Christmas for Trains

For nearly three years, the railroads of the Northeast have been highballing toward disaster. Six lines,-which control half the trackage in the 15-state area, are bankrupt, maintenance has been cut for lack of cash, and equipment is literally falling apart. Now, however, there is light at the end of the tunnel: following House approval, a Northeast rail reorganization bill passed the Senate last week. Expanded to include the Ann Arbor, a ruined Michigan line, and bearing a price tag of at least $4 billion, the measure is quite a Christmas treat. While the railroads clearly need help, the Senate proposal has all the markings of one of the biggest federal giveaways since Congress handed out land for a two-company transcontinental railroad in 1862.

As detailed in its 164 pages, S. 2767 would establish the Government National Railway Association, which would have 420 days to determine how much of the 30,000 miles of track should be retained before submitting a plan to Congress for final approval and funding. GNRA, or "Ginnie Rae," as railroad men are calling it, would issue billions in federally guaranteed bonds to satisfy creditors of the bankrupt lines (there is no precise limit). In addition, a new Railroad Equipment Authority would guarantee $2 billion of loans to finance the purchase of new rolling stock. Then Ginnie Rae would turn over operation of the new system to a United Rail Corp., a freight-carrying version of Amtrak, which runs the nation's passenger trains. If the United Rail Corp. is profitable, holders of Ginnie Rae's bonds could eventually exchange them for stock in the corporation, turning it into a privately owned company. There is little evidence, though, to suggest that the line would be a moneymaker. If it is not, the Government will end up sole owner-at a cost of several billion dollars in debt that it would have to repay on top of about $ 1 billion in cash it will fork out to get the corporation rolling.

The proposal is freighted with Yuletide gifts for just about everyone connected with the railroads. For labor there is a provision that an estimated 20,000 nonexecutive employees of the seven existing lines who are not given jobs in the new system will nonetheless continue to receive salaries of up to $30,000 a year until age 65. In some instances old hands will go on drawing paychecks even if they find work elsewhere. Communities served by little-used routes that may be cut out will get $400 million in grants to help them buy tracks and equipment and keep them in operation under regional rail authorities three-quarters funded by the Government. Complains Charles Van Horn, a Washington representative for the Chessie System, a profitable Northeast line: "It's a Christmas tree."

A number of expenses remain open-ended. Payments to displaced employees are budgeted at $250 million, but Department of Transportation analysts figure that they could end up double that. An unlimited-compensation provision could inspire creditors who felt that they were being bought off too cheaply to make extravagant claims for payment. Department analysts worry that this provision could cost the Government billions. Penn Central alone claims its properties are worth $14 billion.

No Veto. The bill is endorsed by organized labor, many shippers who use the railroads, and most railroad executives. Transportation Secretary Claude S. Brinegar has denounced it as "damned expensive." He would like to see tighter limits put on employee compensation and federal support for the creditors. But even though his skepticism is shared by the President, Brinegar predicts that there will be no White House veto.

When Nixon signed a lavish $407 million appropriation for Amtrak only last month, he asserted that strengthening the nation's rail system was necessary to cope with the energy shortage. And a Transportation Department study for the White House indicates that any abrupt halt in rail service by the bankrupt carriers would boost the national unemployment rate by 3% and lower the gross national product by 2.7% within two months. That seems an extravagant prediction, but the Administration is hardly likely to risk any derailment of the economy on top of Watergate and the energy crisis.

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