FINANCE I want to turn now, Mr. Chairman, to what might be called the facts of life of the transit development program. What is its cost? How is it to be financed, and by whom? In a report issued by this committee on June 23, 1960, to accompany H.R. 11135-what was then the proposed National Capital Transportation Act-it was pointed out at page 12 that: The Bureau of the Budget *** told the joint committee that, over a period of 50 years, a rapid transit system would not only pay its operating costs, but would repay a large part of its capital costs, and perhaps eventually all of them. The committee itself concluded that: There is every reason to expect that, if the Federal Government will make its credit available to create such a system, it will receive its money back, with full interest. The National Capital Transportation Act reflects this conclusion. Section 102 sets forth the congressional finding that the creation of major transportation facilities for the region that are beyond the financial capacity or borrowing power of the public carriers, the District, and the local governments of the region, will require financial participation by the Federal Government. Section 204(g) of the act directs that any program submitted by the Agency shall provide as far as possible for the payment of all costs by persons using or benefiting from the facilities and services recommended, and shall provide for the equitable sharing of any remaining costs among the Federal, State, and local governments of the region. Under section 204 (g) we were also directed to consider alternative forms of organization for transportation in the region, and to submit recommendations. Our cost estimates, financial plan, and recommendations on organization are spelled out in the November report, the appendix volumes, and the summary report transmitted to the Congress by the President. These matters will be dealt with in detail by our Assistant Administrator and General Counsel in his testimony. The main point I want to emphasize is that the Agency has paid close attention to the requirement set forth by the Congress that as far as possible the costs of the transit development program should be borne by the users of the system. This committee in 1960 refused to accept the proposition that a regional rail rapid transit system here in Washington must be a deficit operation. Neither do we. Neither do we. Instead, we uncovered the facts and took a long, hard look at them. I mean the facts here in this area-not as they are in New York or Boston. There is nothing to be gained by clouding our local picture with the problems that beset these older transit systems. True, we can profit from their experience, but this does not mean that the transit fare policy in New York, or the inefficiencies which have become imbedded in older operations over the years, must apply here. We have a new slate to write on. Our job has been to determine, in a hardheaded, businesslike manner, just what this region can pay for and support. We have done this, Mr. Chairman, and it is abundantly clear that given the conditions now existing in the National Capital region and the dramatic growth expected in the years ahead, the transit development program before you today will be largely self-supporting, and, over a period of some 35 years, will repay all borrowing for capital requirements. And notwithstanding the comment this conclusion has excited in some quarters, it is not concocted of legerdemain and wishful thinking. It is based on the facts. The key ingredient for success exists here in Washington, but not in any other rapid transit city; namely, a history of realistic, economical transit fares. Unlike these other cities, where transit fares have been kept artificially low, with the municipality making up the deficits out of general public funds, fares in the Washington area have kept pace with the cost of providing transportation service. As you know, the basic cash fare within the District has been 25 cents since March 1961. Beyond the District line, the fare increases depending upon the distance or number of fare zones traveled. Today, a trip by bus from Rockville to downtown costs 83 cents. From Bowie, Md., the fare is 75 cents, and from Fairfax, Va., it is 50 cents. It is these fares which exist today, which the Agency has modified slightly, that permit us to make a go of it. Gentlemen, this knowledge that the transit development program will be largely self-supporting is the cornerstone of the financial plan we have proposed. We estimate that the entire system will require a capital outlay of $793 million. We propose that the necessary funds be provided through a combination of private borrowing and Government grants. $180 million would be provided in the form of matching grants from the Federal, District, and local governments of the region, and the remainder through borrowing in the private bond market. The grants could be repaid out of system revenues after the retirement of the bonded debt. The principal and interest payment on the bonds would be underwritten by the Federal Government. The matching Government grants will be apportioned among the Federal and local governments of the region in accordance with the formula proposed by the administration in the pending legislation to provide Federal assistance for urban mass transportation development on a national basis. Two-thirds, or $120 million, would be provided by the Federal Government and the remaining $60 million by the local governments of the region. At this point I would like to simply add, Mr. Chairman, that in preparing this financial plan for a transit development program, we had the benefit of an advisory committee on finance, the chairman of which is Mr. James Kerr, who is here in the room today and who will testify later. This committee consisted of a number of businessmen from various parts of the country and this region who spent a great deal of their time voluntarily and without compensation to assist us in assessing this problem. Before settling on this plan, the Agency considered a number of alternatives. These alternatives are discussed in detail in appendix volume VI. Our objective throughout was to produce a plan meeting the criteria established by our statute; namely, one placing the maximum burden on the users of the system, and distributing any remaining costs among the Federal and local governments on an equitable basis. The recommended plan satisfies all the tests. It puts the principal burden where it belongs, entails a minimal impact on Federal budget expenditures, and calls for equitable participation by the local governments. As for the question of the appropriate form of organization to own and provide for the operation of the system, the President has rightly emphasized the desirability of establishing an interstate compact agency with its own financing powers. It should be pointed out that the task is a difficult one beset with complex constitutional, legal, and political considerations. Furthermore, the compact would have to be passed upon by the two State legislatures involved, and then approved by the Congress. Thus, the President's position has been that the compact negotiations should continue until an appropriately endowed organization has been created. In the meantime, work on the transit development program should go forward vigorously. If no compact agency has been created at the time private borrowing is to begin under the financial plan, a Federal corporation should be established to carry the program forward. The corporation would require authority to sell bonds publicly. As I have pointed out, the bonds would be underwritten by the Federal Government. In conclusion, I would like to repeat certain observations made by President Kennedy in his letter transmitting this program to the Congress. They echo Congress' own conclusions expressed in 1960: There is no questioning the fact that an improved transportation system is essential for the continued and effective performance of the functions of the Government of the United States, for the welfare of the District of Columbia. for the orderly growth and development of the National Capital region, and for the preservation of the beauty and dignity of the Nation's Capital. Nor can it be doubted that improved transportation must include a major rapid transit system. Mr. Chairman, the transit development program is both a challenge and an opportunity. We are challenged to attack the peak-hour traffic congestion at its roots by providing an attractive, economically feasible alternative to automobile travel. It is an opportunity to exercise leadership and set an example for the Nation by creating here in the capital of the free world a system of urban transportation second to none. Mr. WHITENER. At this point in the record, we will insert the written reports of the National Capital Transportation Agency. (The reports referred to follow :) NATIONAL CAPITAL TRANSPORTATION AGENCY, Hon. JOHN L. MCMILLAN, DEAR MR. CHAIRMAN: We appreciate the opportunity afforded us by your letters of June 7 and June 23, 1963, to comment on H.R. 6633 and H.R. 7249, which would authorize the prosecution of a transit development program for the National Capital region. The transit development program would provide a system of rapid transit and express and feeder bus service to alleviate the traffic congestion problems of the National Capital region. The program was prepared by this Agency in accordance with directions given it by the Congress in the National Capital Transportation Act of 1960. That act sets forth three basic requirements for the transit development program. First, in recognition of the need for a means of fast distribution of people in the downtown area, Congress required the Agency to "give special consideration to early development of a subway from Union Station capable of rapid dispersal of passengers from the railhead to the principal employment centers in the District of Columbia and its immediate environs." The Agency has included as part of its transit development program a downtown subway system which provides service between the Union Station and the Capitol and all major employment centers in downtown Washington. Second, Congress required the Agency to consider extensions of the downtown subway system "to serve other parts of the region." The Agency was further directed to consider use of low-cost highway and rail rights-of-way to provide such service. Of the eight radial lines leading out of the downtown area in the transit development program, three make use of existing rail rights-of-way and three make use of highways which are under construction or are shortly to be constructed. The transit development program will therefore provide excellent service to the entire region, while at the same time minimizing construction cost. Third, Congress directed that the Agency should "provide as far as possible for the payment of all costs by persons using or benefiting from regional transportation facilities and services, and shall provide for the equitable sharing of any remaining costs among the Federal, State, and local governments." Because of the existing zone fare structure in Washington and the fact, as outlined above, that the Agency has been able to make use of low-cost surface rights-of-way, the Agency has been able to recommend a financing plan which requires a minimal Federal contribution and which places the main burden of paying for the system on the users. We believe that the Congress will find in this proposed transit development program the answer it has long sought to the transportation problems of the National Capital region. Together with a vigorous highway program, the transit development program will not only provide for the thousands of additional people who will be traveling through the Washington area in the future, but will substantially improve today's conditions. The Agency believes that an early start on the construction of the program is desirable and we are prepared, at your convenience, to testify in support of H.R. 6633. We believe that the November 1, 1962, report to the President and the technical appendixes attached thereto comply with 5 U.S.C. 642(a). If further the Agency has been able to recommend a financing plan which requires a advises that there is no objection to the submission of this report to your committee and that enactment of this legislation would be in accord with the program of the President. Sincerely yours, Hon. BASIL L. WHITENER, C. DARWIN STOLZENBACH, NATIONAL CAPITAL TRANSPORTATION AGENCY, Chairman, Subcommittee No. 6, Committee on the District of Columbia, DEAR MR. CHAIRMAN: As requested in Mr. McMillan's letter of July 2, 1963, we forward under separate cover copies of studies and reports prepared during the course of the Agency's preparation of the transit development program. I am submitting for enclosure in the record of hearings on H.R. 6633 and H.R. 7429 a listing of these studies and reports with a short note on the scope of each. We have previously delivered to the committee 21 sets of the Agency's 6volume technical appendix containing data supporting our November report to the President. If additional information is desired, please advise. Sincerely yours, C. DARWIN STOLZENBACH, Administrator. APPENDIXES TO NOVEMBER 1, 1962, REPORT TO THE PRESIDENT Volume I. Engineering Sets forth engineering details, including plan and profile drawings and cost estimates, for the rail rapid transit system recommended by Agency. Subjects covered include route alignments and profiles, establishment of criteria for the 21-468-63-3 system, methods of construction, costs of construction and equipment, analysis of rapid transit vehicle systems, and boring logs. Volume II. Study of commuter service using existing railroad facilities for Washington, D.C. A report prepared by Louis T. Klauder and associates, Philadelphia, Pa., describing existing rail facilities in the National Capital region. Includes an analysis of alternative proposals for use of these facilities for commuter service, both with and without rapid transit. The report details estimated capital and operating costs, patronage, operating schedules, and requirements for new facilities and equipment. A note on the contractor appears under Report 5, below. Volume III. Traffic forecasting Describes in full detail the traffic forecasting process on which the Agency's traffic estimates were based. Volume IV. A model for estimating travel mode usage in Washington, D.C. A report to the Agency by Traffic Research Corp., New York, N.Y., containing further details on the Agency's traffic forecasts. Includes a discussion of (1) program specification, (2) input to modal split program block, (3) calculation procedures followed by modal split program, (4) program output and (5) operating instructions. Also, graphs of 1955 and 1961 showing relationship of travel time, cost, convenience, and economic status to people's choice of method of travel (transit or highway). A note on the contractor appears under Report 3, below. Volume V. System planning Describes the Agency's highway and transit traffic forecast by route, estimated transit revenue and costs, including express and feeder bus operations, an evaluation of the 1959 MTS plan, and a description of alternative transportation systems tested by the Agency. Volume VI. Organization and finance Chapter I.-Report of Wainwright & Ramsey, Inc. "Recommendations on Methods of Financing the Proposed Rapid Transit System for the National Capital Region." Wainwright & Ramsey, Inc., is a prominent firm of municipal financial consultants, providing expert advice on all phases of public finance. Among its clients have been towns, cities, counties, States and authorities all over the country. Chapter II.-Report of Hawkins, Delafield & Wood on "Organization for Transportation in the National Capital Region." A detailed legal analysis of various organization alternatives, with emphasis on an interstate contract. The consultant is a New York law firm, nationally known for its experience in the municipal bond field. NCTA TECHNICAL REPORT—A STUDY OF BUS RAPID TRANSIT OPERATIONS FOR THE NATIONAL CAPITAL REGION, 1963 This technical report summarizes Agency studies on the use of buses to provide rapid transit service in the National Capital region. Prepared by Agency staff, it includes also three studies developed by engineering consultants to the Agency. The main conclusions of the report are: (a) A rail subway is the only feasible method of providing rush-hour transit distribution in Washington's downtown employment area. (b) For the high volume transit corridors, rail transit provides better service at lower cost than bus. Capital and operating cost estimates were developed for a downtown bus subway and a trunkline route. The bus subway was clearly infeasible from the standpoint of capital cost alone. The trunkline study consisted of comparisons of costs, service, and capacity for the Route 66 line. The comparisons show train clearly superior to bus for this corridor. On corridors with higher traffic volumes, the comparisons would favor rail to an even greater degree. 1. Comparative analysis of rapid transit vehicle systems, preliminary study Date of report: July 1962. Contractor: Operations Research, Silver Spring, Md. Operations Research Inc., is one of the largest independent operations research analysis firms in the |