanbaamaaaite 82 Burbank y. Lockheed Air Terminal, 411 U.S. 624 ETUDE | ‘ccinsuscntsinnnatesnisaninidindinaiiaiaiailmeadeimateeiaieimabimiaieaaiiaaddls 115 Buichers Union Co. vy. Crescent City Co., 111 U.S. 746 UDEIETEED xin cesiesntchbiadeeleiehh lenient al leak iaeail 69, 73, 82, 92 Calder v. Bull, 3 U.S. (3 Dall.) 386 (1798) ~.....0............ 66 California Teachers Ass’n v. Newport Mesa Unified School District, 333 F. Supp. 486 (C. D. Cal. 1971) ..88, 93 Campbell v. Hussey, 368 U.S. 297 (1961) -...............-.-- 115 Chicago, B. & Q. R.R.v. Chicago, 166 U.S. 226 (1897). 101 Cloverleaf Butter Co. v. Patterson, 315 U.S. 148 EUDITIUE _ ‘comsssieassiiesiamatiesaeniinnetionapennnasetitinbiiatiddibclaesdatabhieladiiiede: 115 Courtesy Sandwich Shop, Inc. v. Port of New York Authority, 12 N.Y.2d 379, 240 N.Y.S.2d 1, appeal dismissed, 375 U.S. 78 (1973) -..............c.-ccec-es-ecenceeees 111, 112 DeCanas y. Bica, 424 U.S. , 86 S.Ct. 933 (1976) -..... 116 Delaware River Port Auth. vy. Tiemann, 531 F.2d 699 Ge Spel SEP. eainvenetinnicenenetceidiiisnnanadsiltdeaticasialahinnsiaiiaesis 53 DeV eau v. Braisted, 363 U.S. 144 (1960) 0. 118 East New York Savings Bank v. Hahn, 326 U.S. 230 ERIEETED - coceneseubevsnsninieniundteisiuciiaaditineiisiietanalinbasdelaaniiaaialatalaatnats 84 El Paso vy. Simmons, 379 U.S. 497 (1965) ....73, 79, 82, 84, 85- 88, 89, 91, 92, 93, 95, 102 Faitoute Iron & Steel Co. v. City of Asbury Park, 316 Rai TE IED eunsedenidesitulsicicecinneeisinicicahuacditions 72, 75, 74, 85, 92, 93 First Nat'l Bank v. Maine Turnpike Auth., 156 Me. hs, See Gs ee ET ITED ceicivdiientinatenntenchancietnessenbnadeses 94 Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) -.......... 65 Florida Lime & Avocado Growers, Inc. v. Paul, 373 SEPIA. MIU CIPI sosscsssecenpetdeneitdineshasiesitbicnnmmnniaiibidbeaasiastiiigiied 115, 116 Flushing Nat’l Bank vy. Municipal Assistance Corp., A.D.2d =, 882 N. Y.S.2d 764 (1st Dep’t 1976) ........ 73 v PAGE Free v. Bland, 369 U.S. 663 (1962) ...................-s-cces-eeeees 114 Friends of the Earth v. Carey, 535 F.2d 165 (2d Cir. TD antcveniann 51 Gelfert v. National City Bank, 313 U.S. 221 (1941) ......82, 83 Goldblatt v. Town of Hempstead, 369 U.S. 590 (1962) .......... easianauienntiniitaieinesneneteta 101 Ham v. Maine New Hampshire Interstate Bridge Auth., 8 104 Henderson vy. Delaware River Joint Bridge Comm’n, 362 Pa. 475, 66 A.2d 843, cert. denied, 338 U.S. 850 SUITE icisinicexiiacnnesitenniiadancibaiasintniietenneeintiniteiaieaundumniiiiinieiate 104 Hicks v. Miranda, 422 U.S. 332 (1975) ............----.---0---+- 111 Hill v. Florida, 325 U.S. 538 (1945) -.0222..2.----eeeeeeeees 117, 118 Hines v. Davidowitz, 312 U.S. 52 (1941) -................ 115, 116 Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398 i aie ..65, 70, 71, 79, 81, 83, 84, 86, 93, 95, 102 — v. North Bergen Township, 113 N.J.L. 143 CER, GD Bis TER cerctceenscitincceensernscenesnteisiectnninaninhiinapniitiiniihanes 74, 75 Huddleston v. Nebraska Jewish Educ. — 186 N.W. 2d 904 (Neb. 1971) ..... 93 Illinois Central R.R. v. Illinois, 146 U.S. 387 (1892)... 103 Indiana ex rel. Anderson vy. Brand, 303 U.S. 95 (1938) 74 Jacksonville Port Auth. v. State, 661 So.2d 825 (Fla. 1964) 93 Katzenbach v. Morgan, 384 U.S. 641 (1966) ....000002.... 119 Kesler v. Department of Public Safety, 369 U.S. 153 (1962) 116, 117 Kheel v. Port of N.Y. Auth., 331 F. Supp. 118 (S.D. N.Y. 1971), aff’d on other grounds, 457 F.2d 46 (2d Cir.), cert. denied, 409 U.S. 983 (1972) 77 League to Save Lake Tahoe v. Tahoe Regional Plan- ning Agency, 507 F.2d 517 (9th Cir. 1974) cert. denied, 420 U.S. 974 (1975) 104 PAGE Levine v. Long Island R.R., 38 A.D.2d 936, 331, N.Y.S. 2d 451 (2d Dep’t), aff’d, 30 N.Y.2d 906, 335 N.Y.S. 2d 565, cert. denied, 409 U.S. 1040 (1972) -.222.. 73 Long Sault Development Co. v. Call, 242 U.S. 272 EIT — capintonesteiedanmennntinesnesnampiniensiemasiaapennsiiine 103 Louisiana v. Pilsbury, 105 U.S. 278 (1881) .................... 72 Lynch v. United States, 292 U.S. 571 (1934) -............. 8+ Massachusetts Port Authority v. Txeasurer & Receiver General, 352 Mass. 755, 227 N.E.2d 902 (1967) .......... 78 Michigan Transp. Co. v. Secretary of State, 41 Mich. App. 654, 201 N.W.2d 83 (1972), leave to appeal denied, 389 Mich. 767 (1973) -...........-.-.....-c.-csecseceereoreee 8S Miller v. Schoene, 276 U.S. 277 (1928) 20.22... eeeneeenee 101 Mugler v. Kansas, 123 U.S. 623 (1887) .......................... 101 Municipal Investors Ass'n vy. City of Birmingham, 316 SEA SD CHIIIED .ceectniiesrnensnticisinneniinenrenimaciesitienmainsspamannnanie 103 New Bedford vy. New Bedford, Woods Hole, Martha's Vinyard & Nantucket SS. Auth., 336 Mass. 651, 148 N.E.2d 687, appeal dismissed for want of substan- tial federal question, 358 U.S. 53 (1958) -............ — New Hampshire v. Maine, US. (1976) ........ 104 New Jersey Highway Auth. vy. Sills, 111 N.J. Super. 313 (Ch. Div. 1970), aff'd, 59 N.J. 432 (1971) ....79, 84, 85 New Jersey Sports & Exposition Auth. v. McCrane, 61 N.J. 1, appeal dismissed, 409 U.S. 943 (1972) -........ 73, 80 Newton v. Board of County Commissioners, 100 U.S. Pe CD cccsnbicninisecnsnnstenencidpuncamienamemniananmintininminaiiniins 68 N.Y. Dep't of Social Services v. Dublino, 413 U.S. 405 STN cictinntesinesniontanlinniaianii ‘ 114 Opinion of the Justices, 334 Mass. 721, 136 N.E.2d 223 PITTED cncsevisiossvismbisdnahiedaitininiadithepeansiidieannasteintiigiaetnates 73, 75, 78 Opinion of the Justices, 313 N.E.2d 882 (Mass. a dienpiopmiemiinentt Resnininne 78, 79, 93 Patterson vy. Carey, App. Div. 2d , 383 N.Y.S.2d FF, Sk ___, RENEE TOUTE NO aa 79 ~~ vii PAGE Pennsylvania v. Nelson, 350 U.S. 497 (1956) .......... 114, 115 Pennsylvania v. Wheeling & Belmont Bridge Co., 54 U.S. (13 How.) 518 (1851) ~... iaasiaunniaiieeies 104 Pennsylvania Hospital v. Philadelphia, 245 U.S. 20 (1917) ....... 68, 73 Perez v. Campbell, 402 U. | fo) =e 116, 117 Perry v. United States, 294 U.S. 330 (1934) 73, 74 Petty v. Tennessee-Missouri Bridge Comm’n, 359 U.S. 275 (1959) 104, 105, 106, 109 Proprietors of the Charles River Bridge v. Pro- prietors of the Warren ae 36 U.S. (11 Pet.) | nT EE 66, 74 Reitz v. Mealey, 314 U.S. 33 (1941) .. 117 Rhode Island vy. Massachusetts, 37 U. Ss. (12 Pet.) 464 ne 105 lice v. Sante Fe Elevator Corp., 331 U.S. 218 (1947) 115 Rogers Park Water Co. v. Fergus, 180 U.S. 624 (1991) 74 Ruano vy. Spellman, 81 Wash.2d 820, 505 P.2d 447 (1973) ..... 94 Stone v. Mississippi, 101 U.S. 84 (1880) 68, 69 Train vy. Natural Resources Defense Council, 421 US. 60 (1975) ..... 114 Treigle vy. Acme Homestead Ass’n, 297 U.S. 189 (1936) 84 Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819) 65, 66 United States v. American went Express Co., 265 U.S. 425 (1924) eccccccsseeesees 1038 United States v. Little Lake Misere Land Co., 412 U.S. BD CIID ceciccinteicersncishisemnnttnticndiniintenencemnintioninnannintetnemnne 63 Veia vy. Sixth Ward Bldg. & Loan Ass'n of Newark, 310 U.S. 32 (1940) ..... - 83, 84, 93, 102 Village of Euclid v. Ambler Realty Co., 272 U.S. 365 RI ddiiiceanniepieiliteitemtialiais Maar Saeed ae raat 101 Virginia v. Tennessee, 148 U. S. 503 (1893) iinpenanseaiiniiahin 104 PAGE Von Hoffman v. City of Quincy, 71 U.S. (4 Wall.) 535 COUP ccvesccnicinsinisnssinscistnenviiiteniiiaiesnensiniestnbniitisshlimanaissetutcuasinasitapas 72 W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935) = 85 Wedding v. Meyler, 192 U.S. 573 (1904) -.0.002202... 104 West River Bridge Co. v. Dix, 47 U.S. (6 How.) 507 ae satannsinnaininniinitianitbiasdiaeingaerindeiedddall 67. 68 Wolff v. City of New Orleans, 103 U.S. 358 (1880) ..... 72 Constitution Cited: US. Comat. 086. 5 9D ncccccccsccsonsncnsessnsesessveessnenseconsuonsonse 105 8 ES Ree 102, 103 Federal Statutes Cited: Bridge Act of 1906, 34 Stat. 84 22.0... ‘3 Federal Aid Highway Act of 1973 -......0022.222-2202...-. 113 ey I Or I eiiitiecidnitassicntnhitiihictinhineeanideantannasinidl 112, 116 National Mass Transportation Assistance Act of SOUT. svseiaseinisidden ddaiapiteaiamed aaailipiciealaddiabenbeiiapeabiantiidiaiiiabeiamsaenii 48, 113 Ordinance for the Northwest Territory, 44 Stat. 1851 PORE STII sscciersicciiinsidnieiehiaieinithiabiieiesacacilasi statin ates 65 Port Authority Compact, Pub. Res. 17, 67th Cong., Ist Sess., 42 Stat. 174 (1921) 2,3, 95, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112 Port Authority of New York Comprehensive Plan .... 3, 109 Regional Rail Organization Act of 1973 (Jan. 2, 1974) 48,113 Urban Mass Transportation Assistance Act of 1970 113, 116 15 U.S.C. §§ 751 et seq. (Emergency Petroleum Allo- ITE Te eT seentenetedinninbahaieiintititaiintniens 46, 116 15 U.S.C. §§ 791 et seq. (Energy Supply and Envi- ronmental Coordination Act of 1974) 00000... 48 PAGE 42 U.S.C. §§ 1857 et seq. (Clean Air Act Amendments >, 50, 95, 116 49 U.S.C. §§ 1601 et seq. (1964) (Urban Mass Trans- portation Act) iis 112, 113, 116, 117, 118 State Statutes Cited: Ch. 25, Laws of New Jersey (1974) -.......2....2...-.220-0--0--- 1,2 Ch. 151, Laws of New Jersey (1921) ................---......--. 2 Ch. 208, Laws of New Jersey (1972) .............-.------------ 59 Ch. 245, Laws of New Jersey (1971) .............--.-----------. 57 Ch. 277, Laws of New Jersey (1927) -......202.2..2..22..----.-- 5 Ch. 154, Laws of New York (1921) , ~ 8 Ch. 318, Laws of New York (1973) -.....2..2.2222222.2..-----00+- 59 Ch. 993, Laws of New York (1974) ~...00..0220.20.0.2.2---0--- 2 New Jersey Emergency Energy Fair Practices Act of 2 caida taiaisabtadiadlidcia Ail iiea ical Sol eh coats 47 iB TeM, TRE GB BOG. cccrcccensnseccesenscssesscesansneensersncenscsnssounees 2 eas TINIE scnectuharcvenicecisiisenioteuienitnenienncnbindesasnaindsea inanainsans 3 I a eaiiennienaniaiiel 57 eee 57 is TaN ‘snicisisciespninniseisiesbissibindeupiaiepunnaiiatanbinneeans 17 N.J.S.A. 32:1-35.51 et seq. me siniicaiaibailpmaaasi 59 Ns: SEED -escechcsccesssncimculiiiinesiseteanidgsimaniaamcdaatpen 18, 29 I ea cian eoeniianalies 99 Ss: CTIIIIIIT -sccrisntncsesnnsinentesnicnnsthncninrtinesiaiiiaieminialimainaniin 6 N.Y. Unconsol. Laws §§ 6401 et seq. -.............-------+-+-+---+- 3 Regulations Cited: 49 C.F.R. § 148(i) (1) . 53 38 Fed. Reg. 9645, 9657 (1973) ...............--c-ecccceec-eeeeseeees 46 I I I I as ecnnssiniieeeaieriacadteelanitinle 46 Se is, I: UIE UTED tcsenscctteeicnetentacistninnmmntommesinoniatee 51, 52 x PAGE Other Authorities Cited: E. W. Bard, The Port of New York Authority CHIE . vicheecissineensnestsitinenstaaehiiineiiniaaimadiaiiaudnaienin 3, 5, 6, 7, 107 OR Sth Gr OD erritititcerniencnccistrniesticctrcnnceiit 107 | Farley Committee Report of 1963 (N.J. Senate) ......8, 26, 75 II M. Farrand, Records of the Federal Constitution ETENETD weikditsittsiopeiiositchisadiailiniesatilialapaiiasiatemddiiiniebasitbats oncatidaaaaieal 65 Hale, The Supreme Court and the Contract Clause, 2 Oe ee 102 New Jersey Assembly Bill No. 16 (1958) (not RE I TOC STK oe Soa CONNER Te 9, 13, 14, 16 New Jersey 1959 Joint Assembly Committee Report Oh HE Bs TU deechinclttnteiciisadarseitsiiatetone 16, 41 New Jersey Joint Legislative Committee Report of ERE a eal 7 ERASE EO ey LOD 46 6 Seton Hall L. Rev. 48 (1974) 2.2.2... ccccccccccscseceeeeee 78 Wright, The Contract Clause and the Constitution SED ernevutesunlsiniaindilacksiiasnaniiuabitelidiamabdaacn dead 65 IN THE Supreme Court of the United States Octrosper TERM, 1975 No. 75-1687 A a Unrrep States Trust Company or New York, as Trustee for The Port 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 Jersey, Brennan T. Byrne, Governor of the State of New Jersey, and Wriiiiam F. Hy.anp, Attorney General of the State of New Jersey, Appellees. ON APPEAL FROM THE SUPREME COURT OF NEW JERSEY BRIEF FOR APPELLEES COUNTER-STATEMENT OF THE CASE Introductory Statement This is an appeal from a judgment of the Supreme Court of New Jersey, unanimously affirming a judgment of the Superior Court oi New Jersey (Hon. George B. Gelman, J.S.C.), upholding the constitutionality of Chapter 25 of 2 the Laws of New Jersey, 1974.! The challenged 1974 sta- tute, together with concurrent and identical New York legislation, Chapter 993 of the Laws of New York, 1974, repealed 1962 bi-State legislation purporting to limit by covenant the application of the revenues and reserves of the Port Authority of New York and New Jersey for pas- senger railroad purposes. The trial court found that, “the claim that bondholder security has been materiaily impaired or destroyed by the repeal is simply not supported by the record.” A 127. The trial court further held that repeal constituted a rea- sonable exercise of the State’s police power. Judgment was entered accordingly, dismissing appe!lant’s complaint and declaring Chapter 25 valid and constitutional. On direct appeal, the Supreme Court of New Jersey unanimously affirmed, “substantially for the reasons set forth in the opinion of Judge Gelman.” A 135. Appellees respectfully submit that the judgments below were correct and shoul? be affirmed. A. The Early Years: A Port Authority That Was Not Self-Sustaining, the Arrangements That Enabled It to Carry Deficits and the Failure of Legislative Efforts to Have the Authority Assume Responsibility for Passenger Railroads The Port Authority Compact was enacted by New Jersey and New York and consented to by Congress in 1921. Ch. 151, Laws of N.J., 1921, N.J.S. A. 32:1-1 et seqg.; Ch. 154, 1. The statute appears at pages 5-6 of Appendix B to the Juris- dictional Statement. 2. “A” refers tothe Appendix. “A.B.” refers to the brief for appel- lant. “Stip.” refers to the Stipulation among counsel dated December 20, 1974, the entire text of which is contained in Volume IV of the Joint Appendix (cited as “Ja”) submitted to the Supreme Court of New Jersey. 3 Laws of N.Y, 1921, McKinney’s Unconsol. Laws $6401 et seq.; Pub. Res. 17, 67th Cong., 1st Sess., 42 Stat. 174 (1921). Declaring that “a better coordination of the terminal, trans- portation and other facilities in, about and through the port of New York, will result in great economies, benefit- ing the Nation, as well as the States of New York and New Jersey,” the Compact created the Port of New York Authority to pursue those elusive goals.’ The Compact granted the Port Authority enumerated powers “and such other and additional powers as shall be conferred upon it by the legislature of either State con- curred in by the legislature of the other, or by Act or Acts of Congress.” Compact Art. III; see also Art. VII. Among the powers enumerated is “full power and authority to pur- chase, construct, lease and/or operate any terminal or transportation facility within the [Port] district.” Com- pact Art. VI. “Transportation facility” is in turn defined to include “railroads ... for use for the transportation or carriage of persons or property.” Compact Art. XXII. In 1922, the States, again with the consent of Congress, adopted a Comprehensive Plan mainly concerned with rail- road freight operations and facilities. A 69. But the Com- prehensive Plan was never implemented, in part because of the Port Authority’s refusal in 1922 to help solve the problems of railroad passenger traffic. See E. W. Barn, Tur Port or New York Avutnority 65-66, 128-130 (1942) (hereinafter cited as Barp). New Jersey quickly recognized that the Comprehensive Plan was not sufficiently comprehensive: it enacted a law in 1922 finding that the Comprehensive Plan “does not include the problem of passenger traffic in the territory covered by [the] port development plan” even though the 3. The name of the Authority was changed to the Port Authority of New York and New Jersey on July 1, 1972. N.J.S.A. 32:1-4. 4 “problem of passenger traffic should be considered in co-op- eration with the port development commission.” A 569.4 The Port Authority also recognized that freight and passenger service were not two problems but inseparable parts of a single problem. Its 1924 Annual Report observed : “There is barely room during the rush hours for the trains carrying freight because of the commuter service, while passengers and freight must both nec- essarily move during these hours.” A 156. The point was repeated in the Port Authority’s 1928 Annual Report: “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 passengers as well as of freight throughout the Port Distriet.” A 151, 575. The Legislatures of both States agreed. In 1927, the New Jersey Legislature, stating that it was acting “under and pursuant to the provisions of the [Port Authority] compact,” 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. ...” A 57.5 This legislation, which became 4. The legislation established a study commission that worked with the Port Authority in establishing a new agency, of which the Authority was a member, to coordinate solutions to the problems of commuter transportation. A 576. 5. In light of this early history, appellant obviously errs at the very outset of its discussion of “Port Authority Involvement in Mass Transit,” A.B. 8, when it says: “As early as 1922, the legis- latures recognized that the Port Authority was not the appropriate agency to develop a solution to the problems of railroad traffic.” Id. . i ad tetoen, —_ atid, wees 5 Chapter 277 of the Laws of New Jersey, 1927, was signed by Governor Moore and approved the following year by the New York Legislature, but was vetoed by Governor Alfred E. Smith. A 572-574. As the trial court found, Governor Smith’s veto ended the Port Authority’s active involvement in any solution of commuter transit problems for the next 30 years. A 80. The Port Authority took a new tack and began its con- struction program by building four bridges for motor vehicles. A 71. These bridges, which still account for much of the Port Authority’s financial strength, see A 737, were made possible by advances from the States to pay 25 per- cent of the costs of construction. The advances took the form of loans subordinated to the bonds the Authority sold to the public. A 71. A separate series of bonds was issued for each bridge and the bondholders’ security was limited to the revenue from that bridge. A 71. In their early years, however, the bridges did not meet revenue expectations and the Authority was not only not self-supporting, but faced default on its bonds. A 70 n. 8, 72, 820. The Legislatures’ response to the Port Authority’s pre- dicament was two-fold. First, they transferred the control, operation and revenues of the highly successful Holland Tunnel to the Authority: its annual surpluses after debt service were large enough to cover the bridge deficits. BARD at 238; A 70 n. 8. Second, the States enacted stat- utes creating the General Reserve Fund, in which surplus revenues from all Authority facilities are pooled to create a bondholders reserve fund in an amount equal to 10 percent 6. Appellant says, A.B. 8, that Governor Smith vetoed the bi-State legislation “on the ground that the Port Authority was never intended to become involved in rail mass transit.” The veto message, A 572- 574, contains no such statement and bases the veto on Governor Smith’s unwillingness to divert the Authority from the solution of the freight distribution problem. The Port Authority Commissioners responded that the feared diversion of efforts would not take place, A 151 n. 9, demonstrating that they too understood this to be the basis of the veto. 6 of the par value of the Authority’s outstanding bonds. and the Governors would never have approved, any increased tolls on Port Authority bridges and tunnels, as suggested by the Environmental Protection Administra- tor, unless some of the new revenue were applied to sup- port rail mass transit. Yet the covenant, as interpreted by Mr. Tobin to the Legislatures in 1971, precluded the use of increased vehicular tolls for rail mass transit. A 689. 3. The Port District’s public transportetion requirements The pivotal importance of adequate passenger rail trans- portation to the welfare and economy of the State of New Jersey has never been denied by appellant. See A.B. 66, where appellant finally admits: 35. The tolls charged on the Authority’s bridges are subject to the Bridge Act of 1906, 34 Stat. 84, 33 U.S.C. §491 et seq., which pro- vides that the tolls charged “shall be reasonable and just.” The Fed- eral Highway Administrator is authorized to prescribe such tolls. 32 Fed. Reg. 5607, 49 C.F.R. §148(i) (1). In the Delaware River Port Authority case discussed at A 724-726, the Administrator said that “a reasonable and just toll schedule would be one sufficient to sup- port” all of the Authority’s activities, including a rail mass transit line, A725, and referred to “the urgent need to structure toll rates for crossings in major metropolitan areas to encourage use of mass transit and carpools,” A 726. The Administrator’s order reducing tolls was subsequently vacated by the Court of Appeals for insuffi- cient findings with respect to whether the reduced tolls would permit the Authority to sustain its “total activities.” Delaware River Port Auth. v. Tiemann, 531 F.2d 699 (3d Cir. 1976). J ich In July 1974, the federal Department of Transprtation, whi includes the Federal Highway Administration, concluded in a report to Congress that: “in some areas (New York, Philadelphia, San Francisco), bridge toll revenues provide significant support for transit capital and/or operating costs, thereby providing transit serv- ice improvements which promote decreased dependence on automobile travel. Therefore, it would appear to be in the Fed- eral interest to permit the imposition of tolls which would promote a more efficient utilization of the urban transportation system. Such a policy would not be unjustly discriminatory but more appropriately reflect the total costs of using the facility in peak demand periods.” A 726-727. 54 “Tf it can be said in the case at bar that the ends to be accomplished are improvement in mass transit, decrease in air pollution and conservation of energy, it must be granted that they are legitimate.” Kven a brief review of the massive record demonstrates that these were precisely the ends to be served by repeal. Prior to 1962, public concern with rail mass transit in the Port District produced little more than a stream of studies and ‘reports. A 79-80, 605. While these reports portrayed in graphic terms the continuing deterioration of rail mass transit in the Port District—a condition to which the vehicular facilities developed by the Port Authority directly contributed, A 604, see Stip., pp. 96, 100, 108, 134- 135, 139, 140-141, 154; ix. VII, pp. 125A-126A, 130A-133A —no significant steps were taken to improve the situation until the early 1960’s. A 80. Thus, when the 1962 cove- nant was enacted, no one knew what could actually, rather than theoretically, be accomplished by coordinated support of rail mass transit in the Port District. Since 1962, the public attitude and policy has changed dramatically from “Why Worry?” A 601. By September 1973, the State of New Jersey had committed more than $350 million to its program, modestly begun in 1960, to maintain and improve commuter rail services. Stip., pp. 15, 144. In New York, it was found, contrary to the 1958 report of the Metropolitan Rapid Transit Cominission, Stip., pp. 109- 110, upon which appellant relies at A.B. 8-9, that financial support could be obtained from existing public authorities. Tn addition to the Port Authority’s modernization and oper- ation of the Hudson & Manhattan (now PATH), surplus revenues of the Triborough Bridge and Tunnel Authority, including additional surpluses created by the doubling of tolls on vehicular bridges and tunnels, were applied to the deficits of subways and passenger railroads. During the 59 seven years prior to the end of 1974, the Triborough turned over approximately $305 million to the New York Metro- politan Transportation Authority to help support rail mass transit. A 732. Despite this substantial infusion of funds in the years since 1962, the plight of the commuter railroads within the Port District remains critical, as the Court knows. See Blanchette v. Connecticut Gen. Ins. Co., 419 U.S. 102, 108, 156, 159 (1974). Beginning in 1967, each of the four private companies operating commuter rail services in New Jersey has been involved in reorganization proceedings under the federal bankruptcy laws. A 81 n.21. The express policy of the State of New Jersey has been to impress upon the federal courts supervising the reorganization proceedings the necessity of continuing most of these rail services. A 546. The most recent comprehensive program of the New Jersey Department of Transportation, published in Sep- tember 1973, explained the reasons for this policy: “Cessation of mass transportation services in these urban areas 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 few years unless a major investment in capital facilities, equipment, and operating subsidies is provided by the public.” A 546-547. By 1970, it had become apparent that although it had re- vitalized the Hudson & Manhattan, the Port Authority had not kept pace either with its ability or with the need to increase its participation in rail mass transportation. Thus, in April 1970, Governors Cahill and Rockefeller announced a joint program to expand the Authority’s role in rail mass transit by having it build a rail link to Kennedy Airport and 56 extend PATH to Newark Airport and other parts of New Jersey. A 99-100, 686. In March 1971, legislative committees of both New York and New Jersey held joint hearings on the relationship of the Port Authority to mass transportation. The commit- tees heard testimony, summarized at A 687-690, see further Stip. pp. 223-233, and Stip., Ex. VII, from numerous wit- nesses, including several recognized experts, to the follow- ing effect: the Port Authority had substantial funds avail- able in excess of required interest and principal payments; the Port Authority’s revenues could be increased substan- tially by doubling the tolls on its bridges and tunnels ;*° the largest commercial bank in the Port District had released a report calling for the imposition of higher and economically more reasonable charges for the use of highways and river crossings in order to transfer badly needed revenues to rail mass transit; the covenant did not add to the security of Port Authority bondholders and was simply a condition that the Port Authority made to its assumption of responsibility for the Hudson & Manhattan; passenger rail ridership within the Port District had increased substantially as a result of massive highway congestion, which was also ad- versely affecting air quality and intelligent land planning and use; and the Port Authority had “subverted” the ef- forts of the Metropolitan Rapid Transit Commission as part of its long-range effort to avoid rail mass transit in favor of the lucrative development of vehicular facilities. During the March 1971 joint legislative hearings, Mr. Tobin stated that even if vehicular tolls were doubled, the tens of millions in increased revenues “could not go under the law [to] mass transit anyway ... we could use them for other facilities supported by the General Reserve Fund, but 36. Executive Director Tobin predicted that doubling the Author- ity’s vehicular tolls would raise “holy political hell,” A 688, a prophecy borne out by the reactions to the 1975 toll increase dis- cussed at A.B. 37-38. The fact remains that despite these reactions the toll increase is in effect. A 528. 57 you could not, under the law and the constitution, use them for mass transit facilities.” A 689. The obvious barrier was the 1962 covenant. In the light of this evidence, there was extensive discus- sion during the 1971 joint legislative hearings concern- ing possible repeal of the 1962 covenant. Assemblyman Koppell of New York asked whether the covenant could be repealed “not only for the future, but for the past” on the basis of the legislative finding “that in the exercise of our right to protect the people of the two states, we find that this covenant stands in the way of the proper development of mass transportation facilities, which is essential to the people’s good and welfare.”