(erielack) Property taxes and EL

[Wdburt1_@_aol.com]

Gordon Davids writes:

The point, though, is that the huge property tax burden in New Jersey was 
gone before the EL bankruptcy, but all the money drained in past years was never 
recovered by the Corporation or the Estate.

Comment--The company was practically bankrupt after paying off $11 million of 
E-6 bonds in 1969 because it was unable to refinance them.  So maybe that 
ought to be where we start measuring.  But Gordon's other point is well taken in 
any case:  Property taxes, along with several other burdens, had been sucking 
the life out of the Eastern railroads for years before that.

I worked on the 4R Act as a congressional staffer and being from the southern 
tier of New York was keenly aware of the impact of property taxes on EL.  The 
4R Act, in a bow to a consensus that had been building for years among rail 
industry people and the public policy specialists in this field, prohibited 
states and localities from taxing railroad property more heavily than adjoining 
commercial and industrial property.  The legal theory underlying this assertion 
of federal power was that New Jersey and other similarly positioned states 
had been acting like the troll under the bridge, collecting tolls that were paid 
by all of us--and thus interfering with interstate commerce.  It was on the 
basis of this clause that Conrail successfully forced New York to modify its 
tax policies in the 1990s, although not as much as has been generally supposed.

I well remember one December 1975 day when Sen. Howard Baker, who was a 
member of the conference committee that was charged with the task of reconciling 
the House and Senate versions of the bill, suddenly appeared in the stuffy, 
narrow little room under the Capitol steps where the conference committee met.  He 
had one thing on his mind:  If the bill passed with the tax provision intact, 
it would bankrupt every school district in Tennessee.  He wanted the 
Volunteer State exempted, and expounded heatedly about that for a few moments.  Then 
he left.  Vance Hartke, who chaired the Senate side of the table, just shook 
his head and went back to work.  I always remembered that when I later saw Baker 
described as a statesman.  I guess we all have our days.

WDB


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