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of Appeals case to which I made reference
and was also a member of the Ross Com-
mission in 1941 which studied the B&O
special situation. I would yield to Judge
Henderson.
THE CHAIRMAN: Delegate Henderson.
DELEGATE HENDERSON : Very brief-
ly I would just like to answer Delegate
Case's question, because I did happen to
argue the case in the Court of Appeals
where we very strenuously, at the time I
was Assistant Attorney General, made the
point that the State could not barter away
its sovereign power, and also made the
point that this exemption was granted as
an inducement to build property which
had long since been replaced and had out-
lived its usefulness by almost a hundred
years or more. All of those points were
made but they were unavailing.
The Court of Appeals, in an opinion by
Judge Park, relied heavily upon the Dart-
mouth College case, of course, in the Su-
preme Court, and they said that this was
an inviolate contract and it existed in
perpetuity.
Now, the point about this constitutional
provision and the reason why I should
strongly urge that it be retained in the con-
stitution is that in its present form it was
virtually a compromise with the B&O.
The B&O did surrender some of its tax
exemptions. It does pay a good many taxes.
All that is left, really, of its tax exemp-
tion — although that amounts to a good
deal of money — is the one-fifth rate on
gross receipts and the property exemption
on only one of its many lines, so that it
has been whittled down to some extent.
Nevertheless, I recall in the argument of
this case that I urged my colleague, Nor-
wood Orrick, to ask the Court of Appeals
whether we were really dealing with the
iron horse or the sacred cow, but being a
young man he declined to answer that ques-
tion.
THE CHAIRMAN: Delegate Clagett.
DELEGATE CLAGETT: Delegate Gal-
lagher, the prospect of a bonanza in the
form of income or receipts is certainly very
alluring, but what study did the Committee
make of the practicality of retaining this
provision as related to the present financial
condition of the Baltimore and Ohio Rail-
road and other railroads throughout the
country?
THE CHAIRMAN: Delegate Gallagher.
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DELEGATE GALLAGHER: Well, the
Baltimore and Ohio Railroad is the only
railroad in the State of Maryland which
enjoys this unique exemption. It has been
very careful to preserve it, because it has
never altered its original charter of 1826.
It is quite aware of the monetary value it
enjoys and it is equally aware of the im-
pact of this constitutional provision op-
erating upon any charter modification. It
has also refrained thus far from carrying
out a contract obligation — that is to say,
merger with the C&O Railroad — which
would undoubtedly bring it within the
four corners of this constitutional section.
THE CHAIRMAN: Delegate Clagett.
DELEGATE CLAGETT: I do not be-
lieve you understood my question. My ques-
tion really is what study was made by the
Committee to determine the ability of the
Baltimore and Ohio Railroad to pay any
such taxes if and when this protection went
out of the constitution and they were re-
quired to pay it?
THE CHAIRMAN: Delegate Gallagher.
DELEGATE GALLAGHER: We did not
inquire into that. In addition to Judge
Henderson, however, there was another
member of the Ross Commission, Mr. Wal-
ter Lewis, who is quite familiar with this
section, and it was his estimate that the
impact of the exemption was worth several
million dollars. We did not feel it was in-
cumbent upon us to look into the ability of
the railroad to pay.
As a former people's counsel, I do recog-
nize the ability of public utilities to in-
crease their rates to take care of increased
expenditures, and I would believe the B&O
would not be averse to taking this road to
economic security.
THE CHAIRMAN: Delegate Clagett.
DELEGATE CLAGETT: By way of
caption on what we have said, I gather the
Committee then made no background study
to determine whether if this exemption was
lost by the B&O it would be or would not
be able to meet the obligation to tax?
DELEGATE GALLAGHER: No, sir, we
did not feel that was a proper matter of
inquiry.
THE CHAIRMAN: Delegate Case.
DELEGATE CASE: Maybe we can get
at it this way, Mr. Chairman.
Succinctly, would the B&O Railroad like
to see this provision in the constitution or
out of the constitution?
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