Under the terms, the city was obligated to pay the Pennsylvania Railroad a portion of the additional operating costs incurred in providing the increased service. The company assumed any revenue losses resulting from the reduced fares. Encouraged by the success of this experiment from the city's standpoint, responsibility for contracting was placed in the Passenger Service Improvement Corp. of Philadelphia, with whom contracts began August 1, 1960. Services to Manayunk and Torresdale were covered by a contract with PSIC beginning October 30, 1960. Fares were reduced and the number of weekday trains increased from 19 to 28 on the Manayunk line and from 18 to 25 in the Torresdale service. Parking improvements were made at several stations. Thirty-eight new A.C. cars were placed in service in October 1963.

Volume on the PSIC contract lines has shown significant growth since the beginning of the experimental program of October 26, 1958.

Operation Levittown is partially financed by the southeastern Pennsylvania transportation compact, with matching grants from the Housing and Home Finance Agency.

This 3-year demonstration program of improved suburban rail service on the Pennsylvania Railroad between Philadelphia, Pa., and Trenton, N.J., began December 3, 1962.

The number of trains was increased almost 50 percent, from 25 to 37, on weekdays. Fares were reduced as much as 45 percent. All suburban parking lots were made free, with four of them being expanded and improved. Further improvements were made in August of 1963 when new air-conditioned stainless steel electric cars, owned by the city of Philadelphia, were operated on most of the trains, permitting a 25-percent reduction in running time, from 60 to 45 minutes for 33 miles with 13 intermediate stops.

To preserve this service from ultimate abandonment, the city of Philadelphia had begun a small program in 1960, underwriting the cost within the city limits. The public response to the combined programs has been phenomenal:

Public contract payments (made possible in this program through $1,200,000 worth of HHFA matching grants) under the 3-year period have (1) preserved an essential rail service, (2) met a critical urban transportation need and assisted in alleviating some of the highway congestion problem, (3) provided improved rail service, and (4) helped reduce railroad losses which would have eventually required elimination of the service. Annual results have been:

Senator LAUSCHE. Now, Mr. Saunders, although you have touched on this, I want to put it to you in question form. Briefly describe what you anticipate will be done with respect to the Pennsylvania's service if the agreement which you mentioned is entered into with the Federal Government to make this test in the corridor?

Mr. SAUNDERS. First of all, we have to upgrade our right-of-way and so forth. We will have to spend some $9.5 to $10 million to do that, which we expect to do ourselves.

W would expect, in cooperation with the Government, to acquire up to 50-and that figure is not set yet, we have discussed from 28 to 50 cars, and that will depend to some extent on what price we get from the manufacturer, how expensive they are. But if we get a good price, it will probably be in the range of 50 new MU cars, as we call them. I described the type of car in my testimony.

We will operate these new cars in trains ranging from 4 to 10 cars. We will operate them alternately with our present equipment, every other hour. In other words, one hour we will operate our conventional equipment which we have at the present time, and the next hour we will operate one of the new trains.

Senator LAUSCHE. What will be the difference between the conventional equipment and the new equipment?

Mr. SAUNDERS. Well, the conventional equipment in the first place will be operated by what we call, or pulled by what we call, a GG–1 locomotive. That is the locomotive on the head end. These new cars will have power in each car. While most of the cars we operate in this service are fairly modern, they are nothing like what will be the comfort and convenience of these new cars. And of course the new cars will operate at a higher speed. We can't operate the present equipment at speeds of this type.

Senator LAUSCHE. Can't you operate them at a higher speed because of the horsepower they generate, or is it because of the roadbed? Mr. SAUNDERS. Well, it is both. The type of cars we are talking about getting will be able to operate at higher speeds in much greater comfort, with less sway and noise and things of that sort. Also we will have to improve the roadbed. In addition, the power that is required to generate speeds of over 100 miles an hour we can't get in our present equipment. It wouldn't be as comfortable and maybe not too safe a ride. It certainly wouldn't be comforable.

Senator LAUSCHE. Your initial objective would be to provide 100 mile-an-hour service?

Mr. SAUNDERS. That is correct. In certain areas we may go higher than that, test areas. But I also would like to point out, Mr. Chairman, as I stated in my statement, we will increase the number of trains operated between Washington and New York from 50 to 72. In other words, there will be more frequency of service and we think much better service.

Senator LAUSCHE. What do you anticipate the result will be? I know that you are looking into the future and I know the hazards of trying to foretell what the future will bring. But I would like to at this time put you on record so that at a later date we might be able to parallel what the actual results are with the prediction.

Mr. SAUNDERS. We think that with this modern high-speed operation you will see a very substantial increase in patronage on these trains. And of course we will have an excellent opportunity to test it, because we will have the conventional equipment operating 1 hour and the modern equipment the other. And we will vary that from time to time, in order to get the best possible test.

But to answer your question, we think this will be a success. And if we didn't, the Pennsylvania Railroad would certainly not put $10 million or more into the project unless we felt it had real chances for

success.

Senator LAUSCHE. Do you anticipate that at any time you will be able to make the revenues equal to the expenses of operating this system?

Mr. SAUNDERS. I think that is a very difficult question. If you can make cost reductions in crew and so forth, if you can adjust your fares, I would say that in this particular type of operation the chances are you can make money on it, yes.

Senator LAUSCHE. You are, however, of the belief, definitely, that it will take automobiles off the highways and put passengers on trains which are a low-cost type of transportation?

Mr. SAUNDERS. I have no doubt about that whatever. I also think it will relieve the congestion in the airways too, because if we can get down to less than 3 hours, or down to two and a half hours, it will be much quicker to go by train than by air, when you take into account the time getting to and from the airports and things of that

sort.

Senator LAUSCHE. You stated that travel volume on the New Jersey Turnpike has increasd to an average of more than 166,000 vehicles daily. Is that a toll road?

Mr. SAUNDERS. Yes, it is a toll road.

Senator LAUSCHE. From what period forward did that increase occur? Do you have that available?

Mr. SAUNDERS. Yes. The growth on the New Jersey Turnpike, take 1960, they had 134,474. The New Jersey Turnpike was opened. in 1951. In 1952 they carried 49,174 vehicles. Then in 1960 it was 134,474. In 1962 it was 150,413. In 1964, 166,522.

Senator LAUSCHE. Thanks for that information.

Now you say last year the Pennsylvania operated its passenger service at a loss of more than $34 million, and that half of this deficit was incurred in connection with the operation of intercity trains. Will you give your reasons why this loss was suffered? What were the main factors?

Mr. SAUNDERS. Well, there are a number of reasons. We have been experiencing a teriffic decline in our passenger revenues. And the number of people riding the trains. In other words, it is a decline in volume. Last year our total passenger revenues were $88,157,000, whereas in 1950 they were $149 million. Actually in 1946 they were $207 million. In other words, we have had a decline of at least onehalf to two-thirds in the passenger revenues. Most of this has been in, or a large part of it has been in our intercity transportation.

So, first of all, while we have reduced the amount of service that we give somewhat, the number of trains we operate, we have not been able, under the regulatory laws of both the Interstate Commerce Commission and the State commissions to reduce our service comparable to the reduction in volume. And we are required today to operate many trains on which we really are not making money, we are losing a substantial amount of money. While we have been able to get a number of these trains off, it is a very slow process.

For instance, recently we tried to combine the Penn-Texas and the Spirit of St. Louis. But we were not able to show that we were losing any substantial amount of money on either of these trains. But we could combine those trains without affecting the service to the public at all and save $900,000 a year. Well, the Interstate Commerce Commission refused to let us do that. And it is things of that sort, because of regulations and because of labor agreements and things of that sort, we can not reduce our costs to meet the reduction in our volume of business.

Also we have not been able to adjust our fares, and even if we did, I don't think we would gain anything by it, because of the terrific competition we have from other modes of transportation. It is much more convenient for a person to go from New York to Chicago by air in terms of time and in terms of money also, particularly when you take into account the cost of a Pullman and meals and things of that sort; it is much cheaper for him to travel that way. And we can't compete with that type of operation.

So particularly on our long haul intercity transportation it is a very bleak future.

Take the Broadway, which is one of the great trains in the country, the Broadway Limited. We are operating that train many days with as few as 60 or 61 passengers. That won't even pay for onethird of the crew cost on such an operation as that. There is just not the public demand. Of course in the short-haul operations you do have the competition of the automobile. But we firmly believe if you can make what we call relatively short-haul transportation, like here to New York, distances of that sort, and applied even to other sections of the country, if you can make that transportation first class in terms of speed, in terms of service, in terms of comfort, that the people will travel that way, and we have found that to be true in our commuter operations, and we think it will also follow through in these intercity operations.

Senator LAUSCHE. You at least believe it is worthwhile making the test to see if the passengers will be attracted to the train and induced to give up their automobiles and air travel?

Mr. SAUNDERS. I definitely feel so. I don't think there is anything you could do, Mr. Chairman, that would return or that has the potentialities of returning greater dividends than this.

Senator LAUSCHE. You do know that some tests that were made and statistics that were gathered showed that you would have to pay some people actual money to induce them to give up their automobiles and travel by train?

Mr. SAUNDERS. I am not familiar with what you are referring to. Senator LAUSCHE. We had testimony on that a few years ago, that there was a certain percentage of automobile operators who said that even if you paid me, I would not give up my automobile and travel by train.

Mr. SAUNDERS. There may be some people of that sort, but I think that is a relatively small group.

Senator LAUSCHE. Well, but that envisioned the absence of facilities and comfort and speed.

Mr. SAUNDERS. I think that is true. If they tried it, and you had this type of operation, I think they might change their minds.

Senator LAUSCHE. At the present time do you have any thoughts that this is the beginning of the Government taking over the railway system?

Mr. SAUNDERS. Not at all. I think this is wholly consistent with private enterprise. As a matter of fact, I think that if you don't do something of this sort, you are going to be faced with the necessity of the Government getting into transportation much more deeply. In other words, it seems to me that this is an investment in research and development which will preserve and keep the railroads in private enterprise.

Senator LAUSCHE. All right, Mr. Saunders, thank you very much for your help. Excuse me, just one more question. How do the railroads of the Nation generally stand with respect to this proposal? You are for it?

Mr. SAUNDERS. Yes, sir.

Senator LAUSCHE. What about the Midwestern railroads?

Mr. SAUNDERS. Well, I can't speak for them, of course, Senator, and I don't know the attitude of all of them. But I would say this, that in the first place they are not faced with the same problems that we are, or to the same degree. They do have them, but not to the same degree. I would say that they have not really studied this matter, and have not formed any definite opinion. There are certain railroads, I would say, that are not in favor of it. But those railroads have no problem of this sort, by and large.

Senator LAUSCHE. But there are some railroads then that do not favor it. There are others that do, and there are some that are neutral?

Mr. SAUNDERS. I wouldn't say that, I would say they are indifferent to it, I would put it that way.

Senator LAUSCHE. Could you identify them?

Mr. SAUNDERS. I wouldn't want to do that, because I have not specifically discussed it with them, and what their definite attitude would be, I don't know. I think the strongest I would put it is that they are indifferent. I don't know that there is any railroad definitely opposed to this legislation. At least I have not been advised of it. Senator LAUSCHE. I think that is all. Thank you very much. Senator Kennedy, you may proceed with your testimony.