trunkline railroads. While our collective membership owns approximately 80,000 interchangeable freight cars, many depend wholly on their trunkline connections for car supply. The vast majority of trunkline railroads have long accepted the responsibility of supplying these feeder lines with the necessary freight equipment just as they supply cars to the individual industries located on their lines, and I believe Mr. Martin in his statement yesterday also admitted that they had a responsibility to furnish equipment to their short line connections. Such an arrangement was naturally recognized in the establishment of through rate divisions for the short line carrier.

Now we are faced with the possibility of increased car rental charges when in some instances per diem charges already exceed revenues for handling a particular shipment over a short line carrier. This is a matter of increasing alarm to our membership. Of course, there are procedures for reviewing and changing established divisions of rates, but such procedures are lengthy and require expensive legal talent which the short lines quite often cannot afford. Also, any per diem relief offered through procedures before the Interstate Commerce Commission would quite often be too expensive to be advantageous to the short line carriers.

The basic purpose of these bills is to effect from a rail carrier in possession of other rail carriers' cars something over and above adequate compensation and to cause these moneys to be paid to the car owners. People more competent to do so than I call attention to the fact that such bills may be unconstitutional in that they do not establish any standards for application of such penalties, and penalties constitute payment from one citizen to another rather than to the Treasury of the United States.

We feel that the sole interest of this committee and the Congress in consideration of these bills is to assure an adequate car supply. Because, in the opinion of a majority of members of this association, these bills would not tend to increase the Nation's car supply, but rather could have a serious impact upon the very existence of the short-line railroad industry, it is the hope of our member lines that these bills will not be favorably considered. We would, at the very least hope for an amendment that would mandatorily exempt our class II carriers from the provisions of the bills. We cannot emphasize too strongly that our existence as a feeder to our major rail transportation system, and as the backbone of many small towns and communities, is in jeopardy.

Mr. Chairman and members of the committee, I thank you for the opportunity of voicing the short-line railroads' views in opposition to these bills.

That completes my statement, Mr. Chairman.

The CHAIRMAN. Mr. Burks, thank you very much for your statement on behalf of your very fine organization.

Mr. Rogers, any questions?

Mr. ROGERS of Texas. Mr. Burks, what do you have to be to be a short-line railroad, to qualify for your association?

Mr. BURKS. Mr. Rogers, there is no qualification as far as our association is concerned, other than being a common carrier by rail, and there is no exact definition of a short-line carrier. For the most

part and the majority of our membership are class II railroads as classified by the Interstate Commerce Commission. In other words, those railroads grossing $5 million or less per year.

Mr. ROGERS of Texas. What percentage of the freight cars that you require do your members actually own?

Mr. BURKS. Our total membership of 248 members owns 85,000 cars. Now, a goodly portion of our members own no cars whatsoever, but depend strictly upon their trunkline connections for car supply. As I pointed out in my statement, this was done through agreement with the trunkline carriers, and this was taken into consideration in establishing the division of the through-freight rate that the short line would receive for their participation in the carriage.

Mr. ROGERS of Texas. And it is your argument that you provide a service that the trunklines do not want to provide and would not provide under any circumstances.

Mr. BURKS. We quite often provide a service over lines which the trunklines at one time applied for abandonment.

Mr. ROGERS of Texas. I see.

Mr. BURKS. This is not true in all cases of course. But we are more or less an extension of the trunkline service to the small communities and towns which they cannot economically serve.

Mr. ROGERS of Texas. Do you keep any of these cars and shift them around among your own members?

Mr. BURKS. Oh, no. We abide by the Association of American Railroads interchange rules and the car service rules the same as any trunkline railroad does.

Mr. ROGERS of Texas. Thank you, Mr. Chairman.

Mr. BURKS. Yes, sir.

The CHAIRMAN. Mr. Younger.

Mr. YOUNGER. Thank you, Mr. Chairman.

As I understand it, the short-line railroads are comparable to the feeder lines in the air transportation.

Mr. BURKS. That contrast could be made; yes.

Mr. YOUNGER. And of course, in the case of feeder lines, the Government recognizes the necessity for those and gives a subsidy but they do not give a subsidy for the trunklines.

Mr. BURKS. True.

Mr. YOUNGER. In case your lines are entitled to a subsidy of some kind, I am wondering this. As you know, Mr. Perlman advocated this yesterday. He said if every road had enough cars to handle the business originating on its line, then there would be no shortage. Mr. BURKS. I would agree with that.

Mr. YOUNGER. In case your lines are entitled to a subsidy of some cars to take care of the freight originating on their own lines? Mr. BURKS. How many trunklines do own enough cars? Mr. YOUNGER. Yes.

Mr. BURKS. I could not answer that, Mr. Congressman. It is apparent that some trunklines do not own enough or else we would not have the car shortages that we are suffering. I do feel that all of the railroads collectively are cognizant of this fact. We are all in the business of selling transportation service, and for every car that we do not furnish to a shipper when he wants to ship something, this is

dollars lost in our pockets. And for this reason alone, if for no other, we are vitally interested in eventually reaching a status of adequate car supply. I do not think there is any doubt in the world that the railroads are cooperating, through technological advances and through building cars, to alleviate this situation.

Unfortunately, as I pointed out in my statement, we had so many years of suffering, and no profits at all or very little profit, following World War II up to a very few years ago, that we simply did not have the money to put into our fleet. Then with a few incentives like the 7-percent tax credit and more liberalized depreciation allowances, we began to accumulate a bit of money, and we began to invest not only in our rights-of-way and in centralized train controls that enable us to handle the traffic more quickly, but in equipment.

In the last 3 years-in every one of the last 3 years we have had orders for 60,000 to 70,000 cars, and I think this is going to improve. Mr. YOUNGER. Do you think that the short lines contribute more to the car shortage than do the class I roads?

Mr. BURKS. I quite frankly do not think we contribute to the car shortage in this sense, Mr. Congressman. The short lines-as I pointed out, quite a few of them came into existence by purchasing lines about to be abandoned by the trunklines-we made agreements with those lines, and in setting the divisions of the through-rate freight rate we took a lesser division through the fact that we made an agreement with the trunkline connection that they would furnish us with the necessary equipment. I feel that the trunklines accepted this responsibility, and several of them have said in this hearing and in the Senate hearings that they do accept responsibility of protecting the loadings of their short-line carriers.

I do not feel, with the very small revenues realized by the shortline railroads, that we have an obligation, that is as a whole, to the car supply.

Mr. YOUNGER. Thank you very much, Mr. Chairman.

Mr. BURKS. Yes.

The CHAIRMAN. Mr. Burks, how could there be established a rate for the use of a car by one railroad and charge a different rate for another railroad for the same car, the same haul?

Mr. BURKS. Well, under our existing practice this is done in some instances through reciprocal switching as far as a terminal carrier is concerned, or through agreement betwen some of our short-line carriers who have only one connecting railroad.

The only thing that I am saying, Mr. Chairman, is that to increase per diem cost to the short-line carrier can well put the short-line carrier out of business. I would be the first to agree that there are means for us to offset these costs by applying for greater divisions of the rates or applying to the Interstate Commerce Commission for per diem relief as far as that is concerned under this legislation. But unfortunately our small railroads have such a small margin of profit, if any profit at all, that they cannot even afford the legal talent and the time to participate in such proceedings.

I fear that to increase our car rental

The CHAIRMAN. I have heard this poverty claim in the railroad industry for years and years, and I am just not particularly impressed

by this idea that we cannot do this and we cannot do that because we are not making the money to do it. Now, the railroad industry is a great industry in this country. Yours is too. And I would like to see a different mental attitude. It seems that whenever there is some problem and a recognized problem develops and we try to do something about it, why we are faced with this idea that you are going to be put out of business. Now in my judgment nobody can be put out of business. As I said to Mr. Perlman yesterday, you recognize there is a problem. You say there is a shortage. He says there is a shortage. But you come back and say, "We are trying to do a job; we are doing the best we can; we are doing everything that can be done," but at the same time the shortage is continuing to grow.

Now, 5 years ago or 4 years ago we went into this and we had the same song. We did not do anything about it because we wanted the railroad industry to do it. Now we have arrived at a point where there are great demands that are coming in here outside of the eastern area itself, stating: "We cannot get cars."

I think the time has come to change this attitude and say let us go at it and see if we cannot provide the service, because that is what you are supposed to do.

I do not know what the answer to it is. I wish I did. This attitude of an industry that is so important to the Nation-and we have undertaken to do so much for it, some of us, or what little we could, not only for protection purposes but for opportunities, and it seems that every time we try to do something and we have a chance to do this, we are still faced with this thing, "We cannot make it."

No one has been stronger for the railroad industry as such and under our system than I have. But something is going to have to be done in this field, and we have seen ways how to do it. All we get out of those who are opposed is: "We are doing the best job we can. Do not do this to us. There is a problem. It will go away maybe sometime."

I am getting pretty much to the point after all these years that somebody maybe should have the authority to go into it, after the kind of a hearing they ought to have, developing all the facts, and then having some kind of authority that they can deal with it. I would like very much to hear somebody discuss that kind of a program.

It seems to me we might think about giving authority to the established regulatory agency maybe some date down the line, on the basis of giving the industry additional time to do something about it.

Mr. BURKS. Mr. Harris, I have no argument whatsoever with your comment. Actually our only argument as far as this particular means of solving the car inadequacies situation is that increasing car rental costs, wherein 85 percent of the industry merely trade dollars, provides no incentive or no money for building new cars.

The CHAIRMAN. Of course that is questionable, and you get into the middle of this argument between you. Mr. Perlman agreed yesterday that Mr. Martin was right, that less than 25 percent of the class I roads owned over 40 percent of the total. Now, if that is the case, then what you say just cannot be the fact. You do not have that balance there.

Mr. BURKS. Well, I think that Mr. Newton, the figures to substantiate that argument.

The CHAIRMAN. We have a lot of figures. of figures from the Association of American

who will follow me, has

We got another big set Railroads today, in view

of what we had yesterday. The ICC gave us a lot of figures, and everybody who has come along gave us a lot of figures. But there are two things about it: No. 1, there is a shortage in this area. You said so, Mr. Perlman said so, and the others said so.

No. 2, nobody seems to be doing anything about it, though you say, "We are doing all we can."

Mr. BURKS. Well, this is where I would disagree, Mr. Chairman. I think that we are doing something about it.

The CHAIRMAN. Well the shortage is getting greater, is it not?

Mr. BURKS. I would not say that. If you compare boxcars available today with boxcars available a few years ago, yes; we have less. But I think our carrying capacity

The CHAIRMAN. Should there not be some way to get more boxcars? Mr. BURKS. I think our carrying capacity is increasing. I think we are technically building cars that will handle the shippers' requirements in a better way than the old plain boxcar. I think that the figures that have been given in boxcar shortages do not reflect the number of boxcars that have been released for other loading through Flexi-Vans, as Mr. Perlman mentioned yesterday, and the other trucktrailer vans that are in existence today or the covered hoppers in which we are loading grain, or the Big-John cars.

I do not think anybody has explored how many boxcars have been released through this new type of equipment. All they are comparing is boxcar to boxcar. I think we are making progress. I think that every railroad man in this country is opposed to a car shortage because it is taking dollars out of his pocket, and I think the industry is doing something about it, and that they will do more.

The CHAIRMAN. You said that 4 years ago, but we have got a greater shortage now than we had 4 years ago. Now, you cannot argue anything else, Mr. Burks, except that that is a fact, and you ought to recognize it and get working on something and come up here and tell us there is some way to do something about it.

Mr. BURKS. Well, I agree with that, but at the same time I feel that we are making advancement and we are making progress toward alleviating these car shortages and that in the end that these car loading shortages, except during rare seasonable occasions, will not exist.

The CHAIRMAN. Well, they have been existing for 20 years on down the line. It is gradually getting worse.

Mr. BURKS. But it has been existing, Mr. Chairman, through a declining railroad business. But this has been reversed, thanks to your Transportation Act of 1958 and thanks to the tax credit and depreciation.

The CHAIRMAN. Yes, and the railroads are getting to the point that they believe they can compete again and are willing to go out and do it. Mr. BURKS. Well, this is partially the answer, but we are beginning to have the money to do something with again, which is a situation that did not exist for many years following World War II.

The CHAIRMAN. Well, I appreciate your problem, and I appreciate your position. We are always glad to have the position of your organization, which is so important to our national welfare. I just wish that we could instill into the minds and action of those of you who recognize that this problem is continuing, to stimulate some kind of