Preserving Freight and Passenger Rail Corridors and Service (2007)

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SYSTEM IN CRISIS By the late 1970s, the legacy of many decades of government regulation of the nation’s freight railways had brought the rail service network to a crisis stage. The merger and bankruptcy of the Penn Central Railroad had threatened to shut down rail and commuter operations in the U.S. Northeast. A full 20% of the U.S. rail network was in bankruptcy, and carriers that were nominally solvent were deferring investment on a mas- sive scale, effectively consuming their physical plant assets to maintain cash flow for the short term. Main line operations in certain corridors were reduced to 10 mph to minimize the effect of an increasing number of derailments. Faced with a nationwide rail service crisis, Congress elected to substantially deregulate most railway decision mak- ing, enabling rail managers to price, market, and demarket traffic much like any other business. Line abandonment and sale decisions were put on an expedited timetable for review, with the burden of proof (and responsibility for subsidies) shifting to those opposing such actions. Collective rate mak- ing was abolished, and confidential contracting conveyed new bargaining leverage to the largest-volume rail shippers. These changes had major implications for the country’s physical rail network. Economic pressures were fully brought into play as determinants of size and shape of the track net- work, and rail line abandonment accelerated. Given these new powers, the major rail carriers began to shed from 4,000 to 8,000 miles of their networks annually (6). Local and state officials, alarmed at the loss of local services, began to lobby for rail assistance programs at the state and federal levels. STATES MOVE INTO RAIL BUSINESS A federal rail service assistance program was established by the 3R Act (following the Penn Central bankruptcy), and was amended by the Local Rail Service Assistance (LRSA) Act of 1978 and the Omnibus Budget Reconciliation Act of 1981. The LRSA program provided funding on a federal/local matching share basis for four types of projects: rehabilitation, new construction, substitute service, and acquisition. States, at their election, could provide funds on a grant or loan basis. It was during this period that states began to treat seriously the need for public rail planning. The National Conference of State Railroad Officials was established in 1976 to provide policy input to federal agencies and to share best practices 6 regarding rail assistance programs. This group later became the Standing Committee on Rail of AASHTO. In 1990, LRSA was changed to a Local Rail Freight Assistance (LRFA) program. The criteria for eligibility for rail lines to receive assistance were revised and clarified. Funds for the program were dramatically reduced in the 1990s, and congressional appropriations ceased in 1995. More than $544 million in federal funds were expended between 1976 and 1985. Some states continue to recycle monies originally made available through LFRA by means of revolving loan funds that may, at times, be fortified by mod- est infusions of new state funding. A summary of state rail assistance programs is shown in Table 1, taken from the as- yet-unpublished NCHRP report, Rail Freight Solutions to Roadway Congestion (Project 08-42). As may be seen here, states vary considerably in their approaches to freight rail assistance programs; however, most such programs set as a priority the preservation of service on light-density lines. A line in active service is far easier to defend than an idle corridor, whose utility is seen to be only sometime in the future. Nonetheless, some states have active corridor preservation programs to preserve align- ments even where short-to-medium term prospects for viable business volumes do not exist. The Federal Railbanking Program described later is an important tool for those seek- ing to preserve alignments that have little prospect for short- term commercial use. PUBLIC SUPPORT AND SHORT LINE OPERATIONS Champions of local branch line freight service must, at some point, face a key irony that shadows short line operations—that the business success of many short line railroads is substan- tially tied to the service performance of the very entities that spun them off in the first place. Many short line rail carriers are physically captive to the larger “parent” railways and thus can- not provide competitive service without excellent cooperation and reliable interchanges to the larger trunk systems. Another important consideration for those seeking a “short line” strategy to preserve rail corridors is the physical condi- tion of transferred rail infrastructure assets. The physical con- dition of the nation’s short line carriers ranges from robust to barely operational. Track conditions often reflect the history CHAPTER TWO PRESERVATION STRATEGIES

7OR Short Line Railroad Rail Infrastructure Improvement Program Grant (with railroad match) Oregon DOT Short Line Credit Premium Account— Lottery bonds $2 million for 2001–2002 Have requested $2 million for 2003–2004 No OR Grade Crossing Protection Account Grant Oregon DOT State Highway Fund—Portion of registration and driver license fees $300,000 annually $200,000 for federal matching, $100,000 for maintenance Yes State Program Program Type Administrative Agency Funding Source 2002 Funding Current Status Class I Eligibility IL Rail Freight Program Revolving loan Illinois DOT— Bureau of Railroads General funds No new funds $3 million total from state, $1 million total from federal State—Yes Federal—No IN Industrial Rail Service Fund Grant (75% state) and loan Indiana DOT— Rail Section 4/100s of 1% of state sales tax receipts About $1.3 million from tax Generally $1.3 million annually, with additional from loan repayments No IN Passive Grade Crossing Improvement Fund Grant Indiana DOT— Rail Section General fund $500,000 Cut to $465,000 in 2003 No IA Rail Assistance Program Grant or loan Iowa DOT— Office of Rail Transportation Appropriation No new funds. Funds almost depleted Previously received annual funding Yes IA Rail Economic Development Program Grant Iowa DOT— Office of Rail Transportation Appropriation No new funds. Funds almost depleted No new funding for past 2 or 3 years Yes IA Intermodal Pilot Project Loan Iowa DOT— Office of Rail Transportation Exxon Settlement via DNR $700,000 total Started 5 years ago. No projects selected yet Yes IA Rail Revolving Loan Fund Loan Iowa DOT— Office of Rail Transportation Appropriation Current balance $130,000 Active since 1998 Yes ME Industrial Rail Access Program Grant (50% state) MEDOT Office of Freight Transportation Legislative bond package $2 million over 5 years Asking for $2–3 million No Class I Railroads in ME ME Bonds for Matching Federal Programs Grant (used in conjunction with CMAQ) MEDOT Office of Freight Transportation State bonds As needed Active—but used mostly for Amtrakís Downeaster No Class I railroads in ME NH Rail Line Revolving Loan Fund Revolving loan NHDOT General fund appropriation $150,000 ($4 million total in program) Established in 1993 and increased in 1997 No NJ NJ Rail Assistance Program Grant (70% state) NJDOT Bureau of Freight Services State Transportation Trust Fund, CMAQ $8 million— Trust, $2 million— CMAQ Annual since 1983 No OH Spur and Rail Rehabilitation Program Grant Ohio Rail Development Commission & Ohio Department of Development General fund appropriations $3–4 million for 2001–2002 shared across three programs New budget begins July 1, 2003 Yes OH Acquisition Program Grant and loan Ohio Rail Development Commission General fund appropriations $3–4 million for 2001–2002 shared across three programs New budget begins July 1, 2003 N/A OH Railroad Rehabilitation Program Loan Ohio Rail Development Commission General fund appropriations $3–4 million for 2001–2002 shared across three programs New budget begins July 1, 2003 Yes OH Rail Grade Separation Program Grant Ohio DOT & Ohio Rail Development Commission Federal Section 130 Approx. $20 million 10 year, $200 million effort Yes TABLE 1 SAMPLING OF STATE FREIGHT RAIL PROGRAMS (continued on next page)

8of a short line’s establishment as much as the underlying com- mercial value of the clients served by the line. The Class I carrier business model encourages “harvesting” of free cash flow, with minimal investment, on lines that are destined for spin-off or abandonment. Short lines that assume control of such properties after a lengthy period of neglect may develop new revenues sufficient to support “normalized” cap- ital and maintenance, but not large enough to address a signif- icant capital backlog. Public assistance may thus be required to overcome this capital gap to both maintain operations and attract new rail clients who would insist on access to the new, heavier-loading rail equipment. The upgrade of standard carload weight limits by Class I carriers from 263,000 to 286,000 lb has put stress on many short line operators whose infrastructure, even when properly maintained, was not designed to handle rail cars of that weight size. Many short line roads are plagued with large numbers of timber-frame bridges that are functionally obso- lete and should be replaced to handle the heavier cars. The 286,000 lb issue is particularly acute for those roads that han- dle primarily bulk commodities such as grain or coal, given the price competitiveness and sourcing competition for such movements. The impact of poor track conditions on short line operators takes many forms. • Increased incidence of derailments, with attendant increases in insurance premiums. • Inability to handle certain classes of hazmat (hazardous material) rail commodities. • Slower operating speeds, leading to less efficient use of crews. For example, Meridian Southern Railroad, in east- ern Mississippi requires two days for a full round trip over its 54-mile operations. Customers who would otherwise receive daily service are served only tri-weekly. • Loss of traffic to trucks or main line rail locations for commodities that benefit from the higher-standard (286,000 lb) maximum carloading. • An inability to attract new, on-line client investment if future rail service is viewed as uncertain. • Low carload weight limits may impair the relative eco- nomics of rail shipping and/or drive new investment to main line industrial sites capable of 286,000 lb loading standards. Still, the challenges of reassembling rail corridors are such that extra pains to preserve freight rail operations of some sort may be seen as desirable if there is any potential for more intensive future use. The line will survive legal challenges to its integrity and may not be broken up by adjacent landholders so long as active service is taking place. Two additional preser- vation strategies may also be considered—passenger excursion services and rails-to-trails interim-use designations. PASSENGER EXCURSIONS A number of rail spin-off properties around the country are kept in service by operation of specialized excursion opera- tions that lever the modern-day novelty (at least in North America) of traveling by rail or take advantage of its proxim- ity to major tourist attractions. A handful of such operations appear to have reached a “critical mass” of patronage and ser- vice frequency, appealing to the general public as well as WA Freight Rail Program Grant and loan Washington State DOT Multimodal account— rental car tax, new and used vehicles sales tax $4 million for 2001–2003 biennium $61.29 million for 2003–2013. $48.89 million is for 13 specific projects Yes, but has not been done WA Grain Train Program Purchase Washington State DOT Originally received $750,000 in Stripper Well overcharge funds. Program now self-sustaining through car- hire payments. N/A Active N/A Source: NCHRP Project 08-42: Rail Freight Solutions to Roadway Congestion. DNR = Department of Natural Resources; CMAQ = Congestion Mitigation and Air Quality; N/A = not available. State Program 2002 Funding Current Status Program Type Administrative Agency Funding Source Class I Eligibility PA Rail Freight Assistance Program Grant PennDOT— Bureau of Rail Freight, Ports & Waterways General fund appropriations $7 million Active, though previously at $8 million/year No, due to PennDOT policy TABLE 1 (Continued)

9those with a specific interest in trains. Some long-running examples include: • The Napa Valley Wine Train—This 36-mile operation between the towns of Napa and St. Helena is now a world-famous part of the California wine country tour- ing regimen. Special packages include tours of specific wineries and gourmet five-course meals. • The Great Smoky Mountain Railroad—Entering its 19th year of service, this North Carolina operator ran 932 trains in 2005, taking visitors over an historic and rugged alignment that first opened western North Carolina to settlement in the late 1880s. The long-term success of such operations depends on a number of factors, including: • Proximity to a major urban market with trains staged at a “long commute” driving distance from those urban centers. • Additional, complementary tourism draws such as na- tional parks, scenic lookouts, and cultural attractions. • Professional operations and marketing leadership. Technical regulations and staff training requirements that go well beyond what is typically required for other tourist attractions of a similar scale. LEGACY OF RAILS TO TRAILS Substantial deregulation of America’s railroads through the Staggers Rail Act in 1980 accelerated the network downsiz- ing trend that had been in progress since the close of World War II. In 1983, the U.S. Congress reacted to the flood of abandoned lines (then averaging 4,000–8,000 track-miles per year) by amending the National Trails Systems Act to create a federal rail banking program. The Rails to Trails Act allowed the federal government to regulate the disposition of lines threatened with abandonment, preserving the rights-of- way to permit future reactivation for rail services. Interim use of such corridors for bike and trail ways is permitted; how- ever, permanent structures along the routes must be kept intact consistent with the potential restoration of rail-based transportation. Nearly 2,100 miles of rail alignments throughout the country have been formally converted to multiple-use trails since the 1983 act. Preserving such rights-of-way has created a variety of attractive new recreation and transportation resources in communities nationwide. Preservation of rail corridors for trail use may also occur as a result of voluntary negotiations (outside of the federal rail banking framework); however, approximately one in six rail-trail miles exist today as a result of the Rails to Trails Act. Other corridors are the product of voluntary negotiations between the original (rail carrier) owners and public or private groups that have recognized the value of intact readily con- vertible linear property parcels. From a legal perspective, the important distinction between the Rails to Trails corridors and other rail banked alignments is the federal preemption under the Rails to Trails interim-use grant that effectively trumps the actions of groups seeking to block restoration of rail service by a prospective new operator. Rails to Trails corridors include a number of provisions that are important to those considering future active rail ser- vices for the corridors in question. • The public agency or qualified organization that is seek- ing to control the rights-of-way must be willing to assume financial and legal responsibility for the corridor. • The abandoning railroad can decide to donate, lease, or sell their property to the prospective trail manager. • The trail manager, once in control of the property, may remove railroad track and ties, but may not disturb other long-term structures required for future rail service restoration. • The trail agency may build no permanent structures on the trail alignment. • The corridor remains under federal jurisdiction, and any state laws that might extinguish the trail manager’s right to use the corridor are preempted. • A rail banked line is subject to possible future restora- tion of rail service by any qualified service provider. Trail users must surrender their interim rights of use if they are unable to reach alternative accommodations with the prospective (new) rail service provider. The legal authority of the Rails to Trails legislation to override local and state authorities, as well as private prop- erty interests, has been repeatedly tested in the courts and has survived each and every challenge. A landmark (and unani- mous) 1990 Supreme Court decision affirmed that: The Amendments are a valid exercise of Congress’ Commerce Clause power. The stated congressional purposes—(1) to encour- age the development of additional recreational trails on an interim basis and (2) to preserve established railroad rights-of-way for future reactivation of rail service—are valid objectives to which the Amendments are reasonably adapted [Preseault v. ICC, 494 U.S. 1 (1990)]. That same court decision acknowledged that the petition- ers may be entitled to compensation for their alleged loss of property values through the rail banking process; however, actual payouts since the Supreme Court decision have been scattered and modest in size. SURVEY RESULTS A survey was undertaken to assess current practices with respect to rail corridor preservation. State departments of transportation (DOTs), selected metropolitan planning organizations, commuter rail agencies, short line holding

10 companies, and Class I rail carriers were all surveyed for information. Response rates to the survey were moderate, averaging 24% overall, supporting the notion that preserva- tion of rail alignments is not a high-priority issue in many jurisdictions (see Table 2). A few state respondents, how- ever, had a great deal of experience and valuable observa- tions on rail preservation policies and could be said to have become expert on this subject through their dealings with several dozen rail corridors over the past two decades. North Carolina, Ohio, and Pennsylvania DOTs each have serious, well-established rail sections and a history of suc- cessful preservation efforts. Respondents engaged in corridor preservation efforts were successful most of the time, with 103 of 114 targeted alignments (90%) kept intact. Tellingly, the successful preservation initiatives were nearly without exception the product of a formal state corridor policy or involved align- ments that had previously been identified as essential in formal state or regional transportation plans. Of the 103 pre- served properties, 57 have active freight service today, 23 are used primarily for recreation, 21 are dormant, and 2 are used for passenger rail excursion trips. Respondents who had succeeded in preserving rail align- ments were asked to score, on a scale from 0 to 10, the importance of various elements to the success of their efforts. The 17 “successful” entities ranked these elements as described here. Access to funding topped the list followed closely by the existence of formal preservation policies and plans (see Table 3). It may appear surprising to see financial contributions from the federal government ranked so highly, as no such funding for line preservation exists today. From an historic perspective, however, it was the federal local freight rail assistance programs that provided seed funding in the 1980s and early 1990s to both protect rail alignments and establish regular state-administered loan and grant programs to pre- serve light-density lines. Some of those original federal disbursements continue to be “recycled” by certain states for new projects through revolving funds as loans are repaid by short line operators. )%( etaR esnopseR noitubirtsiD puorG tegraT State Departments of Transportation 50 19 38 Selected Metropolitan Planning Organizations 41 7 17 5 1 12 seicnegA liaR retummoC Short Line Rail Holding Companies 7 0 0 34 3 7 sreirraC liaR I ssalC 42 03 621 latoT erocS egarevA rotcaF knaR 1 Financial contributions from state agencies 6.4 2 Financial contributions from federal sources 6.2 3 Formal state corridor preservation policy 5.2 4 Financial contributions from local public agencies 5.0 5 Support from trail or recreational interest groups 5.0 0.5 noitalsigel sliart ot sliar laredeF 6 7 Rail shipper/receiver carload commitments 4.0 8 Financial commitments from prospective rail operators 3.9 9 Financial contributions from local rail users 3.0 10 Other (mostly inclusion in a formal plan or policy) 1.0 TABLE 2 SURVEY PARTICIPATION TABLE 3 RAIL PRESERVATION EFFORTS: IMPORTANT ELEMENTS