Track troubles

WARNING lights are flashing for the American railway system, and Congress -- not surprisingly -- has taken notice. What's happened is a convergence of issues, some welcome, some questionable, that -- taken as a whole -- could have a profound effect on US transportation in general and US railroad systems in particular. Precisely because of the importance of rail service to the nation's transportation grid, it is vital that congressional committees examine these issues with special sensitivity.

The Department of Transportation has said it intends to sell Conrail to the Norfolk Southern Corporation. Some 85 percent of Conrail is owned by the federal government -- i.e., American taxpayers. The rest is owned by the railroad unions associated with Conrail. Public funds to the tune of $7.5 billion have been pumped into Conrail, a freight and passenger system serving 15 Midwestern and East Coast states since the system was put together after the collapse of the Penn Central and five other carriers.

The Reagan administration, meanwhile, as part of its fiscal year 1986 budget proposal, is seeking to eliminate all federal operating subsidies for Amtrak.

The administration also proposes reducing federal subsidies for mass transit by roughly two-thirds.

That the three issues should come to a head at this time is not unexpected, given the philosophical bent of the Reagan administration. The free-market-oriented administration questions why American taxpayers should be in the ``railroad business'' in the first place.

The public, and congressional lawmakers, should welcome the debate. In fairness, the administration has acted forthrightly and decisively. One may disagree with all or parts of the administration's strategy regarding federally subsidized railroad systems, but one could not say that the White House has failed to inform the American public exactly where it stands on this matter.

Divesting Conrail makes sense. Even many of the critics of the planned sale of Conrail to Norfolk Southern would not dispute the need to sell off the system. Rather, they would question the way the system should be divested. Some critics would turn Conrail into a public company through a public stock offering. Others would select a different buyer.

Congress is expected to take a close look at the planned sale. If the $1.2 billion deal goes through, the resulting carrier would be the nation's largest railroad system. It would dominate the Midwest. Would a monopoly result? What would be the effect on freight charges? What about the impact on smaller or competing carriers? Lawmakers should also determine whether the sale price is enough. Conrail's chief executive, who favors a public stock offering, claims the system is worth $1.5 billion to $2 billion. Is he right?

Still, a Conrail-Norfolk Southern linkup would be a strong and logical twinning. Norfolk Southern, itself the result of a 1982 merger, is a vigorous, financially secure carrier with long experience in railroads. Norfolk Southern would seem to have a legitimate commercial impetus for wanting to ensure that service in the Northeastern United States, where Conrail is particularly important, remains first rate.

Unfortunately, the administration's arguments for cutting back operating subsidies to mass transit and Amtrak seem far less compelling than the Conrail divestiture. The mass-transit cutbacks would be quickly felt in big cities. Transit operations in metropolitan New York, for example, are subsidized up to 7 percent with federal funds, although the dollar impact is even greater. Meantime, in smaller and medium-size towns, subsidies make up 50 percent or more of operating costs. And Amtrak would lose up to 40 percent of its entire revenue if its subsidy ended, although, in economic terms, Amtrak's subsidy is probably the most difficult to justify. Whether states and localities could offset such significant revenue reductions seems questionable.

Granted, there are alternatives to rail passenger service. But each of them, in a sense, receives or has received a lavish federal subsidy: air carriers, through federal support for flight safety and airports; bus carriers, through the federally funded Interstate Highway System.

The United States needs a widely diversified transportation grid. Congress should be wary of the deep cutbacks in mass transit and long-distance passenger service proposed by the White House. ------30--{et

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