IDA tax cuts keep railroad on track

By CHARLIE BUTERBAUGH

MONTICELLO, NY — Survival of the 125-mile Port Jervis short line, something investors say is doubtful without significant cuts in the railroad’s property taxes, could become a tale of triumph.

Along its route from Port Jervis to Binghamton, NY, the line curves along the Upper Delaware River, serving manufacturing sites in Sullivan County that employ about 70 people. But a new investor is hopeful that the line will eventually play a larger role in the northeast transportation industry and perhaps even grow the local agricultural economy.

The first step for the short line’s new operator, Central New York Railroad Corporation, however, will be to bring the railroad up to snuff, and to do that, the company has requested property tax relief from three counties.

The Sullivan County Industrial Development Agency (IDA) voted on February 18 to shrink the payments Central New York will owe to Sullivan County, four townships and the Sullivan West Central School District over the next five years, giving the corporation a boost in the direction of railroad development.

Nathan Feno, general counsel for the New York Susquehanna and Western Railway Corporation (Susquehanna), said Central New York’s lease of the short line from Norfolk Southern would not be viable were the IDA to reject the tax abatement proposal. Central New York is an affiliate of Susquehanna (both are subsidiaries of the Delaware Otsego System).

The IDA’s approval, which was unanimous, will be effective only once the Broome County IDA joins Delaware and Sullivan counties in support of the abatements. If all three affected counties approve the measure, the sum of lost revenues in Sullivan County from 2005 through 2009 would equal $293,511 (see table at right). The Broome County IDA is expected to vote on Thursday, February 24.

The New York State Legislature passed the Railroad Ceiling Law in 2002, which would have reduced taxes on the short line each year until 2009, though not as fast as Central New York’s plan under the IDA.

During a public hearing held last Thursday in Callicoon, NY, a resident plainly asked Feno about the purpose of the tax abatements. Feno replied, “To keep this line—to maintain and improve it so it can continue and hopefully improve its business.”

The 125-mile short line was not particularly important for Norfolk Southern, Feno said, adding that the last time major work was done on the railroad’s ties was in 1970.

“[The line] will be of much more importance than it was to Norfolk Southern, which owns 30,000 miles of railroad and contracts with companies like Ford Motor Company,” Feno said.

“One of the things I can guarantee is that we will be seeking state funding for this line,” he said.

Beyond the importance Feno and Central New York’s chairman and CEO Walter Rich assign to the short line, the passageway is vital to Forestburgh resident Eugene Blabey, chairman and CEO of the Western New York and Pennsylvania Railroad, which constitutes the western end of the Port Jervis line.

“I don’t want to see the Erie Railroad truncated in any way,” Blabey said, offering that his business would suffer if the IDA did not support Central New York.

In order to further reduce costs, Feno said Central New York has already applied to the Federal Railroad Administration for permission to eliminate the line’s train signal system, which is not an automobile traffic signal system but one that alerts locomotive operators about oncoming trains.

Feno described the system as “high maintenance” and said it “does not have a cost benefit from a safety standpoint.” He said it costs $300,000 per year to maintain the signal system on the 125 miles of tracks.

Blabey said, “If you’re concerned about safety, the replacement of the ties and dealing with the railroad’s substructure is a critical issue and a safety issue.

“You should be spending about $10,000 per mile per year to maintain a track.”

Feno said it is difficult to believe the fast pace at which the railroad freight business has advanced over the past few years.

“If you told me we would be handling the business we’re now handling three yars ago, I wouldn’t have believed you,” he said about the Susquehanna, particularly the lines that run through New Jersey.