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PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.



U.S. House of Representatives,

Railroad Subcommittee,

Committee Transportation and Infrastructure,

Washington, DC.

  The subcommittee met, pursuant to notice, at 2:08 p.m. in room 2167, Rayburn House Office Building, Hon. Susan Molinari (chairman of the subcommittee) presiding.

  Ms. MOLINARI. Thank you and good afternoon.

  I'm pleased to have this opportunity today to hear testimony on ways in which Title V rail infrastructure programs can be updated and improved to make them more user friendly.
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  I'd like to state very carefully and clearly at the outset of this meeting that the scope of this hearing is limited exclusively to Title V programs and it is not meant, nor will we allow witnesses to address the broader issue of rail eligibility for ISTEA funds. I believe all our witnesses were told that in advance.

  ISTEA funding eligibility is the sole jurisdiction of the Surface Subcommittee and while I appreciate being chairperson of the Rail Subcommittee, I want to do nothing to offend the people on the Surface Subcommittee, particularly as we move towards ISTEA reauthorization so I want you all to go back and tell them I said that clearly.

  I urge the witnesses and members to refrain from delving into these matters during this hearing.

  The Title V programs, which we're here to discuss, were enacted as part of the 4R Act in 1976 to address a series of railroad bankruptcies and many years of deferred capital investment that threatened the very survival of the rail industry.

  The Congress last amended the Title V programs in 1991 in ISTEA when railroad issues were under the jurisdiction of the Energy and Commerce Committee. Although the programs were regionally conceived as a bail-out for the larger railroads, today's rail industry is dramatically different than the rail industry of the 1970s.

  Today, we have only five large Class I railroads, most likely soon to be four, whereas in the 1970s, there were dozens of Class I railroads. Today, the Class I railroads own less than 200,000 miles of track, down from over 300,000 miles in 1975. Much of this track has been revived and kept in railroad service by the short line and regional railroads which today are operating a third of the rail track in the United States.
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  If not for the entrepreneurship of the small rail operators, most of this track would be either abandoned outright or converted into recreational trails leaving hundreds of communities and rail-dependent industries with inadequate links to transportation networks throughout our country.

  Unfortunately, many of these smaller railroads are undercapitalized, they often obtain key equipment such as rails and crossties by scavenging from salvage yards. In some cases, they need very long-term loans that banks are unwilling to provide. For these small railroads, one bad storm can wipe out an entire operation.

  This is where I believe Title V programs can play a role. Through the provision of Federal loan guarantees, rails would have access to much needed private capital at very low cost to the Federal Government since only the risk factor of the loan guarantee has to be appropriated.

  The Title V Program can also play a role for intercity and commuter railroads. In 1991, the ISTEA legislation expanded eligibility for Title V to include passenger and high-speed rail. These operations also have significant, unmet capital needs and the Federal Loan Program could be a great benefit to them.

  I want to thank the four witnesses for appearing today and I will now turn to Mr. Borski, the acting Ranking Member on the subcommittee for his opening statement.

  Mr. BORSKI. Thank you very much, Madam Chairman.
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  Let me commend you and the Ranking Member, Mr. Wise, and to make apologies for Mr. Wise. Unfortunately, he is detained back in West Virginia with a little matter of flooding in his area and district, so I know he will be missed.

  Madam Chairman, the distinctive feature of ISTEA, the Intermodal Surface Transportation Efficiency Act of 1991, was that it was not simply a highway bill, or even a highway and transit bill. Instead, it restructured the entire process by which we planned and carried out surface transportation improvements in the United States. It really was an intermodal surface transportation act and among the modes that were importantly affected by it were railroads.

  Madam Chairman, I look forwardly to today's hearings as the opening of a discussion about how best to handle the planning for and the funding of railroad infrastructure. This will be an important part of our deliberations on the overall ISTEA reauthorization bill.

  Thank you, Madam Chair.

  Ms. MOLINARI. Thank you, Mr. Borski.

  Ms. Granger?

  Ms. GRANGER. Thank you for holding this hearing on the status of Title V of the railroad revitalization and regulatory reform programs contained in ISTEA.

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  I'm looking forward to hearing from the witnesses. I'm also delighted to be serving as your vice chair and look forward to working closely with you and the members of the subcommittee to improve the conditions of our Nation's railroad infrastructure and resources.

  I thank you for this opportunity.

  Ms. MOLINARI. Thank you and we're delighted to have you here and acting as vice chair.

  Mr. Blumenauer?


  Ms. MOLINARI. Mr. Boehlert?

  Mr. BOEHLERT. No, thank you.

  Ms. MOLINARI. Mr. Filner?

  Mr. FILNER. Just briefly, Madam Chair.

  Thank you for having a hearing on a subject that I think needs far more publicity and knowledge. I know, for example, that the opportunities offered in Section 511 give us incredible leverage for public-private partnership in activities of short-line railroads and I know many examples around the country, including my own area of San Diego, where the rehab and revitalization of a short-line railroad can have enormous impact on the economy of a region.
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  I look forward to working with you because we can have a real positive stimulus for economic growth in this Nation.

  Ms. MOLINARI. I'm sure everyone here is aware that the gentleman has been a leader in trying to negotiate those projects through the House of Representatives. We appreciate your future efforts.

  Mr. Pitts?

  Mr. PITTS. Madam Chair, I don't have any prepared statement. I just would like to say I'm pleased to serve on the subcommittee with you and look forward to serving under your leadership and also to hearing the testimony today.

  Ms. MOLINARI. Thank you very much. We're delighted to have you on this subcommittee.

  Mr. Sandlin?

  Mr. SANDLIN. Nothing.

  Ms. MOLINARI. Thank you very much. The efficient Railroad Subcommittee does it once again.

  I'd like to now call for the testimony of Mr. Flohr, a member of The Regional Railroads of America Executive Committee.
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  Welcome and thank you for being with us.


  Mr. FLOHR. Thank you very much for having me.

  Congresswoman Molinari and members of the committee, my name is Bruce Flohr. I'm Chairman of RailTex which owns and operates 29 different short line railroads across the United States, Canada and Mexico, including one, the San Diego and Imperial Valley, that's in Congressman Filner's district.

  We also are part owner and operator of two railroads in Brazil and we have two consultants working in Kazakhstan, all involving railroad projects.

  I'm a past president of Regional Railroads of America and currently serve on that organization's Executive Committee. Today, I'm also appearing on behalf of the American Short Line Railroad Association of which I am also a longtime member.

  I appreciate this opportunity to provide our views on this aspect of our Nation's transportation system.

  The recent history of the short line and regional railroad growth is an important transportation success story. Since passage of the Staggers Act of 1980, more than 30,000 miles of excess rail track has been transferred from major carriers to more than 300 new regional and short line railroads.
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  If joined together, these railroads would comprise the largest sixth system in the United States. Together, they connect large regions of America to the mainline rail system. We're really the retailers of freight and the big railroaders are the wholesalers of freight.

  Without them, hundreds of communities would lose rail-dependent industry, as well as economic development opportunities. Agricultural-producing areas, served by small railroads, would suffer the rising transportation costs and become noncompetitive.

  These are the lines that no longer fit in the Class I cost structure and the majority of them were headed for abandonment. As such, they received little or no investment by their previous owners and were transferred in generally poor condition. Their new owners are entrepreneurs prepared to take on the debt necessary to bring the infrastructure up to a state of repair that will generate the safe, efficient and competitive transportation services that we all want and should require.

  The investment required is enormous and there are a number of factors that limit the small railroad industry's ability to meet the needs. We are startup businesses. The track we are buying has been in a steady state of decline, as have the revenues associated with the lines.

  We are asking banks to make what, for them, are relatively small loans to businesses that many of the banks do not understand; we offer very little traditional collateral. Our collateral, the ties, the rail, the ballast, the bridges, are not their typical trade in stock and they view this collateral very skeptically.

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  Basic infrastructure improvement is a hard sell to a bank. Despite the fact that the short line and regional owners have demonstrated that we can operate and even grow the business on these lines, far too much slips through the cracks.

  Too many of our lines are operating well below optimum speeds; there are too many costly derailments. Moreover, there are well over 10,000 miles of additional light density track that have yet to be transferred from the Class I railroads. To the extent our portion of the industry cannot raise capital necessary to rehabilitate this track, it will ultimately be abandoned.

  The Title V Grant and Loan Program, to which the Chair referred, were created to address the near bankruptcy of much of the Class I rail system. I helped in administering those programs while Deputy and Acting Administrator of the Federal Railroad Administration in the period 1975 to 1977, so I'm very familiar with the functioning of those programs.

  They were very, very successful. Thousands of miles from such historic properties as the Rock Island, the Chicago Northwestern and the Illinois Central and the Katy Railroad, remain in current service because of those programs.

  Today, the needs are different and the government's resources are more limited. We understand both these points and we are offering a proposal that recognizes this. I have detailed those proposals in my written testimony and I will touch on them briefly here today.

  We are proposing an overhauled Title V Program, which combines the best of the old Title V rail enhancement and preservation programs with an innovative partnership feature. The program is essentially a Federal loan guarantee program structured in a way that will leverage maximum State, local and private dollars to meet specific capital requirements.
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  All Federal loans and loan guarantees, including those under the 511 Program, require Congress to appropriate an amount equal to the assumed risk of the loan. Under our program, this risk subsidy would be paid by so-called infrastructure partners, including States, localities, shippers or railroads who stand to benefit from the project.

  The railroad, as an example, on a $20 million rehabilitation project, could put together $2 million in cash for the project, a loan guarantee would be sought, OMB would assign a 10 percent risk factor to the loan this would be the collateral money, no longer requiring a budget impact with Federal dollars.

  I want to emphasize to the committee that our program contains very little risk for the Federal Treasury. It is demonstrated in hundreds of cases that when a new, startup railroad is able to rehabilitate and upgrade their track, we are able to break the cycle of decline.

  Repayment history has been excellent under the old Title V Loan Program. To the best of my knowledge, there has been only one default in over hundreds of millions of dollars of guarantees.

  We believe this kind of program will benefit the communities, the States and our shippers to maximize the transportation assets in each community and State.

  I appreciate the opportunity to testify and welcome any questions you might have.

  Ms. MOLINARI. Thank you very much for being here.
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  I must admit, you were Deputy and Acting Administrator of FRA so many years ago, you must have been a kid when you worked there.

  Mr. FLOHR. I was in my middle forties then.

  Ms. MOLINARI. You didn't have to admit that, for God sakes.
  Mr. FLOHR. More gray hair now.

  Ms. MOLINARI. Yes, we all have more gray hair now, although some of us have options that others don't.


  Ms. MOLINARI. If I can ask just as an overall question, because you touch on it and you go into more detail in your written testimony and I think it's very important for those of us who may try and make these changes in this ISTEA legislation, if you could spend a little more time talking about the proposal you put forth.

  I'm referring specifically in your written testimony to the paragraph that starts, ''The overall credit limit,'' on page four, fourth paragraph?

  Mr. FLOHR. Yes.

  Ms. MOLINARI. If you could basically cover those points for the record so that we can all understand in more detail the proposal that you're advancing?
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  Mr FLOHR. The situation we have now is under the Budget Reconciliation Act and the Credit Act. If there is going to be a loan guarantee program put forward, the government has to appropriate sufficient funds to cover the risk money, in case there was a default. What we are saying now is that instead of the Federal Government picking up that risk component, we would have other agencies, either public or private agencies that would be willing to pick up that risk component.

  Literally, what we would envision is that cash would be placed into an escrow account that would then be called upon in case there were a default on the loan.

  We're not really asking for a low interest, government loan. Our problem is the banks simply won't loan us money at all, because the banks are very troubled by the collateral that we offer. Bank examiners really get on local banks when they find there is a rail program that offers this kind of collateral.

  That's the case where you're talking about rehabilitation of track, the increasing of low carrying capacity on bridges, increasing clearances, if you want to get into double stack container movement, the banks just won't lend us the money.

  By having a loan guarantee program, this would give the local banks the ability to participate in that lending, have the down side protection. We're saying, let the collateral money, the risk guarantee, come from either local sources, State government sources or from even private sources.

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  Ms. MOLINARI. So, under your proposal, the Federal Government would be protected financially in any event?

  Mr. FLOHR. We believe they would be.

  Ms. MOLINARI. And even more so than they are now?

  Mr. FLOHR. Even more so than they are now, yes.

  Ms. MOLINARI. Let me ask just one more quick question and then I'll come back.

  In general terms, what has been the track record of the smaller railroads in repaying loans made under the 511?

  Mr. FLOHR. The repayment record has been excellent. In fact, the last time this program was put through under the existing structure was a loan that went to the Delaware Seaco Corporation, the Susquehanna Railroad, and in that case it was assigned a 5 percent risk factor, a 5 percent default rate. That was a program that was in 1995.

  Ms. MOLINARI. Ms. Granger, questions?

  Ms. GRANGER. This proposal that you outlined creates an option for State and local governments to put up the security deposit. Do you have any precedent or prior experience with this type of off-budget technique for capital financing?

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  Mr. FLOHR. I believe it was done in some maritime legislation last year, but that's the only one that I personally know of.

  Ms. MOLINARI. Mr. Filner?

  Mr. FILNER. Thank you, Madam Chair.

  I appreciate the very innovative suggestion. I personally think the Congress ought to take advantage of that existing authorization and appropriate the money on its own.

  As I said earlier, we get a 20 to 1 or a 10 to 1 leverage and I would hope to do it. Your proposal gives us another way of handling that in case our colleagues object to that and I greatly appreciate the work on it.

  Mr. Flohr, if you can change hats for just a second and take 2 minutes, would you outline for the committee the economic benefits to a region of the reconstruction of a short line railroad? Let me take one at random, the San Diego and Imperial Valley Railroad?


  Mr. FILNER. What impact would that have on southern California regions, do you think?

  Mr. FLOHR. It's a railroad that's near and dear to our heart because it was the very first railroad that we ever started back in 1984. It was a railroad that Southern Pacific had filed for abandonment on because they couldn't make it work and then a company named Kyle Railway came in and at that time they were the biggest operator of short line railroads. They defaulted 2 years into a 10-year contract because they couldn't make it work. We came in 1984 and we've been making a profit on it ever since.
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  The part that we're looking at now is reopening about a 50-mile segment of the railroad that runs east out of San Diego and eventually connects with the Union Pacific at El Centro, California.

  The importance to the region is that this would provide a second Class I railroad with access to the Port of San Diego; and as the Port of San Diego is trying to develop greater activity moving freight through that port, having two railroad access is extremely vital to that sales effort to get more ships calling in the Port of San Diego.

  That creates jobs immediately in the port as far as the stevedoring activity of the loading and unloading of the ships; it creates a lot of economic value-added potential because there is also all the Maquiladora projects that are just over the border south from San Ysidro in the Tijuana-Tacodi area.

  We would see a lot of that traffic would move directly east out of San Diego rather than now north up to Los Angeles and then out. This is in a CEMAQ, nonattainment area right now. So the more movement we can put back on rail rather than staying on truck will also have a tremendously positive environmental impact.

  There are a lot of winners in this whole project.

  Mr. FILNER. Thank you, Mr. Flohr.

  Thank you, Madam Chair.
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  Ms. MOLINARI. My pleasure.

  Mr. Boehlert?

  Mr. BOEHLERT. Thank you, Madam Chair.

  I noticed you asked Mr. Flohr to start with paragraph four on page four. I would have preferred you asked him to start with paragraph three because paragraph three outlines the origin of this very innovative concept that happens to have come from Walter Rich who is a constituent of mine and a friend to the industry and Joe Boardman who is now the Acting Commissioner of the Department of Transportation for the State of New York.

  I want the record to note that paragraph three should be underlined several times.

  I'd like you to take us through this if you will in a real life example of how this would work so that everyone clearly understand this because I think this is an exciting concept, but I want to make sure I understand it. If I understand it, everyone else will.

  Mr. FLOHR. Let's take as an example, specifically something that is in Congressman Filner's district.

  Mr. BOEHLERT. I'd prefer you take something in my district.

  Mr. FLOHR. I don't have a railroad in your district.
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  Ms. MOLINARI. Filner has bought into this already. You might want to try Pennsylvania or Texas.

  Mr. FLOHR. We could take Texas very easily as an example because we have three railroads operating in Texas, one out in Monahan, a second one headquartered in Sherman, Texas, and a third headquartered in Garland, Texas.

  The idea would be we would want to put money into our track to build up the carrying capacity, the speed, improve the safety on the track. In the case of all three railroads, we are moving hazardous commodities by rail on those tracks.

  What we would do is we would apply to the Federal Railroad Administration, because that's the agency in place right now, and we would be asking for a loan guarantee. We would then go to either the Federal Financing Bank or, if the legislation permitted, to a local bank in the area. We would borrow the money from the bank to do the track improvement project, and then the bank would get the guarantee from the Federal Government through the Federal Railroad Administration.

  For the component that would be looked upon as the potential default rate, and we'll just say 5 percent of the loan and say it's a $20 million track rehabilitation program, 5 percent of $20 million would be $1 million; $1 million would be deposited in an escrow account to handle that risk component factor.

  Who would come up with the $1 million? We, the railroad, might come up with it; an economic development authority say in the area of Garland or Greenville, Texas, might be the one to come in with the money as an escrow amount; it might be a State Department of Transportation that might have the money, and some States have been very active in working on lending programs to the railroads.
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  Mr. BOEHLERT. New York, for example.

  Mr. FLOHR. New York has been an excellent example of that and Walter Rich is probably looked upon by his peers as the most successful in ways that you can build private-public partnerships in funding these kinds of projects.

  The loan would then be paid off and at the time the loan has been completely paid off, then that escrow money would be returned to whichever was the contributing agency and then that would complete the whole program.

  Mr. BOEHLERT. I'm anxious to have you address the exposure of the Federal Government in the event of default.

  Mr. FLOHR. If there is a default to the situation, first of all, what the bank would look to is what collateral was there and there usually will be some type of collateral there, but if they are not able to get their direct hands on that, then the other element would be to be able to access the money that was deposited in escrow.

  Mr. BOEHLERT. So how do you think CBO would score this?

  Mr. FLOHR. I'd hope they'd score it very high because that's somebody else's money other than the Federal Government's money.

  Mr. BOEHLERT. That's the key point. That's the thing I wanted to emphasize.
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  Mr. FILNER. Would the gentleman yield?

  Mr. BOEHLERT. I'd be glad to yield.

  Mr. FILNER. Explain to me, since I'm new at this, Congressman Boehlert, doesn't the CBO score now under 511, it just scores it as $1 million, not $20 million, am I correct on that?

  Mr. BOEHLERT. I'm not sure.

  Mr. FILNER. I think that was my understanding when we tried legislation last year. The CBO now scores only what the guarantee is or the actual cash exposure, although I think to be honest, we have to understand this, the Feds, I think, would be ultimately responsible for the $20 million that if there was a default, minus the collateral, minus the $1 million, but the default rate is based on the experience. That is, there is only a 5 percent chance that's going to occur, so that's a 20 to 1 odds, that's going to be successful. I think that's a good deal for the government.

  I think we need to be honest, that does expose the Feds to that $20 million.

  Ms. MOLINARI. I think it might be helpful if one of our counsels addressed this issue.

  Staff COUNSEL. Just to confirm what Congressman Filner was saying that the only portion that gets scored in terms of the appropriations process is the subsidy amount, in this example, the $1 million; the $20 million does not get scored against an appropriations bill, but if there is a default, because there is a Federal guarantee, then yes, the Federal Government is on the hook for that amount of money.
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  Mr. BOEHLERT. Thank you for that clarification. Very helpful.

  Thank you, Madam Chair.

  Ms. MOLINARI. Thank you.

  Mr. Clement?

  Mr. CLEMENT. Thank you, Madam Chair.

  Mr. Flohr, as you may know, Congressman Spencer Bachus and I recently initiated a letter to Chairman Shuster from over 35 House colleagues expressing our strong conviction that the American short line railroads should be considered for loan guarantees and other assistance.

  We both know that there are about 45,000 miles of infrastructure operated by short line and regional railroads which is of national importance and deserves our consideration.

  Would you expand on my statement?

  Mr. FLOHR. let me expand in several ways. First, let me expand on the importance of our element of the industry. Right now, I've heard numbers as high as 20 percent of the carloads of freight that are originating in the United States today actually originate on short line railroads.

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  The trend that we're seeing happening is the big railroads prefer to be the hook and haulers; they prefer to put 100 cars behind 4 locomotives and do the long-haul, high speed on their mainline corridors and the small operators are the ones that are literally delivering those railcars to the factory loading dock.

  I'd like to compare that to being in the retail and wholesale business. We're providing that retail component, delivering the cars to the shipper and letting the big railroads do the long haul, which each one of us can do best.

  Within that, the importance is the fact that the short line railroads, as a group, are really an effective bunch of entrepreneurs. We're out there hustling for every new carload of business that we can get. It's that incentive that we have that ultimately spills back to the big railroads giving them more long-haul cars for their trains.

  In the case of our company, in 1996, we had an 8.3 percent increase in carloadings on railroads that we've been operating for more than a year, so this is same store growth like in the retail business.

  The big railroads in the United States and Canada combined had a carloading decline of one-half of one percent in 1996 compared to 1995. That's where this entrepreneurial spirit comes in and is putting more business back on rail. That is what is so exciting about what we're doing.

  The other side of it though is because we are small businesses, we generally don't have the ability to go out and spend a lot of capital improvement dollars, things like rebuilding our track, upgrading the carrying capacity of our bridges, those sorts of things, to do it off our own balance sheet. We have to get money from somewhere else.
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  In reality, the banks just will not lend us the money now because they have real troubles with their bank examiners because the bank examiners will challenge them as to where is the collateral and how easily can the bank get their hands on the collateral if there is a default.

  That is where a loan guarantee program becomes so effective for us because that gives the ability to borrow from local banks, so you can keep the business in the local communities where we work, and yet at the same time fund these rehabilitation programs that over the long term are going to be beneficial, are going to be paid back.

  Mr. CLEMENT. The Administration has argued that it is better to funnel money for railroads through a State program like their State Infrastructure Bank Program rather than having the projects be selected by the Federal Government.

  Do you think it is better to have the decisionmaking process focused at the Federal level or at the State level?

  Mr. FLOHR. I'm going to be evasive on my answer on that one because it depends on the State. Clearly having been a part of the Federal program, I felt it worked very well back in the middle 1970s when I was part of the Federal program, but at that time, many of the States were not well-equipped to take over that responsibility and even today, there are some States that have very effective transportation departments with a rail component to those departments, and other States don't have much of a program in place. So it really depends on the State you're talking to.
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  If the State does have an effective department in place, I think it should go to the local State level but if the State is not equipped to do it, then it should reside back in Washington, D.C.

  Mr. CLEMENT. Thank you.

  Ms. MOLINARI. Just getting back to your original proposal, a point of clarification, under your proposal, FRA would have to agree to whatever financing deal you put together, so there is a possibility that if it is risky, FRA can say no go, we're not going to back this?

  Mr FLOHR. I would assume there would be some kind of a check and balance in the system because the expertise does reside here within the Federal Railroad Administration.

  I would even see it that they might establish instead of a 5 percent risk factor, they might put a 10 percent risk factor on it. It's the way the legislation would be written and what role the FRA would have in working this out.

  Clearly, lending on certain types of projects, the collateral value is a lot higher than on other projects and therefore, that's where you might look at it. Also, just the credit history of the railroad involved would be another component they would look at. We looked at that when I was with the Federal Railroad Administration.

  Ms. MOLINARI. So, in other words, under your proposal by no means would short lines be given a de facto blank check to go ahead and do this, there's a lot of interaction of government to make sure it is done only where appropriate for taxpayers' benefit?
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  Mr. FLOHR. That's what I would believe, yes.

  Ms. MOLINARI. Mr. Fox?

  Mr. FOX. Mr. Flohr, I understand that about one-third of the total mileage in the United States rail network is now operated by the small short line and regional carriers. Given their major role in keeping our rail system operational, aren't these carriers being shortchanged somewhat when we underutilize the Title V programs as we have for the past decade?

  Mr. FLOHR. They have been shortchanged on it. It's actually about one-sixth of the total mileage is with Short Lines and they've been shortchanged because we really haven't had any funding available under the Title V Program, so there's been no way they have participated.

  Four or 5 years ago, there was still some funding under the Local Rail Freight Assistance Program and that was a grant program where generally the railroad had to put up one-third to one-half of the money and then the Federal Government, as a grant, put up the other component of it. That program is no longer being funded either.

  That was probably the most recent one where some grant money was available and in current reality of today, we're feeling more could be done through a guaranteed loan program than an outright grant program.

  There still are areas where we suffer from flood damage and we cannot get insurance for flood protection. You can buy insurance for bridge protection that would be damaged from floods, but if you have a track that runs along a river, and almost everybody's tracks seem to run along a river someplace, if that river gets out of the banks and wipes out your railroad track, we cannot buy insurance for that kind of protection or cost for rehabilitating the track.
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  I would also encourage the committee to look into what we could do for some of these kinds of mother nature-related disasters that also strike us.

  Ms. MOLINARI. Mr. Sandlin?

  Mr. SANDLIN. No questions.

  Ms. MOLINARI. Mr. Pitts?

  Mr. PITTS. Mr. Flohr, I believe your company has had some experience with shared use of tracks and facilities by local transit operations and short line freight railroad.

  Could you comment on how Title V programs may be relevant to jointly-used passenger freight infrastructure?

  Mr. FLOHR. First of all, for the clarification of the committee, where we have had joint use track, the first was out in San Diego where the transit authority out there bought Southern Pacific Railroad track, built a street car, light rail system and have been operating that since I think 1982.

  The street cars operate on that track during the daytime and then our freight trains come out and operate on the very same track at night. We have a window where the street cars quit operating at about midnight and then don't start again until 5:00 a.m. and so we have a five-hour window where we operate our freight service in the middle of the night.
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  We pay a user fee to the trolley for our shared cost of the maintenance of that track. Any of the track that is solely for our use, such as the freightyard track that we hold the cars until we get a window to move on the street car tracks, that is entirely our own track maintenance dollars and also all the track usually goes into the various industries and all the supporting trackage for our locomotives and other service operations. That is all our track.

  That is the area that we would see using some kind of guaranteed loan programs for improvements on those freight-only tracks that are adjacent to the street car tracks.

  We're going to have a second operation like this in Salt Lake City, Utah. We have the Salt Lake City Southern Railroad, about 14 miles long. A transit authority in Salt Lake City, Utah has purchased that line from Union Pacific. We have the contract to provide the freight service there and they've just got the money to build the light rail transit system. It will be ready for the winter Olympics in 2002.

  During that construction period and afterwards, we will then be operating our freight service at night and the street cars will be operating in the daytime.

  Mr. PITTS. What about insurance costs?

  Mr. FLOHR. We are able to buy insurance, right now half a million dollars self retention with a $50 million high side as the amount of insurance we currently carry. It's expensive but we are buying it and there is a market available for people like ourselves to buy it.
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  The big issue is you don't have common operations of the light rail transit and the freight at the same time. You keep them separate. That seems to work the best and I think is also the safest.

  Mr. FILNER. I used to serve on the Trolley Board in San Diego and Mr. Flohr, we're very proud of our San Diego trolley and we would never call it a street car. Because of that terminology, we get a 95 percent farebox recovery which pays for that operation. We're very proud of the San Diego Trolley.

  Mr. FLOHR. It's a light rail transit system.

  Mr. PITTS. I have no other questions.

  Ms. MOLINARI. Mr. Franks?

  Mr. FRANKS. No thank you.

  Ms. MOLINARI. We want to thank you very much for your innovative proposal. Whatever results from today, you have the commitment, I think, of this subcommittee to make sure that we can do what we can to keep your business flourishing throughout the United States.

  Thank you very much for your proposal and your time. We'll be in contact on the details.

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  Mr. FLOHR. Thank you very much.

  Ms. MOLINARI. Thank you.

  Our next witness will be the Honorable Jolene Molitoris, Administrator of the Federal Railroad Administration.


  Ms. MOLITORIS. Good afternoon, Madam Chairwoman. Thank you for inviting me to this important hearing and my greetings to the members of the committee.

  The President is committed to transportation infrastructure investment because it's crucial to our economic vitality and that's why, in the last 4 years, we have increased funding available for transportation 20 percent and we're committed to continuing that improvement through the 21st Century.

  Secretary Slater has identified safety, transportation investment, and common-sense government as the touchstones of the DOT policy. We believe the proposal that we have for rail infrastructure responds to those guidelines.

  I know you called this hearing focusing on Title V. In my written testimony I have provided some extensive historical background. My main message to you and the committee today is that we see 511 as a program that worked well in the past, but the Administration's National Economic Crossroads Transportation Efficiency Act of 1997 (NEXTEA) proposal is our view of how we should move forward in this area.
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  As you know, Title V was initiated in the 1970s and early 1980s to avoid the Midwestern repeat of the Penn Central collapse. The 505 program made $580 million in loans available to 24 recipients and the 511 program guaranteed $253 million in loans to 8 recipients.

  The Title V programs were primarily geared to keeping Class I railroads in the private sector. The Chicago and Northwestern rebuilt 600 miles of mainline between Chicago and Omaha and the former Chicago, Rock Island, St. Paul and Pacific Railroad (Rock Island) line between the Twin Cities, in Minnesota to Kansas City with 505 money and refurbished 700 freight cars with 511 guarantees.

  The Illinois Central Gulf Railroad rehabilitated 905 miles of corridor between Chicago and New Orleans with 505 funds and the Missouri, Kansas and Texas Railroad acquired a Rock Island line and rehabilitated segments of 1,084 miles of main line from Kansas City to Houston. These were important programs. They served an important purpose.

  As we know, the Class I's today are very healthy, they're the model for the world due primarily to deregulation, and it is unlikely that Class I's would need the Section 505 or 511 programs.

  As Mr. Flohr testified, the Class II and III railroads have been extraordinarily effective in the growth of their business.

  From my own personal experience in Ohio, we saw the tremendous synergism between the Class I's and the short lines and the importance that the short lines and regionals played in their service, especially to smaller communities.
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  In a survey we did in 1993, the Class II and III railroads identified about $400 million in infrastructure needs they believed they could not get financing for through the private sector or through their own revenues.

  Since 1993 and our study, this Administration has recognized the importance of these projects. Consequently, the innovative financing initiative of the Department has included rail freight projects. We have funded 12 rail-related projects and have many more already in the pipeline.

  I should also mention the FRA has made a big effort in outreaching to local and State governments because Mr. Flohr is right, in the past, certainly in the 1970s and early 1980s, State governments and local governments weren't used to working with railroads. They didn't understand about how to get them financed because they were used to doing highway projects.

  We have outreached to them in several ways: person to person, working directly with the State DOTs, and local planning agencies, and developing manuals to help them begin to understand how to evaluate the benefits of rail investment. We have even developed a software package called RAILDEC which they can use, it's a very user friendly system, to help them evaluate the public benefits of an investment so that when they make it their priority, they can see how much this gives to them.

  In addition, during the last 4 years, the National Highway System Designation Act of 1995, which Secretary Slater was so influential in passing, made highway connectors between NHS and intermodal terminals eligible for NHS funding.
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  Our NEXTEA proposal is more flexible than 511. I think it's important to recognize that it includes rail under the Highway Trust Fund for the first time because we believe that the National Transportation System must have a key rail component.

  What NEXTEA does as we propose it, is give a menu of opportunities for rail freight projects. Surface transportation programs are applicable to publicly funded facilities, and anyplace such as yours, Congressman Filner, where you have a nonattainment zone, that is applicable with ISTEA or NEXTEA funding.

  The State infrastructure banks are another option for a State to choose to invest in rail freight projects, and finally, the Credit Enhancement Program is an opportunity for big projects of more than $100 million to have what is called revenue stabilization funds applicable to public rail projects.

  We should mention that we know of 74 railroads which are now operating on publicly-owned facilities. I appreciated the information that I heard today from Mr. Flohr. We just received his proposal yesterday. I think I heard a lot of words that are similar to ours—public-private partnerships, the importance of these investments, and the ability to give good return on that investment to the communities and States involved.

  I really appreciate the interest of the committee in this important area. I believe our NEXTEA proposal does offer tremendous opportunities for railroads and States and locals to work together. Because NEXTEA gives States and local governments more decisionmaking, I think it's in the spirit of the ISTEA implementation.
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  I look forward to answering your questions and to working with you on this important issue.

  Ms. GRANGER [assuming Chair]. Thank you very much for your testimony.

  The Chairwoman was forced to leave. She had a leadership meeting and so she asked me to express her apology for not being able to stay with you.

  I've got a couple of questions. Since 1993, when the Federal Railroad Administration study was completed, it showed a total estimated funding shortfall of $440 million for smaller railroads. Many more new regional and short line railroads have been formed. Do you think it would be useful to conduct an update of the 1993 study?

  Ms. MOLITORIS. I think it could be. I think it would be helpful. I think it's also very important to note that during the period of the last 4 1/2\ years, the short line and regional railroads have continued to grow. I think that the ability of this market to serve customers in a very effective way really indicates the overall vitality of the industry in that market.

  I think perhaps an updated study could be more focused than the original one and give us maybe more focused information than we had the first time.

  Ms. GRANGER. You've been a strong proponent of high speed rail and you've worked hard to make high speed rail systems reality.
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  As you know, the Section 511 Program was expanded in ISTEA to include eligibility for high speed rail systems, yet the program has never been used for that purpose. What is your view of the Section 511 Program as a catalyst for high speed rail development?

  Ms. MOLITORIS. I think that the reason it hasn't been used perhaps is that it very specifically identified systems that operate over 125 miles a hour. However, we do see systems throughout the country that are developing toward those kinds of higher speeds, for example, the Fox Project in Florida.

  I think there is an opportunity there. I think in the NEXTEA proposal that the Administration has offered, there also is opportunity for a State to partner. For example, in Florida, the State has partnered with the Fox team and the State of Florida has committed over $4 billion over a period of 40 years of their own State money.

  I think it's that kind of partnership where people are convinced of the public benefit that continues to promote high speed rail and will make it a reality. 511 is definitely an eligible opportunity for high speed projects with speeds of over 125.

  Ms. GRANGER. That's all the questions I have.

  Congressman Filner?

  Mr. FILNER. Thank you.

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  Ms. Molitoris, I have certainly come to appreciate your leadership at the FRA. I have never understood why the Administration was not more sympathetic to the programs we're talking about today and never tried to fund Section 511 or some other programs.

  Your own agency issued a report outlining the needs of small railroads and their capital needs, so I was quite upset with the disconnect between the Administration's studies and the support, if you would like to tell us a little more about that.

  I have not read NEXTEA very carefully, but I've been told that some of the stuff that you're referring to today seems to preclude private railroads from getting assistance as opposed to the public-owned railroads. Can you comment on that also?

  Ms. MOLITORIS. Certainly. On the first subject, the issue of past history in terms of Section V programs, we certainly have, I think, demonstrated the importance of rail freight investment. I believe that the Administration's decision to include rail freight programs as eligible under the Highway Trust Fund in our NEXTEA proposal is an indication that there is a commitment there.

  In addition, the innovative financing projects which we have worked on with the Federal Highway Administration and the State and local governments, have resulted in 12 rail-related projects under ISTEA and the NEXTEA proposal continues and expands ways to fund rail freight projects.

  You mentioned the publicly-owned element and I think it is clear that the NEXTEA proposal, given that the money is from the Highway Trust Fund, is focused on public benefit.
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  For example, in your own case, the San Diego line that you're so interested in is in a nonattainment zone, so even today, it is eligible under ISTEA and that is how we have funded several of these other projects.

  The ability to partner with the State and local planning agencies and to get that support as well as that of local investors really is the kind of partnership that we think is going to make the most sense as we get rail freight ready.

  There is a difference between Mr. Flohr's approach and our NEXTEA proposal; that is ours focuses on publicly-owned facilities. There are 74 railroads on publicly-owned facilities but there are other ways that private railroads can be involved, i.e., the nonattainment zone areas, maybe an area where an authority is. I think in Mr. Clement's State of Tennessee, there are three operations on publicly-owned facilities. Maybe there is an element like a bridge which is part of your project that could be funded, eligible and owned by a port authority or an eligible public authority.

  We think there is an ability to work together that we want to promote.

  Mr. FILNER. I look forward to doing that. I hope the proposal, as stated, did not preclude that the track is actually owned by a public authority and leased to a private company for operation. I don't know the details of the law.

  Ms. MOLITORIS. In fact, that is the kind of partnership. For example, in Florida, their investment gives ownership of the right-of-way to the State and makes it a public-private partnership.
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  I think that maybe the idea of identifying publicly-owned facilities needs to be fleshed out in terms of real life examples of how to do it, but it has worked in ISTEA and we want to make it work even better.

  Mr. FILNER. You've given me several ways to try to be creative, so I thank you.

  Ms. GRANGER. Mr. Boehlert?

  Mr. BOEHLERT. Thank you.

  Just to follow up what Mr. Filner said, and we're usually on the same wave length, the focus is not exactly the right word when you say you focus on the publicly-owned railroads because you exclude the privately-owned railroads, don't you, from any consideration under the Credit Enhancement Program?

  Ms. MOLITORIS. No, we don't exclude them. There are five ways to share in these projects. In the example of San Diego, it is in a nonattainment zone and that makes it eligible for CMAQ funding. That could occur with private railroads.

  For example, in Cincinnati, there was a State of Ohio-Norfolk Southern partnership, on a project in a very, very congested area. Norfolk Southern up-fronted the $15 million to get it done. The State of Ohio got an arrangement with the Department where the State could pay back Norfolk Southern the $5 million over 3 years. It was done within 12 months.

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  It was very effective, it helped everybody, public safety benefits as well as air quality and congestion. So that's a way that private railroads can be involved.

  There is the State Infrastructure Bank, there is STP and there is the credit enhancement opportunities.

  Mr. BOEHLERT. I've just had handed to me a note that says, ''Privately-owned railroads are excluded under the Credit Enhancement Program.'' I'm puzzled by that.

  First of all, maybe the solution is nonattainment areas because the whole country is going to be a nonattainment area pretty soon the way we're going, but take an example that I'm very familiar with, New York Susquehanna and Western. Talk to me about that. Would they be eligible to participate in the program, the Credit Enhancement Program?

  Ms. MOLITORIS. I think it would depend on what Mr. Rich was trying to do and I think the project has to be very defined.

  I think part of the focus, and I think it is a focus on public benefits and publicly-owned systems, or at least parts of those systems, is to get the most public benefit because as the public agency, that is our primary responsibility.

  Mr. BOEHLERT. Sure, but aren't most of the railroads owned by private sources?

  Ms. MOLITORIS. Most of them are. Right now, we know 74 are publicly-owned right of way, 74 railroads, but as I just mentioned to you, there are ways to work together in most cases, not in all, clearly, but in many cases, there are ways to work together, especially with your State DOTs and your local planning agencies to achieve many of the goals that short lines and regionals need.
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  We have spent really a great deal of time over the last 4 years reaching out to DOTs like New York DOT, which is a very effective partner with us. We have worked with them on their turbo trains as you know, as well as other rail projects.

  Mr. BOEHLERT. We've got to be very protective as we deal with ISTEA because the fact of the matter is the private railroads are excluded under your Credit Enhancement Program proposal. That is a fact, is it not?

  Ms. MOLITORIS. That is only a part of NEXTEA, Congressman.

  Mr. BOEHLERT. I understand.

  Ms. MOLITORIS. There are five different programs.

  Mr. BOEHLERT. But I want to get that one program, want to make sure I'm clear on that. Under the Credit Enhancement Program, private railroads are excluded from eligibility? That's a yes or no. It's not a maybe.

  Ms. MOLITORIS. I know it is except I'm trying to think if there are any partnerships. I'm thinking, for example, of something like the Alameda Corridor which actually was funded under 505 but it is a $400 million project which would put it in the NEXTEA proposal under the Credit Enhancement. That was a partnership with private railroads.

  I would have to think through all of the potentials and get back to the committee, if I may, to see what kind of partnerships might be eligible.
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  Mr. BOEHLERT. I would appreciate that.

  Ms. MOLITORIS. Certainly.

  Mr. BOEHLERT. Like Mr. Filner, I want to be creative and we want to be creative on a bipartisan basis.

  Thank you very much.

  Ms. GRANGER. Thank you, Mr. Boehlert.

  Mr. Fox?

  Mr. FOX. Thank you.

  A recent GAO report on the Enhancement Program showed that $150 million in Federal ISTEA funding has been used to create recreational trails from abandoned rail corridors since the enactment of ISTEA in 1991.

  As you point out in your testimony, only one loan guarantee has been made to a short line or regional railroad and this was for $4.2 million.

  Doesn't it seem somewhat unfair that smaller railroads that are attempting to keep a railroad line in service have to compete with trail operators that have the benefit of enormous sums of Federal funding to acquire the rail corridors? Wouldn't an update of the Title V program allow us to have funds for additional infrastructure dollars to privately-owned short line and regional railroads be one way to attempt to level the playing field?
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  Ms. MOLITORIS. Mr. Fox, I think it is clear that the Administration is very interested in rail freight investment, but clearly we have our focus on publicly-owned facilities with opportunities for private investment with partnerships with the State and local planning facility.

  It is very important to note that under the Innovative Financing Program in the last 3 years, we have funded 12 rail-related projects that have been very important in States throughout the country.

  I think that as we work with State and local governments, and help them to better evaluate the ways that rail investment benefits their city or their State, we're going to continue to see growth in applications and interest in this kind of investment.

  I believe the partnership in NEXTEA can help us reach many of the goals that the railroads, the short-and medium-sized railroads, want to achieve. I'm sure not all.

  Mr. FOX. But can we get the funding to be close to what the trails has been?

  Ms. MOLITORIS. I can't guarantee an amount of money but STP money is available, SIB money is available, and more and more States—I think Pennsylvania has been interested in ways that they can work on rail investment, New York, Tennessee, many of the States represented by the committee members.

  We want to help that grow and that is our commitment, but our NEXTEA proposal focuses on partnerships in terms of publicly-owned facilities.
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  Mr. FOX. Thank you.

  Ms. GRANGER. Thank you very much for appearing before us today. We appreciate your appearance.

  Ms. MOLITORIS. Thank you very much.

  Ms. GRANGER. The next witness will be from the West Virginia State Rail Authority, Mr. Leo Howard, Chairman, Board of Directors.


  Mr. HOWARD. Representative Granger and members of the subcommittee, I am Leo Howard, Chairman of the West Virginia State Rail Authority and the South Branch Valley Railroad. I appreciate the opportunity to appear before you today to testify concerning the rail infrastructure programs of ISTEA.

  I'm accompanied today by Mr. William Loftus, President of The American Short Line Railroad Association, who has an extensive background in the Title V financing.

  The South Branch Valley Railroad is owned and operated by the West Virginia State Rail Authority. The State Authority took over operation of what had formerly operated as the south branch of the Chessie system's Baltimore & Ohio Railroad on October 11, 1978.
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  West Virginia became the first State in the Nation to both own and operate a commercial railroad. By preserving the 52.4 rail line in 1978, the State Rail Authority not only protected an existing industry and the estimated 1200 jobs that rely on the rail service in the South Branch Valley, but also made further employment growth possible. Without the railroad, it is extremely doubtful that the more than 1100 new jobs created by the region's poultry industry in recent years would have happened.

  Recent expansion of the Valley's limestone industries is also closely linked to the railroad. Freight tonnage is up significantly in recent years.

  This success story required public investment. During its first 10 years, the railroad spent nearly $5 million on track improvements alone. The devastating flood of November 1985 destroyed or severely damaged a substantial portion of the railroad.

  After more than a year of construction, the South Branch Valley Railroad was reopened for full service in 1987. Damage repairs totaled approximately $12 million. In 1994, the railroad completed a $4 million bond finance upgrade of its line.

  The railroad's continued commitment to upgrade its facilities is evidenced by the current capital program which plans to invest an additional $2.5 million through 1997.

  Some of this critical capital investment was supported by Federal grants. The South Branch Valley Railroad has received local freight assistance grants from the Federal Railroad Administration through the State of West Virginia. These LRFA grants were $336,000 in 1992, $125,000 in 1993, and $450,000 in 1994 for a total of $911,000 over the 3-year period. These Federal grants were critically important for the railroad's capital program.
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  Other West Virginia short line railroads benefitted from the Federal infrastructure investment during the 1991-1995 time frame as well. Funding the rehabilitation of the Neal Run Trestle on the Little Kanawha River Rail included $70,000 in Federal funds; the rehabilitation of the Winchester and Western Railroad received a total of $295,750 in Federal funds.

  However, the LRFA Program has not been reauthorized by Congress and no funds were appropriated in the fiscal years 1996 or 1997.

  Other sources of support for worthy investments like this must be found. Once such source of support is the reconstruction of the Title V Loan Program into a budget neutral vehicle that will provide access to major multi-year financing of large projects on short line and regional railroads and use of a combination of Federal and State-supported commercial loan programs.

  In addition, I believe that the eligibility of the short line and regional freight railroad projects for funding should be clarified as part of the ISTEA reauthorization process.

  Short line and regional railroads are an important and growing component of the railroad industry. Today, they operate and maintain over 45,000 miles of track, 27 percent of the American railroad industry's total route mileage. These small railroads serve every State in the Nation and thousands of shippers and small communities.

  The American Short Line Railroad Association, a group of which the South Branch Valley Railroad is a member, and its sister organization, Regional Railroads of America, are working together toward clarification of eligibility of a short line and regional freight railroad for projects for funding under the next ISTEA legislation.
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  In order to be chosen for funding, small railroad projects would need to clear the hurdle of a strict, public benefit test. Any short line or regional rail freight project would have to be found by the State or local decisionmakers to be a better, more cost effective use of transportation dollars than other transportation projects with which it is compared.

  ASLRA and the RRA are working with the Subcommittee on Surface Transportation in regard to clarification of small railroad ISTEA eligibility. The joint ASLRA and the RRA effort to clarify small railroad ISTEA eligibility goes hand in hand with our joint effort to revise and reinvigorate the Title V Federal Loan Guarantee Program.

  Bruce Flohr, Chairman and CEO of RailTex has discussed the Title V loan proposal in detail. From my perspective, the two programs of assistance we seek mirror the very successful original programs in the 4R Act.

  The Rail Enhancement and Preservation Partnership Act modernizes and revitalizes the loan programs of Title V. Clarification of ISTEA eligibility for short line and regional railroad projects selected by the local communities and States supports the types of projects which used to be funded under the LRFA Program.

  Title V revisions and clarifications of ISTEA eligibility are complementary proposals that serve very different needs. Most short line and regional railroads will be able to benefit from a revised Title V loan program while others, particularly the small ones, quite frankly will not.

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  Continued availability of some kind of cost-sharing grant program is essential for certain types of small railroad projects.

  Thank you.

  Ms. GRANGER. Thank you.

  Just one question. Mr. Howard, in your view, what are some of the ways the Title V Program could assist the regional and short line railroads in making infrastructure upgrades?

  Mr. HOWARD. As an example, in the State of West Virginia, we just discussed the South Branch Valley Railroad which, by the way, those two counties are the lowest unemployment rate counties in the State, we're in the process of buying another 132 miles, the Taggert Junction Subdivision from CSX. It's a $7.5 million railroad.

  We have floated bonds for $3.5 million to purchase this. The remaining amount, we're trying to do it in-kind through the Department of Transportation where our transportation department will take over some of the bridges that CSX and the State now maintain.

  One of the hurdles that we are running into on this in-kind proposal is the State highway legal counsel is looking at it and it seems as though we're getting into a situation where they cannot spend highway funds on railroads, so it's become a matter of a legal question where if we had a different mechanism of getting our funding, there would be a lot more potential for saving these short line railroads and our infrastructure and jobs.

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  Ms. GRANGER. Thank you, Mr. Howard. We appreciate your appearing before us today.

  Mr. BLUMENAUER. Madam Chair, if I may pose a question?

  Ms. GRANGER. Yes.

  Mr. BLUMENAUER. Mr. Howard, I was interested in part of your written testimony where you describe the tradeoff between upgrading track and the impact that it would have had on the road system were you unable to make that modest expenditure.

  I'm curious if you want to just elaborate on that for a moment in terms of not being able to spend road dollars because of constitutional or statutory restrictions.

  Mr. HOWARD. In purchasing this $7.5 million railroad, we had the Department of Transportation to do a study to see how much it would cost us to upgrade the roads in this four county area in order to get the raw materials out which is coal and timber.

  By the way, the coal in this area is some of the lowest sulfur coal in the State of West Virginia which is the half percent to 1 percent sulfur content which will go through the Coal Compliance Act of the year 2000, so obviously there is going to be a market for this.

  The highways found in order to upgrade the roads, instead of making this modest investment on the railroad, it would cost us between $25 and $40 million to upgrade those rural roads in these counties in order to get out our product.

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  Even at that, once you can get the coal out by truck, if it's going any long distance, say in the north east to the utilities, you still have to transload it to a railcar because somewhere along the line, this beautiful compliance coal is still not cost competitive if you're going to try to truck it any distance.

  We feel it's really a good bang for the buck to save the rail infrastructure.

  Mr. BLUMENAUER. Thank you, Mr. Howard. I find examples like that particularly useful when we're trying to think about the reauthorization of ISTEA and we're trying to figure out how all the pieces fit together.

  Your example of where it would have cost five to eight times as much to put this extra burden on the roads, is very useful, and I appreciate your bringing it forward.

  Mr. HOWARD. These kinds of roads, that doesn't even begin to mention the safety factor.

  Mr. BLUMENAUER. Yes, sir.

  Thank you.

  Ms. GRANGER. I apologize for not calling on you.

  Mr. BLUMENAUER. No problem.

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  Ms. GRANGER. Thank you, Mr. Howard. We appreciate it.

  The next witness is from The American Public Transit Association, Mr. Gil Roberts, Executive Director, Tri-County Commuter Rail Authority; accompanied by Mr. William W. Millar, President, American Public Transit Association.


  Mr. ROBERTS. Good afternoon, Madam Chair and members of the committee.

  My name is Gil Roberts. I'm the Executive Director of the Florida Tri-County Commuter Rail Authority, otherwise known as Tri-Rail.

  Tri-Rail is headquartered in Ft. Lauderdale, Florida and we operate a 72-mile, north-south railroad owned by the State of Florida from Miami to West Palm Beach, Florida. The Tri-Rail Corridor parallels Interstate 95 and is a key part of the efforts to reduce I–95 traffic congestion in south Florida.

  First of all, this panel is very interesting to me because in a prior life, I have extensive experience with northeastern freight railroads and I was involved in Section 505 and 511 grant applications. I felt they were very successful grant applications for those railroads. Unfortunately, I see one of the railroads defaulted and the other is still making payments.
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  I'm here today representing the 15 commuter railroads in the United States and the 1,000 other member organizations of the American Public Transit Association. While there are 15 commuter railroads today, I do want you to keep in mind there are some 15 to 20 proposed commuter railroads on the drawing board in some stage around the country.

  Regarding ISTEA reauthorization, generally APTA supports current program structure. We believe the Federal Government should retain a strong role in transportation. There are various items in ISTEA which are important to commuter railroads which I've noted in my written testimony.

  Regarding items within the jurisdiction of the Subcommittee on Railroads, today's hearing on railroad infrastructure provisions of the 4R Act is an outstanding example of the subcommittee's leadership on issues critical to commuter, regional and short line railroads. APTA applauds this committee for their support of commuter railroads and for having a commuter railroad witness here today.

  The Section 505 and 511 loan programs of the 1976 4R Act are generally known for freight railroad capital assistance. What may be less well known is these loan programs were also written with public rail authorities in mind and can also benefit public commuter railroads.

  Commuter railroads, like other forms of mass transit, have great, unmet capital needs. The U.S. Department of Transportation estimates that for all mass transit, capital needs exceed $13 billion annually with $3 billion annually for commuter railroads.

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  Reauthorizing and modernizing the 1970s era 505-511 statutes can help commuter railroads meet these outstanding capital needs and better serve our 360 million annual customers.

  There are occasions where a commuter railroad could use a loan to complete an ongoing capital project for either track or rolling stock. For example, suppose a commuter railroad had or has a full funding grant agreement with the Federal Transit Administration for a 10-year period to build a second track utilizing these FTA grants?

  Recognizing that such FTA grant funds are subject to annual appropriations and the appropriated amount isn't always to the level of what is sought. There are often times that there is an insufficient level of funding and the commuter rail property is not able to meet all their capital needs.

  That's why a 505-511 loan could help a commuter railroad leverage Federal, State and local funds to complete the project in, for example, 3 years, thus reaping the safety and operational benefits much sooner such as by being able to increase train frequency and increase ridership.

  In addition, a reauthorized 501-511 capital program for freight railroads can also benefit commuter railroads. For example, many commuter railroads operate over track owned by freight railroads. It is important to a commuter railroad that track infrastructure be in excellent condition. Bad or poorly maintained track and signals mean passenger delays.

  Accordingly, it is in the direct interest of commuter railroads for a host freight railroad to have access to additional capital resources where it may be needed.
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  Thank you, Madam Chair, and I'll be happy to answer any questions you may have.

  Ms. GRANGER. Thank you.

  You just spoke about commuter railroads operating on track that's owned by a freight railroad. Can you tell me, is it difficult to get the freight railroads to invest in projects that benefit primarily the commuter railroads and do you think Title V could help in providing financing for investments in freight?

  Mr. ROBERTS. To answer the first part of the question, yes, it is. You have to realize that the needs between the freight railroad and the commuter railroad are different. The freight railroads typically may be operating at an operating speed of 30, 40, 45 miles per hour where a commuter railroad will, in all likelihood, be operating at a maximum operating speed of 79 miles a hour, and in some instances, it may even be more than that, 90 miles a hour for a maximum speed.

  The requirements for both track structures are different, so obviously the freight railroad, if they are going to make an investment, they're going to make an investment to serve their own needs with the incremental costs often passed off to the commuter line to pick up that difference in expense.

  I feel that having a program like this available to commuter entities could really start a win-win, almost private-public partnership to address both concerns to maximize that rail line that both the commuter and freight are sharing.

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  Ms. GRANGER. One other question. I don't know whether you were here earlier.

  Mr. Flohr spoke to us and talked about a proposal that would create the option for State and local governments to put up security deposits. Where you here?

  Mr. ROBERTS. Yes, I was.

  Ms. GRANGER. Do you think this type of funding would be beneficial for commuter railroads?

  Mr. ROBERTS. I think it would, to have that option instead of a direct appropriation by the Federal Government, the possible either/or of local participation. You're referencing the State or locals, but Mr. Flohr did make reference to possible private entities in the local areas.

  I know in Ft. Lauderdale, there are developers that are extremely interested in increased commuter operations on the line that we operate, so there is a whole host of possibilities from the private sector to the local government to the State government to help secure that down payment or risk escrow amount that would be required.

  Ms. GRANGER. One last question. This subcommittee has jurisdiction over Federal safety requirements applying to commuter railroads. Many on the subcommittee were particularly concerned about commuter rail safety last year in the wake of the New Jersey Transit accident and the AMTRAK accident in Silver Spring.

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  Do you think that Title V programs could be used to help improve commuter rail safety?

  Mr. ROBERTS. Well, to answer your question, yes. I think there are all sorts of applications that you could use these dollars for. The most critical issue, obviously, relative to commuter and mixed freight operations is the cab signals or lack of cab signals on the various corridors where freight and commuter rail operate together.

  Could these dollars be used for such safety enhancements? Yes, they could. Then you get down to a policy issue as far as is it mandated to have such safety enhancements on those rail corridors.

  I can tell you, in Florida, we have designed or we're in the process of rebuilding our corridor. Our single track main line is 70 miles long with 11 passing sitings. Our goal is to double the rail corridor and in doing that, we are planning to have cab signal, automatic train control systems on our train commuter trains in operation there to address that.

  To answer your question, such a program would be beneficial for such an application.

  Ms. GRANGER. Good. Thank you very much, Mr. Roberts. I appreciate your being here.

  Mr. ROBERTS. Thank you, Madam Chair.

  Ms. GRANGER. I was just told the record will remain open for 30 days for the opportunity for additional questions.
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  Thank you very much. We are adjourned.

  [Whereupon, at 3:34 p.m., the subcommittee was adjourned, to reconvene at the call of the Chair.]

  [Insert here.]









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MARCH 18, 1997

Printed for the use of the

Committee on Transportation and Infrastructure


BUD SHUSTER, Pennsylvania, Chairman

THOMAS E. PETRI, Wisconsin
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HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
JOHN L. MICA, Florida
SUE W. KELLY, New York
RAY LaHOOD, Illinois
FRANK RIGGS, California
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
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ROY BLUNT, Missouri
JOSEPH R. PITTS, Pennsylvania
JOHN R. THUNE, South Dakota
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma

NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
ROBERT E. WISE, Jr., West Virginia
BOB CLEMENT, Tennessee
ROBERT E. (BUD) CRAMER, Jr., Alabama
ELEANOR HOLMES NORTON, District of Columbia
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PAT DANNER, Missouri
JAMES E. CLYBURN, South Carolina
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
BILL PASCRELL, Jr., New Jersey
JAY W. JOHNSON, Wisconsin
JAMES P. McGOVERN, Massachusetts

Subcommittee on Railroads

SUSAN MOLINARI, New York, Chairwoman
KAY GRANGER, Texas, Vice Chairwoman
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BOB FRANKS, New Jersey
JOHN L. MICA, Florida
JOSEPH R. PITTS, Pennsylvania
JON D. FOX, Pennsylvania
BUD SHUSTER, Pennsylvania
(Ex Officio)

ROBERT E. WISE, Jr., West Virginia
ROBERT A. BORSKI, Pennsylvania
BOB CLEMENT, Tennessee
BOB FILNER, California
(Ex Officio)


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  Flohr, Bruce, CEO, Railtex Corporation, on behalf of the Regional Railroads of America and the American Short Line Railroad Association

  Howard, Leo, Chairman, West Virginia State Rail Authority, and the South Branch Valley Railroad, accompanied by William E. Loftus, President, the American Short Line Railroad Association

  Molitoris, Jolene M., Administrator, Federal Railroad Administration, U.S. Department of Transportation

  Roberts, Gilbert M., Executive Director, Florida Tri-County Commuter Rail Authority, on behalf of the American Public Transit Association, accompanied by William W. Millar, President, American Public Transit Association


  Flohr, Bruce

  Howard, Leo

  Molitoris, Jolene M

  Roberts, Gilbert M

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  Molitoris, Jolene M., Administrator, Federal Railroad Administration, U.S. Department of Transportation, letter to Rep. Boehlert, April 11, 1997

  Roberts, Gilbert M., Executive Director, Florida Tri-County Commuter Rail Authority, on behalf of the American Public Transit Association, accompanied by William W. Millar, President, American Public Transit Association, railroad law