By J. Edwin Herbert (C) 2007
The Wreckage of a Splendid System
For the hundred years proceeding 1960 the eleven railroads serving New York, Philadelphia and the Nation from New Jersey grew successfully despite a hostile anti-business tax environment in New Jersey. Between 1919 when the Government returned control [From the United States Railway Administration (U.S.R.A.)] of the Railroads to theyre corporate management and 1925, many railway executives failed to consider the transportation advances developed by the war as by doing so they failed to anticipate the cumulative effect of the automobile, the truck and tractor-trailer on their business. By the end of the Great Depression they were startled to see the depredation of theyre market share, particularly in the lucrative Less than Car Load business. An ancillary problem was the loss of non commutation passengers on local routes to automobiles and better roads.
From 1873 [In New Jersey especially, but in other States as well.] when the railroads had the cumulative power to prevent usurious municipal taxation from being applied they didnt. By 1960 the municipal taxation combined with all of their other problems like aging equipment, the unguided speculation of senior management in attempts to diversify and the cumulative losses of revenue had nearly bankrupted the collective companies. Smaller bridge lines like the Central Railroad of New Jersey were already in receivership, the companys last profitable year was 1957 when the company made less than $43,000.00. While larger bridge routes like the Delaware, Lackawanna & Western, the Lehigh valley and the Reading continued to survive by the barest of margins, even major Class 1 carriers like the Erie, Pennsylvania and the New York Central, all with service to the Midwest and Chicago were still solvent but unable to pay even the smallest dividends to theyre stockholders.
The situation was so dire that bitter enemies, the Erie and the Delaware, Lackawanna and Western merged in 1959, attempting to reduce their collective property tax expense. At the annual stockholders meeting that year, William H. White, the Chairman of the DL&W advocated for the merger, saying, During the last year we were required to pay 42% of our Net Revenues in Class II Municipal Property Taxes. Our proposed merger will not increase our net revenues, it will in fact reduce it by a small percentage, but it will reduce our tax debt from 42% to less than 18%.
The situation was equally grim nationally, the Interstate Commerce Commission [ICC], formed in 1887 as a nonpartisan ombudsman to mediate disputes between the carriers and theyre customers had become a politically controlled dead end when ever abandonment or removal of a line was necessary, pressured by local politicians to refuse the appeal and preserve their tax income. The famed Empire Builder ran with less than thirty passengers on an average trip, the impeccable California Zephyr usually carried twenty, but often fewer. Illinois Centrals legendary City of New Orleans carried the fifteen restless riders and twenty-five sacks of mail, sung about in Guthries renown depression era song. The Erie-Lackawanna maintained 2,283 route miles of service track, but the physical plant included nearly 9,000 miles of ancillary spurs, branches and sidings of which they needed less than 4,000. In 1960 the company partitioned for the abandonment of the old DL&W Anthracite Coal Storage Facility at Saddle Brook NJ, more than a hundred miles of track, unused since 1953. After a three year fight in the ICC the company succeed, but then Bergen County sued in Federal Court and delayed the abandonment for eleven years when the Penn-Central bankruptcy caused the creation of Conrail.
The Rail Passenger Service Act (PL 91-518) of 1970, a United States federal law, created Amtrak, the National Railroad Passenger Corporation of the United States. This organization took over passenger rail service from the private railroads, which afterwards provided only freight service, and placed it in a government corporation.. It was too little and too late! Something that could be likened to assaulting a five alarm fire with a bucket and hindsight being perfect, equally ineffective.
The law was revised in 2001 to reorganize Amtrak, attempt to make it profitable, and spin off some components.
i Christopher T. Baer, William J. Coxey and Paul W.
Schoop; The Trail of the Blue Comet: A History of the Jersey Centrals New
Jersey Southern Division, Pages 366-67; the West Jersey Chapter of the National
Railway Historical Society; Kutztown Publishing Company, Inc.; 1994
ii From the Hills to the Hudson, Walter Arndt Lucas; Mullens-Turtron Co., New York City, New York, 1944
iii Woodrow Guthrie, The City of New Orleans; Capitol Records, New York, N.Y. 1933
iv "Rail Passenger Service Act." Wikipedia, The Free Encyclopedia. 1 Sep 2006, 12:28 UTC. Wikimedia Foundation, Inc. 14 Dec 2007.
By: J. Edwin Herbert (c) 2007.Feedback
This page last updated December 15, 2014.
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