Goldmann, Conford and Freund. Goldmann, S.j.a.d. Conford, J.A.D. (dissenting).
[55 NJSuper Page 381] Susquehanna Transit Commuters Association ("Commuters") and Brotherhood of Railroad
Trainmen ("Brotherhood") appeal, and New York, Susquehanna and Western Railroad Company ("Susquehanna") cross-appeals from a decision and order of the Board of Public Utility Commissioners of the State of New Jersey ("Board") dated December 11, 1957, authorizing Susquehanna to curtail its passenger train service, and from a supplemental order dated December 20, 1957 which approved the curtailed schedule. That schedule became effective January 13, 1958 after this court refused to continue a temporary stay theretofore granted.
Susquehanna originally sought a complete discontinuance of the service about to be described. During the ensuing hearings it amended its petition to change its objective to a curtailment of service, first to four round trips and later, in view of the testimony as to need for train service, to seven trips in each direction on weekdays, with no service on Saturdays, Sundays and holidays. The record is voluminous, and scores of documentary exhibits were marked in evidence, including statistical studies, financial statements and transportation schedules. While the hearings were in progress the Legislature adopted a concurrent resolution declaring that the public interest of the State required that there be no further abandonment or curtailment of passenger rail service in New Jersey pending presentation of the final report of the New York-New Jersey Metropolitan Rapid Transit Commission to the Governors and Legislatures of New York and New Jersey. By decision and order of July 3, 1957 the Board directed that in view of the declared legislative policy, further proceedings on Susquehanna's application be suspended until submission of the Commission report. Susquehanna appealed this decision, with the result that on November 25, 1957 our Supreme Court reversed the Board's decision and order and remanded the matter for further proceedings not inconsistent with its opinion. In re New York, Susquehanna and Western Railroad Company , 25 N.J. 343. The Board then proceeded to a determination on the merits of the case.
Commuters and Brotherhood appeal from every part of the Board's decision and orders, and Susquehanna appeals from only so much thereof as requires it to operate trains in excess of those set out in its amended proposal, shortly to be mentioned.
On January 31, 1958 Susquehanna petitioned the Board for rehearing and reconsideration. The petition was denied. Thereafter Susquehanna, on February 24, served notice that it would apply to this court on March 10, 1958 for an order directing that additional evidence be taken before the Board, and that the Board make its findings of fact thereon. The order issued and the Board held public hearings on March 20 and 21, 1958, at which additional exhibits were introduced and testimony taken for the purpose of bringing up to date the evidence previously presented. The record of these hearings is now before us.
Susquehanna's passenger service operates entirely in New Jersey, from Butler east and south through Paterson and Hackensack to the Jersey City terminal of the Erie Railroad, a distance of 36.8 miles. There are two means of access to New York City: (1) from Jersey City by Erie Ferry or the Hudson & Manhattan Railroad to midtown or downtown Manhattan, and (2) from Susquehanna Transfer, a station located 4.9 miles north of Jersey City, to the Port Authority bus terminal at Eighth Avenue and 41st Street in midtown Manhattan, by busses operated under contract by Public Service Coordinated Transport. Susquehanna also operates a branch extending 0.7 miles from the main line at Broadway station in Paterson to the Paterson City station at Straight Street in Paterson.
Prior to the institution of the curtailed service Susquehanna operated the following trains:
(1) Weekdays (Monday through Friday): 7 round trips between Jersey City and Butler, 1 round trip between Jersey City and North
Hawthorne, 1 round trip between Susquehanna Transfer and North Hawthorne, 1 round trip between Paterson City and Broadway, 2 westbound trips from Susquehanna Transfer to Hawthorne, 1 eastbound trip from Paterson City to Hackensack, 18 westbound trips from Susquehanna Transfer to Paterson City, and 21 eastbound trips from Paterson City to Susquehanna Transfer.
(2) Saturdays: 1 westbound trip from Susquehanna Transfer to North Hawthorne, 1 westbound trip from Jersey City to Butler, 16 westbound trips from Susquehanna Transfer to Paterson City, 16 eastbound trips from Paterson City to Susquehanna Transfer, 1 eastbound trip from Paterson City to Hackensack, 2 eastbound trips from Butler to Jersey City, and 1 eastbound trip from Paterson City to Broadway.
(3) Sundays: 1 eastbound trip from Paterson City to Hackensack, 16 eastbound trips from Paterson City to Susquehanna Transfer, and 17 westbound trips from Susquehanna Transfer to Paterson City.
(4) Holidays: 17 eastbound trips from Paterson City to Susquehanna Transfer, 18 westbound trips from Susquehanna Transfer to Paterson City and 1 eastbound trip from Paterson City to Hackensack.
There was no train service west of Paterson on Sundays and holidays.
Susquehanna's amended proposal sought to eliminate all service on Saturday, Sunday and holidays. Service Monday through Friday was to be limited to four round trips between Butler and Jersey City, serving the areas both west and east of Paterson; and one round trip between Paterson (Broadway) and Jersey City, and two round trips between Paterson (Broadway) and Susquehanna Transfer, serving only the area Paterson and east. The railroad claimed its proposal would afford complete weekday service during commuter hours, providing arrival in New York between 7:15 and 9:30 A.M., and departure from New York between 4:15 and 6:45 P.M. (The Board found that "the public need for service (Mondays through Fridays) is principally during commuter hours. (Eastbound arriving in New York between 7:00 A.M. and 9:30 A.M. and westbound leaving New York between 4:00 P.M. and 6:30 P.M.)") Susquehanna states that this proposal would take care of 1,649 of the 2,164 daily eastbound passengers (76%) and 1,365
of the 1,971 daily westbound passengers (69%) carried prior to the curtailed service, thereby reducing its actual out-of-pocket passenger loss from $336,000 to $136,000 a year.
In making its determination on the merits of the case the Board was keenly aware, as it expressly stated, that it was "required to give consideration to the factors outlined by the New Jersey courts" in railroad passenger service discontinuance cases, and that as between out-of-pocket losses incident to railroad operation and the public convenience and necessity, primary consideration must be given the latter. The Board specifically found that Susquehanna "does not have sufficient overall income to safely carry the deficit of the passenger service and that extraordinary consideration should be given to the financial aspects of its operation." It realized that the cost of providing passenger service could be reduced only slightly if the operation of a train were discontinued without eliminating the cost of maintaining the equipment and providing a crew: "Only when a complete unit of equipment, crew or both can be eliminated does the discontinuance of a train produce any appreciable reduction in operating expenses."
After reviewing the decline in total passengers carried from 1947 through 1956 and the statistics showing the number of passengers carried on each of the trains then in service, the Board made the following observation, significant in relation to the central issue of public necessity and convenience:
"The service rendered by the Railroad and the bus companies, the equipment used, the character of the area served, and the number of passengers carried, all tend to show that these proceedings deal with two clearly defined areas of service. On the one hand, there is the area west of Paterson with a relatively small population, a small number of persons seeking transportation by public carrier, and an incomplete system of public transportation. On the other hand, there is the densely populated area of Paterson, Hackensack and points intermediate to New York, with a large demand for transportation, and with an extensive network of bus and rail service to satisfy the public need.
So far as public convenience and necessity is related to the service rendered by the New York, Susquehanna and Western Railroad, it might be said that west of Paterson the emphasis must be on the necessity, while the area between Paterson and New York produces the emphasis on convenience or preference as to the type of transportation used. This distinction was recognized by the Railroad when it admitted that some rail service is needed in the area west of Paterson. The Company claims, however, that there is adequate alternate service in the area between Paterson and New York.
Study of the use of New York, Susquehanna and Western Railroad trains shows that there exists a need for such transportation throughout the day and on each day of the week but that the density of such traffic varies greatly during the day and on certain days. When the demand is at a high level there is no question of the need for service but there is some question of actual need when the demand is reduced. The present schedule provides a uniform service throughout the day which varies with the use of the trains. Since the service is provided and is used throughout the day the elimination of all service at certain periods might have an adverse effect on the travel programs of a large number of persons and on the alternate public transportation in the area. It is the opinion of the Board, therefore, that any relief that might be granted in this proceeding should be in the nature of a reduction of service throughout the day rather than the elimination of service during long periods of time."
The Board noted that a number of bus companies served the area between New York and Paterson and that representatives had given assurance that additional equipment could be put in service if required to handle an increased number of passengers. There is no complete bus service to and from points served by the railroad west of Paterson.
The Board's decision and order shows that it fully took into account the public need for the passenger service, alternate transportation available in the area, the effect of financial loss from passenger service on the overall operation of the railroad, the number of passengers carried on the respective trains, the equipment used and the character of the area served. The Board then specifically found that (1) the public convenience and necessity requires the operation of Susquehanna passenger service between Jersey City, Susquehanna Transfer and New York, and to stations on
the line to Butler; (2) continuation of service on the Paterson City branch (Broadway to Straight Street), which the railroad had sought to eliminate, was necessary to produce a maximum amount of revenue to Susquehanna; (3) there is sufficient alternate public transportation between Paterson, intermediate stations and New York to supplement the rail service; (4) the public need for service, Monday through Friday, is principally during commuter hours -- eastbound arriving in New York between 7 and 9:30 A.M., and westbound leaving New York between 4 and 6:30 P.M.; (5) nearly all the passengers from stations west of Paterson can be accommodated on four round trips daily, Monday through Friday; (6) in addition, trains should be operated, Monday through Friday, between Susquehanna Transfer and Straight Street, Paterson, plus a late train from Susquehanna Transfer to Butler; (7) Saturday service should be provided by two eastbound trips between Butler and Jersey City, plus five round trips between Susquehanna Transfer and Straight Street, Paterson; (8) Sunday and holiday service should be provided by four round trips between Susquehanna Transfer and Straight Street; and (9) the present transportation of school children on trains 907 and 924 between Butler and Jersey City can satisfactorily be provided for by bus service arranged by Susquehanna. The decision and order then concluded with a listing of trains, Monday through Friday, Saturday, Sunday and holidays, approximately at the scheduled times shown on the current timetables, and directed Susquehanna to prepare and submit a curtailed schedule for the Board's approval. Such a schedule was prepared and approved by Board order of December 20, 1957.
When the matter was remanded to the Board for the purpose of updating the evidence, it reported that comparison of the passenger counts set out in the Board decision of December 11, 1957, covering January 1955, with those for January 1958, showed a substantial reduction in the number of passengers using the railroad. Thus, in January
1958, immediately prior to curtailment, weekday eastbound passengers averaged 2,164 daily, compared with 2,670 in January 1955 (excluding the school children who used one of the trains), a decline of 19%. Westbound passengers averaged 1,971 daily, compared with 2,517 on the earlier date (excluding the school children who used one train), a decline of 22%.
Susquehanna's position on this appeal is that it should have been given all the relief it sought; Commuters and Brotherhood argue that train service should not have been curtailed in any way. Specifically, the railroad objects to the Board's ordering the continuance of the following trains: (1) five eastbound and a similar number of westbound trains between Paterson and Susquehanna Transfer, Monday through Friday, since it would require six extra non-revenue movements to get these trains in position; (2) five eastbound and five westbound trips between the same points on Saturday, which likewise would require six extra nonrevenue movements; also the two Saturday trains eastbound from Butler to Jersey City; and (3) four eastbound and four westbound trips between Paterson and Susquehanna Transfer on Sunday and holidays. In short, Susquehanna would cut weekday trains to seven each way and eliminate all trains on Saturday, Sunday and holidays, as originally proposed by it.
As stated by the railroad, the basis of its cross-appeal is that the Board's own finding establishes that those trains which operate exclusively in the area Paterson and east (except for the two trains from Butler on Saturday), and carry a nominal number of passengers, serve only "convenience or preference as to the type of transportation used" -- this language being taken from the section of the decision and order quoted above -- rather than necessity. Such an objective, it is argued, does not justify requiring Susquehanna to absorb the disproportionate out-of-pocket losses entailed in the operation of those trains, in the light of the Board's finding that the railroad "does not have sufficient
overall income to safely carry the deficit of the passenger service and that extraordinary consideration should be given to the financial aspects of its operation."
The record establishes that Susquehanna's estimated out-of-pocket loss in operating the curtailed service ordered by the Board is $200,270. The loss would be reduced to $136,063 were Susquehanna's proposed schedule to be adopted, a saving of $64,200 annually. This latter figure would be raised to $74,600 because of an additional saving of $10,400 in the annual cost of bus operation between Susquehanna Transfer and New York.
Susquehanna points out that in 1957 it failed to earn its fixed charges of $146,877. Its out-of-pocket passenger loss that year was $336,017. Under the Board's order this loss would be reduced to $200,270, so that Susquehanna would have an additional $135,747 available for fixed charges. That would still leave an annual deficit of about $11,000. It further appears that in 1956 Susquehanna failed to earn fixed charges by about $30,000. Reported income after fixed charges was $53,417, but this was realized only because of an $83,000 federal income tax refund.
The Board was unquestionably aware that Susquehanna's present fixed charges apply to a drastically reduced capitalization approved by the Interstate Commerce Commission, the bankruptcy court, and the United States Court of Appeals as "compatible with the public interest," in a reorganization proceeding under section 77 of the Bankruptcy Act. This proceeding had lasted some 16 years, the railroad emerging in May 1953. See 11 U.S.C. , § 205(b) and (d); In re New York, Susquehanna & Western R. Co. , 103 F. Supp. 981 (D.C.D.N.J. 1951), affirmed on opinion 196 F.2d 216 (3 Cir. 1952). The reorganization resulted, among other things, in reducing capitalization from $42 million to $16 million, and the recasting of first mortgage bonds and junior bonds. Fixed interest debt was reduced from $12 million to $5 million. The Interstate Commerce Commission had found that the reorganized company's earnings
available for interest and other corporate purposes in a normal year might be expected to range between $700,000 and $775,000. The exhibits show that Susquehanna's actual earnings available for fixed charges during the four years following its reorganization steadily declined, so that the rate of return on the reduced capitalization fell from 3.38% in 1953 to 0.14% in 1957. The financial tables make clear that since the reorganization Susquehanna has not earned anything like what the Commission expected it to earn, largely as a result of its out-of-pocket losses in the passenger service.
We consider, preliminarily, the Attorney General's contention, made on behalf of the Board, that none of the arguments advanced by appellants and cross-appellant relating to the sufficiency of the evidence to support the Board's findings should be ruled upon in the absence of an appendix containing all the evidence before the Board. The record runs to almost 3,000 pages, and there are 276 exhibits, many of them voluminous. As Susquehanna points out, a good part of the record consists of procedural matters. Of the substantive material a considerable portion became immaterial before the Board rendered its decision, and another substantial portion was superseded by the exhibits on remand.
As for the remaining material, a very large part bears only on the issues raised by the appeal of Commuters and the Brotherhood. They have supplied no appendix whatsoever, and as to them the Attorney General's argument is completely valid. Nonetheless, we shall deal with such of their contentions as merit consideration.
As for the cross-appeal of Susquehanna, we find the material supplied in its original appendix, supplemental appendix, reply appendix and supplemental reply appendix, entirely adequate. All important financial exhibits have been printed for our information. Susquehanna contends there was substantial evidence before the Board as to the use of
the trains involved in the cross-appeal and the availability and adequacy of alternate means of transportation. It has supplied passenger counts for all trains, discontinued as well as continued, as well as the testimony of witnesses who used the trains which figure in the cross-appeal. It has provided timetables of the alternate means of transportation, tabulations of comparative train and bus schedules, and the testimony relating to the busses and trains suggested as alternate transportation facilities.
We consider that Susquehanna has fully complied with R.R. 1:7-1(f) relating to the appendix on appeal.
In the landmark case of Pennsylvania-Reading Seashore Lines v. Board of Public Utility Comm'rs , 5 N.J. 114 (1950), certiorari denied 340 U.S. 876, 71 S. Ct. 122, 95 L. Ed. 637 (1950), our Supreme Court held that a railroad has a constitutional right to discontinue passenger train service not required by the public convenience and necessity. The court said (5 N.J. , at page 121) that it would be unreasonable to interpret the Railroad Act, R.S. 48:12-99, as requiring the operation of passenger service in a situation when "only a nominal number of passengers present themselves for transportation, where other adequate means of public transportation are available, and when such operation results in continued substantial losses." The obligation to supply a particular passenger service depends upon the need; "without the need, the obligation does not exist." (Ibid. , at page 126) In passing upon an application for curtailment of service the Board must, therefore, be governed by the test of public convenience and necessity, the local factor of public need of the services rendered being the predominant and controlling element. In re New Jersey & New York R.R. Co. , 12 N.J. 281, 289 (1953), affirming 23 N.J. Super. 1 (App. Div. 1952); appeal dismissed 346 U.S. 868, 74 S. Ct. 123, 98 L. Ed. 378 (1953), citing
Alabama Public Service Comm'n v. Southern Ry. Co. , 341 U.S. 341, 347, 71 S. Ct. 762, 95 L. Ed. 1002 (1951). As was said in Chicago, B. & Q.R.R. Co. v. Wisconsin R.R. Comm'n , 237 U.S. 220, 229, 35 S. Ct. 560, 563, 59 L. Ed. 926 (1915), "desire is not a test of requirement, nor is convenience, absolutely considered."
There have been a number of New Jersey cases since the Pennsylvania-Reading case dealing with public convenience and necessity, among them Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , 11 N.J. 43 (1952); In re New Jersey & New York R.R. Co. , above; In re Central R.R. Co. of N.J. , 29 N.J. Super. 32 (App. Div. 1953); In re Central R.R. Co. of N.J. , 41 N.J. Super. 495 (App. Div. 1956); In re Central R.R. Co. of N.J. , 43 N.J. Super. 13 (App. Div. 1956), certification denied 23 N.J. 473 (1957); Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , 48 N.J. Super. 216 (App. Div. 1957). Drawing primarily on decisions of the United States Supreme Court, our courts have during recent years developed an integrated, settled body of law. As we had occasion to point out in the Central Railroad case, above, 41 N.J. Super. , at page 501, among all the factual matters to be considered by the Board in determining the question of public convenience and necessity, three are of major importance: (1) the cost of providing the service; (2) the use made by the public of the service -- i.e. , the local need; and (3) the availability and adequacy of alternate transportation facilities. Of these, the local factor of public need for the services rendered has always been considered a predominating and controlling element. Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 11 N.J. , at page 51; In re New Jersey & New York R.R. Co. , above, 12 N.J. , at page 289. Accordingly, when there is a need for the train service, the mere showing of a loss on the particular passenger train involved does not in itself establish a right to its discontinuance. Ibid. , 12 N.J. , at page 286; Pennsylvania R.R. Co. v. Board of Public Utility
Comm'rs , above, 11 N.J. , at page 51; Pennsylvania-Reading Seashore Lines v. Board of Public Utility Comm'rs , above, 5 N.J. , at page 122; and see Alabama Public Service Comm'n v. Southern Ry. Co. , above, 341 U.S. , at page 347, 71 S. Ct. 762. This duty of a common carrier to meet the needs of the public arises from its acceptance and enjoyment of the powers and privileges granted by the State and endures so long as they are retained. Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 11 N.J. , at pages 50-51; Chesapeake & Ohio Ry. Co. v. Public Service Comm'n , 242 U.S. 603, 607, 37 S. Ct. 234, 61 L. Ed. 520 (1917).
No formula can, of course, be devised to determine the number of passengers which will establish whether or not the operation of a particular train is within the bounds of public convenience and necessity. In re New Jersey & New York R.R. Co. , above, 23 N.J. Super. , at page 9. But in its concern for local users, the Board should not overlook the fact that the interest of the general public lies in the continued operation of our railroads, and that continuing passenger service deficits may jeopardize this operation. As we said in the Central Railroad case, above, 41 N.J. Super. , at page 501, public convenience and necessity "is not to be gauged by the particular persons who may be benefited at a particular locality, but it means the public generally. The effect of the Board's decision upon the whole public instead of a relatively few persons, should be taken into consideration."
There are factors other than the three principal ones just mentioned which should be taken into account in determining public convenience and necessity. The financial success of the railroad as a whole is "one of the important elements to be considered." In re New Jersey & New York R.R. Co. , above, 12 N.J. , at page 289. In passing upon an application to discontinue passenger service the railroad's revenues from freight are not to be overlooked. In re Central R.R. Co. of N.J. , above, 29 N.J. Super. , at page
34; cf. Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 48 N.J. Super. , at page 226; Chicago, Milwaukee, St. P. & P.R. Co. v. Illinois , 355 U.S. 300, 307, 78 S. Ct. 304, 2 L. Ed. 2 d 292 (1958). (In this connection, we observe that Susquehanna's out-of-pocket losses in the passenger service have absorbed a disproportionate percentage of its total freight earnings in the period 1947-1957. Thus, they absorbed 40.92% in 1955, 50.55% in 1956, and 93.62% in 1957. Freight earnings have been in steady decline.)
The Board may also properly consider whether the railroad is furnishing service that is reasonably adequate in point of frequency and speed. In re Central R.R. Co. of N.J. , above, 29 N.J. Super. , at page 36; Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 11 N.J. , at page 50. The Board must be alert to detect attempts by the railroad to discourage passengers by bad service, Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 48 N.J. Super. , at page 230. (Our review of the entire record does not persuade us, despite the contrary arguments of Commuters and the Brotherhood, that such a situation is present here.) The Board may also be influenced by reasonable expectations of future demand for the service, based upon developments under way in the territory served by a particular train or trains. In re N.Y., Susquehanna & Western R.R. Co. , 25 N.J. 343, 351 (1957). Finally, where substitute transportation facilities are available, the Board must determine whether they are comparable and satisfactory. It must be established that the substitute facilities, here the remaining Susquehanna trains, the trains of the Erie Railroad, and the busses of the Inter-City Transportation Co., Manhattan Lines, Westwood Transportation Lines and Public Service Coordinated Transport, have the capacity to handle the additional passengers that might result from the discontinuance of the trains in question. In re New Jersey & New York R.R. Co. , above, 12 N.J. , at page 290. The substitute trains or busses should service all the communities served by the applicant railroad. Ibid. There is
no question here about the availability of comparable and satisfactory substitute transportation facilities.
The Legislature has entrusted the Board with the complex problem of weighing the many relevant factors and formulating policy in cases like this. We will not set aside its determination of public convenience and necessity where there is a reasonable basis for its action. In re Delaware, Lackawanna & Western R.R. Co. , 25 N.J. 353, 356 (1957); In re Greenville Bus Co. , 17 N.J. 131, 137 (1954). The now generally accepted gauge of administrative factual finality is whether the factual findings are supported by substantial evidence. Hornauer v. Division of A.B.C. , 40 N.J. Super. 501, 504 et seq. (App. Div. 1956), and cases there cited; and see Ricciardi v. Marcalus Mfg. Co. , 26 N.J. 445, 455 et seq. (1958) (dissenting opinion).
Susquehanna's main argument is that in fixing the present schedule the Board based its decision on the "convenience or preference" of the riding public, rather than on the need for service. Convenience or preference, it contends, may be a satisfactory standard in determining whether to authorize a new carrier to enter a particular area in competition with an existing carrier. It points out that the Board and the courts have recognized that the public is entitled to the additional benefits of such a competitive service offered by a new carrier, and certificates would issue, unless "the establishment of the new line will substantially prejudice existing lines with consequent adverse effects on the traveling public." In re Greenville Bus Co. , above, 17 N.J. , at page 142. However, in passenger train curtailment cases, says Susquehanna, the Board, in determining whether a carrier may constitutionally be required to continue an unprofitable and burdensome service, must apply the test of public need, and not the convenience or preference of the riding public.
Susquehanna's claim that the Board based its decision
on mere "convenience or preference" insofar as the trains which it would discontinue are concerned, is based on the use of that language in the Board's discussion of the difference in the areas served by the railroad west and east of Paterson. This part of the Board's decision is quoted at length under I, above. The Board there pointed out that the area west of Paterson had a small population, few people seeking transportation by public carrier, and an incomplete system of transportation, contrasted with the densely populated area east of Paterson, with its large demand for transportation and an extensive network of bus and train service to satisfy the public need. The Board then said that insofar as public convenience and necessity was concerned, "it might be said that west of Paterson the emphasis must be on the necessity, while the area between Paterson and New York produces the emphasis on convenience or preference as to the type of transportation used." Although this comment, standing by itself, would suggest that "convenience or preference" dictated the Board's decision as to the trains in question, examination of the entire decision shows that the Board was completely aware that "public convenience and necessity" (or "public need") was the controlling factor, as laid down in our cases. Aside from the single reference to "convenience or preference" just mentioned, the rest of the decision shows that the Board's thinking was completely guided by considerations of public convenience and necessity. Carefully reading the opinion in its entirety, we cannot find that the Board divided up the standard by applying "convenience and preference" to some cases, and "necessity" to others.
Commuters and the Brotherhood attack that part of the Board's order authorizing the consolidation or elimination of certain trains. Prior to curtailment Susquehanna had operated two train services. Four self-propelled rail Diesel cars (RDC) provided service between Paterson and Susquehanna
Transfer, the train numbers being known as the 800 series. Service between Jersey City and stations west of Paterson was provided by conventional passenger coaches and Diesel locomotives. There were 22 passenger coaches, including 16 modern stainless steel units, available for this operation, the train numbers being known as the 900 series. The latter trains duplicated the service of the 800 series trains at stations Paterson (Broadway) and east. Operation of the four RDC units required five crew assignments, operation of the 900 series trains seven crew assignments, Monday through Friday. Agreements with labor unions provided that crews assigned to Diesel trains could not operate the RDC trains, and vice versa.
Because of the additional crews required and the duplication of services, the RDC service resulted in out-of-pocket losses of about a third of the total. To reduce these losses Susquehanna proposed to consolidate four RDC eastbound morning trains with four Diesel trains which left Paterson (Broadway) shortly after the former, and also to consolidate three of the RDC westbound evening trains with three Diesel trains arriving at Paterson (Broadway) shortly after the former. The Board, considering public convenience and necessity, authorized consolidation of the four eastbound trains and one of the westbound trains. We find its action proper. Consolidation resulted in a reduction of only 123 passengers, or 5% of those who had used these trains just prior to consolidation. Although the annual revenue lost from passengers on the five consolidated 800 series trains amounts to some $16,100, Susquehanna benefited by the elimination of a much larger sum representing annual out-of-pocket losses on these trains. On this cross-appeal it seeks to eliminate the balance of that loss through the consolidation of the two other westbound evening trains, known as 835 and 837. We will consider this matter shortly.
Commuters and the Brotherhood attack that portion of the Board's order refusing to direct Susquehanna to retain its four RDC cars, and the railroad's sale of the cars to
the Central Railroad Company of New Jersey pending the appeal. Susquehanna's intention to sell these cars was fully disclosed on the previous appeal, and the matter was remanded to the Board for the exercise of its expert judgment. See In re N.Y., Susquehanna & Western R.R. Co. , 25 N.J. 343, 352 (1957). The Board decided not to order Susquehanna to retain the cars, properly holding that it did not have the power to compel the operation of a particular type of equipment with special features, but was limited to action against the use of unsafe, unsanitary or otherwise improper equipment. See R.S. 48:2-23. There is nothing in the record to suggest that the equipment presently used is not safe, adequate and proper. In this connection we note that the question of retaining the RDC cars was argued before us as a separate issue on the application of Commuters and the Brotherhood for a stay of the Board's order. At that time counsel for the railroad stated that a sale of the equipment was currently being negotiated, and stressed that there would be irreparable damage to Susquehanna if the sale were stayed. We denied the application for the stay. We consider the matter moot.
The Board authorized elimination of a number of trains operating Monday through Friday in the area Paterson and east -- 16 east from Paterson and 14 west to Paterson, after giving full consideration to public convenience and necessity. A study of passenger tables indicates that the number of passengers on most of these trains was nominal. Only four operated during commuter hours. Bus and train schedules supplied in the appendix show that the trains operated in an area which, as the Board found, had "an extensive network of bus and rail service to satisfy public need." The alternate transportation facilities available would unquestionably be adequate to deal with the small numbers of passengers who used the eliminated trains.
The Board further authorized the elimination of 12 eastbound and 13 westbound trains in the area Paterson and east, operating on Saturday. The few passengers carried, and the availability of satisfactory alternate transportation, fully supports the Board's conclusion that public convenience and necessity did not require these trains.
In the area west of Paterson, the Board authorized elimination of three trains eastbound from Butler and three trains westbound to Butler, Monday through Friday, and one westbound train on Saturday. These trains carried few passengers. (One morning and one evening train, Nos. 907 and 924, carried school children, but these were provided for by bus service. See XIII, below.) The Board correctly found that nearly all of them could be accommodated on the four round trips per day, Monday through Friday, made by trains that were retained.
Appellants Commuters and Brotherhood are not correct when they argue that as a result of the Board's order 2,000 out of 5,700 passengers left the Susquehanna service. As of January 1955, there were 5,187 passengers in both directions. Of these 1,052 left the railroad between that date and January 1958, before there was any curtailment of service. The curtailment resulted in a loss of 739 passengers in both directions. It is reasonable to conclude that most of these passengers travelled both ways, so that there was a loss of about 526 daily passengers before curtailment and 370 thereafter.
It is appropriate to consider here the vigorous attack which Commuters and the Brotherhood make upon Susquehanna's operation of so-called "dead-head" passenger trains (trains which do not carry passengers). They point out that in the course of a week the railroad runs 900 "dead-head" passenger train miles. The Board did not require these trains to be opened to passengers because it found no public
need therefor. In its supplemental findings of fact on the remand the Board determined that a transfer of present non-revenue train operation to revenue operation would result in an increase of $9,727 in revenue a year, assuming no reduction in patronage due to schedule changes.
Susquehanna frankly states that it would be most anxious to get this additional revenue of some $800 a month. It concluded to forego it because counsel for the railroad feared that opening these trains to passengers might seriously prejudice the savings of some $6,200 a month which Susquehanna hopes to realize on this cross-appeal. We are informed that the "dead-head" movement of trains actually involves 180 miles each day except Sunday, or 1,080 miles a week. Half of this daily mileage represents "placing" movements -- the moving of a train between a crew terminal and the passenger terminal. The remaining 90 miles daily represent "complemental" movements in order, for example, to enable the crew and equipment from an eastbound (or westbound) revenue train to return to the starting point to operate a second eastbound (or westbound) revenue train. The Board's schedule makes it necessary to operate six such complemental movements daily and Saturday.
Susquehanna argues that if it voluntarily opened these "dead-head" trains to passengers, it could not on this appeal ask for an order authorizing their discontinuance. If it had asked the Board to direct that these trains be opened to passengers, solely in order to lay a basis for appeal therefrom, it feared that the court might dismiss the appeal. It further points out that if this court should grant its cross-appeal, the railroad could immediately eliminate the revenue trains involved, and also their complemental movements.
We need not consider the matter further. Any trains we might decide should be eliminated on Susquehanna's cross-appeal will, of course, resolve the "dead-head" operation connected therewith. In the case of such trains as are not eliminated, the Board may order the opening of the trains
to passengers instead of running them "dead-head," if this will bring additional revenue to Susquehanna.
Brief reference might also be made to the Board's determination that the service on the 0.7 mile branch running from the main line at Broadway Station, Paterson, to Straight Street, Paterson, is necessary in order to produce a maximum amount of revenue to the railroad. The Board here was obviously concerned with the financial aspects of the operation, and not with the actual need for the service. The Board found that the revenue to be derived from the Paterson City (Straight Street) passengers would outweigh the additional cost of running the branch trains. Although Susquehanna made this portion of the order part of its cross-appeal, it has concluded that there is not sufficient evidence to overcome the Board's findings on that one issue and has therefore withdrawn this feature of the cross-appeal.
Before turning to a consideration of the additional trains which Susquehanna would eliminate from its schedule, we deal with the suggestion made on behalf of the Board by the Attorney General that "it is easy to overstate the railroad's financial difficulties." This flies in the face of the Board's specific finding, already mentioned, that Susquehanna "does not have sufficient overall income to safely carry the deficit of the passenger service and that extraordinary consideration should be given to the financial aspects of its operation."
The Attorney General states that "No company is entitled to a guaranteed rate of return." However that may be, Susquehanna has since its reorganization earned only between 0.14% (in 1957) and 3.38% (in 1953 when it emerged from reorganization) on the greatly reduced capitalization
which the Interstate Commerce Commission and the United States Court of Appeals found to be compatible with the public interest. This should be contrasted with rates of return well over 5% which the Board found to be within the range of reasonableness for electric and telephone companies, which findings were approved by the Supreme Court. See In re N.J. Power & Light Co. , 9 N.J. 498, 534 (1952); In re N.J. Power & Light Co. , 15 N.J. 82, 85 (1954); N.J. Bell Tel. Co. v. Board of Public Utility Comm'rs , 12 N.J. 568, 600-601 (1953). As Susquehanna points out, these industries have earnings more stable than in the case of railroads. Susquehanna's return on capitalization is not such as, in the language of Public Service Coordinated Transport v. State , 5 N.J. 196, 225 (1950), "should be sufficient to encourage good management and furnish a reward for efficiency, to enable the utility, under efficient and economical operation, to maintain and support its credit; and to enable it to raise money necessary for the proper discharge of its public duties."
We have heretofore discussed certain aspects of Susquehanna's finances. Examination of the financial tables shows that continuing out-of-pocket losses from passenger service have had to be taken up by freight earnings. These earnings have precipitously declined since 1950 (from $1,148,764 to $358,900), in large part because of the loss of freight business when the Ford Motor Company moved from Edgewater to Mahwah, N.J. As a result, the percentage of freight earnings required to absorb the out-of-pocket passenger losses has, as noted above, increased -- from 32% in 1952 through 1954, to 41% in 1955, 51% in 1956 and 94% in 1957 (round figures). The "lucrative freight business" which was present in Pennsylvania R.R. Co. v. Board of Public Utility Comm'rs , above, 48 N.J. Super. , at page 226, just does not exist here to offset passenger revenue losses.
Commuters and the Brotherhood charge Susquehanna's present management with inefficiency, in contrast to the
preceding trusteeship. The former trustee continued with Susquehanna until mid-1955. In spite of everything he did, freight earnings declined from about $1,150,000 in 1950 to about $777,000 in 1954. Income available for fixed charges in the two years after the termination of the bankruptcy in 1953 fell short by far of what the Interstate Commerce Commission anticipated it would be. Freight earnings declined even further in 1955 and 1956 as a result of the removal of the Ford ...