FHWA Talking Freight Seminar Series

September 20, 2006

Southern Tier Extension Railroad Project

Thomas M. Barnes,Senior Regional

Economic Development Coordinator

Southern Tier West Regional Planning and Development Board

Center for Regional Excellence

4039 Route 219, Suite 200

Salamanca, New York 14779

Telephone: 716-945-5301

Fax: 716-945-5550

Email: tbarnes@southerntierwest.org

Web: http://www.southerntierwest.org

Web: http://discoversouthwestny.com

Southern Tier West region of New York State

Regional Railroad SystemRegional Railroad System

Regional Railroad System

Southern Tier Extension Railroad

145 miles long, from Corry PA to Hornell NY

Regional Description

• Population: 587,000 (6 counties)

• Total size of region: 6,500 square miles

• Average county size: 1,080 square miles

• Population per sq. mile: 90/square mile

• Largest urban areas served:

Jamestown (35,000), Olean (15,000)

• => Rural !

Regional Description

• Primary Manufacturing Clusters: agriculture, automobile components, ceramics, chemical, extraction, food products, forest products, metal fabrication, plastics, power systems, services clusters

• Highway Distances to Metro Areas: – Buffalo 1-2 – Cleveland / Pittsburgh / Toronto 3 hours– NYC – 6-8 hours

Traditional Wisdom

Rural areas need good transportation access to urban markets.

Our Problem

Our primary regional railroad:

• 75 mile-per-hour former East-West mainline connecting the Port of NY and Chicago

• 1980’s - 1990’s: 95 miles out of its 145 miles were out-of-service

• 1990’s: 25 years of deferred maintenance

• Redundant to the Conrail system

• Was expected to be formally abandoned and salvaged in 1998

Project History

• 1986: Southern Tier West began working on rail retention project

• 1991: Conrail / NYS DOT agreement required service only until 1998

Project History

• Early 1990’s: NYS DOT gives Southern Tier West its rights to negotiate with Conrail

• Early 1990’s: Federally-funded (ARC) expert analysis of the line=> We learned that the railroad line

could be revived and restored as an economically viable functioning mainline

• Mid 1990’s: => Southern Tier West began

negotiating with Conrail (purchase) and subsequently with Norfolk Southern

• Norfolk Southern’s Issues: => Low shipping volume=> High property taxes in NYS

Project History

Project History

• Late 1990’s: Southern Tier West became a party of record in the Surface Transportation Board (STB) hearings on the CSX / NS acquisition of Conrail’s assets

Project History

Southern Tier West’s strategy:

1. Get Norfolk Southern to agree to continue to provide service and maintenance

2. Provide a 10 year abatement of county, town and school district real property taxes

3. Work to rehab the line and reinstate service, building local and mainline (through) traffic

Project History

• Local Cost of Abatement?=> $ 1.2 million per year=> > 50% of annual budgets for many

small jurisdictions• Presentations to:

=> 4 county legislatures=> 25 municipal boards=> 20 school district boards

• Unanimous approval !

Project History

Arrangement is similar to an industrial revenue bond relationship:• Norfolk Southern sold the real estate to a

tax-abating entity (to be created)

• Leaseback to Norfolk Southern for a 10 year period (no real estate taxes)

• Ownership reverts back to Norfolk Southern at the end of 10 years

• PILOT in the last 3 years, graduating to 100% taxes at the end

Project History

• June 1998: Agreement reached

=> just before the 1991 agreement was to expire

=> one month prior to the July 1998 STB merger decision

=> STB July 1998 decision memorialized our June 1998 Memorandum

Summer 2000: NY State created a public authority to effect the sale/leaseback and abatement

=> The Chautauqua, Cattaraugus, Allegany and Steuben Southern Tier Extension Railroad Authority (STERA)

=> STERA has a 13 person board, 3 from each of the four New York counties and 1 from the Seneca Nation of Indians

Project History

February 2001:

=> property transfer and leaseback

=> Norfolk Southern subleased line to the operator Western New York and Pennsylvania Railroad Company (WNYP)

=> WNYP became a partner to STERA

=> Southern Tier West provides administrative and staff services to STERA on a contract basis

Project History

Project Focus Since 2001

• Rehabilitation of railroad line

• Assistance to potential shippers

• Intermodal facility project planning (commences late 2006)

Rehab Funding Issue

• Rail freight volumes are insufficient to fund borrowing for rehabilitation.

• This has prompted a strategy of reliance on grants and private investment to advance line rehab needs, on a “critical needs” basis as funds become available

Rehab Description

• 6 rehab phases since 2001, beginning with engineering phase

• Construction phases included welded rail replacement, crop and weld, grade crossing repair, tie replacement, ballast, signal repair and replacement, bridge repair, washout repair, other flood damage repair and mitigation, surfacing

Southern Tier Extension Railroad Project

Total Rehab Investment to Date

FHWA $ 900,000US DOC EDA 3,056,000FEMA 221,000NYS DOT 8,930,000Penn DOT 7,610,000Local communities 7,200,000 *Counties 294,000WNYP 10,000,000 +Total to date: $38,211,000

* Property taxes abated

Washout - before

Washout - after

Interim Project Results (2003)

• Some sections of line opened for service for the first time in over 10 years

• Some local companies return to shipping by rail, gradual return to rail

• Inquiries fielded for building sites and built facilities with rail access

• Highway carriers become more competitive

Interim System Status (2003)

• Northwest PA Railroad Authority transferred ownership of Corry PA to Meadville PA to WNYP=> A 175 mile long railroad line

=> a single railroad operator (WNYP)

=> interconnections with Norfolk Southern at both Meadville PA and Hornell NY

• Result: Upon completion of rehab, ready for re-establishment of mainline “through traffic”

Interim System Status (2006)

Traffic:

• 2001: Less than 75 carloads per year on only 50 miles of rail

• 2006: 54,000 carloads annually on 175 miles of rail.

Current (Phase 6) Rehab Project

• Project Description: replacement of 15 miles of welded rail, 15,000 ties and ballast replacement, grade crossing repair, surfacing, crop and weld

• Timetable: August 2006 to April 2007

Project funding:

NYS DOT Bond $2,000,000

NYS DOT Appropriation 230,000

Safetea-Lu 900,000

NYS DOT Multimodal 3,600,000

WNYP (private equity) 801.889

Total Project $7,531,889

Current (Phase 6) Rehab Project

Southern Tier Extension Railroad Project

• All 6 phases of investment will be completed, in place and operational by spring 2007.

• These figures do not include additional investment by the participating shipping companies (shipping docks, sidings, etc.).

• We anticipate undertaking an additional $15 million of rehab between 2007 – 2009, source: mixed private/public funding.

Next Phase: Intermodal Study Project

• Sponsor: Southern Tier West Regional Planning and Development Board

• Project Description: evaluate and select site for construction of intermodal facility and adjacent business park

• Timetable: September 2006 to Spring 2007• Project Funding: NYS DOT $100,000 US DOC EDA 100,000 WNYP 25,000 (in kind) Total $225,000

Keys to Success

• Key #1: Recognition of the primacy of the regional railroad freight transportation system to the rural economy.

• Key #2: Willingness of localities, counties, and two states to see regionalism as essential to accomplishing a major project, when a focus on local parochial interests would have sunk the entire initiative.

Keys to Success

• Key #3: The existence of a regional project-savvy organization that could lead a long term project planning and implementation process.

• Key #4: Partnerships.

Partnerships

• Federal-State (ARC / EDA / FHWA / FEMA / NYS DOT / PennDOT)

• Multi-state: two states (NYS DOT /Penn DOT)

• Public/private sector partnership with Norfolk Southern Corporation and the Western NY and PA Railroad

• Seneca Nation of Indians

• Multi-regional: 3 EDD’s

Partnerships

• Local public: 6 counties, 25 municipalities, 20 school districts

• A regional public authority (STERA)

• Local economic development organizations and agencies

• Dozens of shipping companies

RESULT:

A rural regional economy with transportation options

- a future with rail service.

Southern Tier West Regional

Planning and Development Board

Center for Regional Excellence

4039 Route 219, Suite 200

Salamanca, New York 14779

Telephone: 716-945-5301

Fax: 716-945-5550

Web: http://www.southerntierwest.org