The Financial Viability of Conrail Page: 6
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-6-
#1 On balance, the downside risks for ConRail from the basic
USRA forecast are greater than the upside profit potential.
This means it is likely that the cost to the Federal go-
vernment of the ConRail package will exceed that anticipated
in the USRA forecast, perhaps by billions of dollars.
#2 The choice between a Unified ConRail and a ConRail/Chessie
solution in the Northeast has very significant financial
consequences. The public is being asked to pay possibly
$650 million or more for the additional rail-to-rail com-
petition resulting from the USRA preferred solution versus
Unified ConRail. It would be helpful to have more insight
into the value of this competition, taking into account the
role of trucks and other presently viable railways in the
Penn-Central area of operations.
#3 It may be appropriate to explore further the financial con-
sequences of some of the findings herein. USRA relies on a
computer model for financial forecasting. The authors of
this report did not have access to that model. Thus, the
report's ability to incorporate the results of the model is
limited by the requirement that the analysis consists solely
of adjustments to published projections. For example, the
scale of the projected coal tonnage increase may exceed the
amounts assumed in the USRA sensitivity analysis, especially
in the early years, to such a degree that different cost fac-
tors, capital requirements, etc. may need to be employed.
#4 The USRA analysis of coal has become dated. This report
finds that the coal tonnage and revenue forecasts in the
FSP are probably too low. Moreover, USRA'S proposal that
Chessie rather than ConRail acquire the only Penn-Central line
into the lucrative West Virginia coal area raises questions
about how thoroughly coal was considered in USRA's plans for
restructuring the bankrupt railroads. Recently available in-
formation from government and private sources could be used
to considerably strengthen the coal projections in the FSP.
As the most important commodity in ConRail's future, it would
appear desirable to understand more fully how more up-to-date
projections will impact on the key issues raised in the FSP.
#5 Both USRA and industry personnel recognized that a deficiency
judgment was likely to be entered against the government. Since
the cost of these claims could exceed all other government
investments, it deserves further consideration.
#6 Once agreement is reached to invest Federal funds in ConRail,
contingency plans should be made to minimize losses. Other-
wise, the taxpayer could continue indefinitely to subsidize
the railroad with no hope of ever recovering public capital.
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United States. Congress. Office of Technology Assessment. The Financial Viability of Conrail, report, September 1975; [Washington D.C.]. (https://digital.library.unt.edu/ark:/67531/metadc39342/m1/15/?q=no.+77%2C+55th+congress: accessed July 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.