The Financial Viability of Conrail Page: 8
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in its plan the conflicting goals of the Act by creating a
system that was financially viable yet did not destroy com-
petition among the solvent carriers and still provided ade-
quate service to shippers.
The recommended alternative in the PSP was a three-carrier
system with the Chessie and Norfolk & Western Railroads com-
peting with ConRail in the Northeast and Midwest Regions. These
currently profitable railroads were to purchase portions of
the bankrupts which would provide them with competitive access,
along with ConRail, to key market areas such as Newark and
Albany. Comments received from the public by the ICC generally
indicated that USRA had fulfilled the goal of maintaining compe-
tition among the carriers. In the FSP, USRA slightly modified
the approach because the Chessie expressed an interest in buying a
major part of the bankrupt railroads whereas the N&W did not.
The proposed solution contemplates the purchase by the
Chessie System, Inc. of 2,500 miles from the bankrupt lines
for $62.5 million. USRA proposes that another 5,700 miles of
light-density lines be pared from the bankrupts and either be
closed down or operated with State and Federal subsidies. Ac-
cording to this solution, USRA believes the Act's goal of main-
taining competition will be met by giving the 11,500 mile Chessie
stronger access to Northeastern markets. The separation of 5,700
miles of light-density lines from ConRail is USRA'S attempt to
balance the Act's goal of forming a financially viable entity
with its goal of maintaining adequate service to the Northeast.
This paper focuses solely on whether or not the ConRail
plan fulfills the goal of developing a financially viable sys-
tem. The significance of this issue for the Congress can be
summarized in the following questions:
1. What are the total financial burdens that will be
placed on the general taxpayer if the ConRail proposal
is implemented? The proposal seeks $1.85 billion in
Federally provided capital with delayed payback provi-
sions on interest and principal. $650 million in con-
tingency funds are sought in addition to subsidies,
guarantees and loans totalling billions of dollars more.
But, the total financial burden may be more than twice
this amount.
2. Will ConRail succeed financially? This question is not
independent from the first, for if enough unprofitable
burdens are lifted from ConRail and enough subsidies are
provided, presumably financial viability could be as-
sured. But such a solution would be a pyrrhic victory,
because it would be little more than an accounting accom-
plishment. The basic question is:How long will Federal
subsidies be needed after initial transfer? The ConRail
proposal expects the restructured railroad will earn a
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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/m1/17/: accessed July 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.