(The following story by Robert Warner appeared on The Battle Creek Enquirer website on December 11.)
BATTLE CREEK, Mich. — A proposal to sell the railroad line between Kalamazoo and Ypsilanti has been rejected by the federal government.
The tracks are owned by Norfolk Southern Railway Co. and used by Amtrak to provide passenger rail service between the Detroit area and Chicago.
Norfolk Southern had proposed to contribute millions of dollars of property to Michigan Central Railway and to keep a one-third controlling interest in the new company, with Kansas-based Watco Cos. Inc. serving as primary owners.
But after Monday’s announcement of the decision by the U.S. Department of Transportation’s Surface Transportation Board, “We’re just a wannabe railroad company that doesn’t have a railroad,” said Ed McKechnie, Watco’s executive vice president and chief commercial officer.
The rejection of the Michigan Central proposal preserves the route’s existing status, with Norfolk Southern continuing to own the tracks and Amtrak continuing to operate trains on them.
The proposed 300-mile route sale included two other sections of tracks: Grand Rapids-Elkhart, Ind., and Jackson-Lansing. It also called for Michigan Central to operate Norfolk Southern’s rail yards in Battle Creek, Kalamazoo, Jackson, Lansing and Grand Rapids.
“Because of all the time and the effort we’ve put into addressing the legitimate concerns of all of the parties in this matter, the decision certainly is a disappointment,” Norfolk Southern spokesman Rudy Husband said. “We’re going to take some time to thoroughly review our options.”
Asked if the company planned to bring another proposal to the Surface Transportation Board, Husband said, “I’m not in a position to answer that question.”
But, Husband said, “The decision does not change the economic conditions that led us to attempt to establish” Michigan Central.
“That’s great,” said Albion Mayor William Wheaton, on hearing the news of the track sale’s rejection. “I’m well pleased with that.”
Wheaton said he was concerned about the owner of short sections of track disrupting the high-speed flow of freight on the line.
“If we could get some of this freight traffic off the highway, too, I would appreciate it,” Wheaton said.
He also said he was skeptical of Michigan Central’s commitment to maintaining high-quality crossings and bridges in the city.
Battle Creek Mayor Mark Behnke echoed Wheaton’s sentiments, saying, “I guess the decision is a good decision for the city of Battle Creek.” Behnke said he also was aware of maintenance concerns.
Behnke said the move seemed to brighten the future for continued Amtrak service on the Detroit-Chicago corridor, though funding for passenger rail remains problematic.
Cities along the lines and unions had actively opposed the Norfolk Southern-Watco proposal. Amtrak supported it after Michigan Central officials promised to spend millions on track improvements and agreed to other conditions.
In rejecting the plan, the Surface Transportation Board reasoned that Norfolk Southern would have too much control over the new company. While its management share might be one-third, its “interest in the economic benefits of ownership” would have been greater than 50 percent, the board said. Also, the board said, Norfolk Southern retained veto power over the annual operating plan, business plan and budget.
Watco’s McKechnie said, “I think we were probably a lot further ahead of what this STB was prepared for.”
“The structure (of the deal) can be addressed,” he said.
The mechanics of the proposal raised questions in communities along the line, McKechnie acknowledged.
“Norfolk Southern was contributing over $100 million in assets,” he said. “That was hard for a lot of people to understand. … They thought ‘Gee, there must be something we’re not seeing,'” as far as control of day-to-day operations.
“As an industry, we’ve gotta do a better job of explaining why we need to build a network of regional rail lines,” McKechnie said, adding that this decision will have a chilling effect on such proposals.
“This’ll stop it for a few years,” he said. “We need an educational process to explain why we have to change the underlying structures in the industry.”