Madison Railroad

Perseverance kept Madison Railroad
alive in lean years

By Ruth Wright
Staff Writer

MADISON, Ind. (January 2003) – This year, Madison Railroad, a part of Indiana’s first railroad, will celebrate its 25th anniversary as a city-operated entity.
The City of Madison Port Authority became the designated operator of the railroad in September 1978 after the Public Service Commission (now known as the Utility Regulatory Commission) approved the city’s petition to run the railroad, according to the railroad’s attorney, Spencer J. Schnaitter.

Train Engine

The Madison Railroad

At that time, the railroad was still owned by Penn Central and had been previously operated by Conrail after Penn Central declared bankruptcy. In 1976, Madison Railway, a private company, was selected to succeed Conrail to operate the railroad with the help of government subsidies under the Railroad Revitalization and Regulatory Reform Act of 1976. However, in 1978, the Public Service Commission, which administered the subsidies, decided to discontinue assistance to Madison Railway due to conflicts with the company.
It was during this time that officials in Madison began to consider operating the railroad in order to maintain service to the city. Schnaitter was asked by city officials to represent the railroad and assist with the petition and hearing. Schnaitter said that while serving as a state legislator in the late 1970s, he drafted a bill with the assistance of state Sen. Wilfred Ulrich, a Democrat from Aurora, Ind., that would allow a city municipal port authority to operate a short line railroad not to exceed 50 miles in length.
The bill, which passed in both the house and the senate in 1977, gave the City of Madison Port Authority the right to operate the railroad if its petition was granted, said Schnaitter. After a three-day hearing in Indianapolis, the Madison Port Authority was granted the right to operate the railroad, which it leased from Penn Central for around $20,000 per month. Schnaitter said that although the city had not entered into the operation with the intent of purchasing the railroad, it became apparent after some time that it was worth considering.
Part of that decision was based on the fact that the city was already paying an exorbitant amount, more than $200,000 a year, just to lease the track from Penn Central. That fact, coupled with the notion that government subsidies would lend support to the operation, motivated the city in 1981 to enter into negotiations with Penn Central to purchase the track. After much negotiation, the city made a final offer to purchase the railroad from the company for $600,000. However, Penn Central would not accept the offer, contending that the railroad was worth much more.
Due to Penn Central’s uncompromising position, in 1981 the city filed a condemnation suit against Penn Central under the Right of Eminent Domain. The railroad company requested a change of venue, and the case was transferred to Scott County, Ind., where, after several procedural challenges were decided in the port authority’s favor, the court ordered the track between Madison and North Vernon condemned. That ruling meant that the railroad could then be appraised and the appraised value paid into the courts for its purchase by the City of Madison Port Authority.

Cathy Hale

Cathy Hale, Madison Railroad director

Penn Central appealed the purchase price, and the court set the matter for jury trial. It wasn’t until March 1984, after a seven-day trial, that a Scott County jury approved a final purchase price of the railroad of $307,000. Penn Central’s evidence had exceeded $1 million, Schnaitter said.
Jerry Thaden, chairman of the board of directors of the City of Madison Port Authority, has been involved with the railroad for about 30 years, including time he spent on an advisory committee that oversaw the purchase of the railroad. Thaden said that the city was fortunate to acquire the railroad, with the assistance of Schnaitter, for a fraction of what they had initially agreed to pay.
Once the city got possession of the railroad, improvements and repairs were made as subsidies and funds became available. However, in the early 1980s the federal government drastically cut railroad subsidies, leaving the City of Madison Port Authority to contend with financial struggles.
For several years, conceded Thaden, the railroad was primarily a maintenance operation with a modest amount of freight service. But with the help of local industries and local and state governments, the railroad was able to maintain operations through times of economic uncertainty. Thaden said city officials determined that the railroad was worth saving as an important transportation link to Madison, which is not close to an interstate highway and doesn’t have an operational port on the river. Economic development officials also deemed the railroad important to the area.
Whether the railroad actually does benefit the community has been the source of public debate. Some have questioned whether the railroad makes any measurable contributions, in light of the major subsidies which have kept it afloat. Others say the railroad is a drain on community resources. Critics cite the need for continual financial assistance from city and county government and private companies to maintain operations.
Proponents of the railroad, however, say things have changed. According to Madison Railroad CEO Cathy Hale, the new century has witnessed the economic independence of the railroad. In fact, besides not needing funding from the city for the past two years, in 2002 the railroad contributed $7,000 to the City of Madison and $3,500 to Jefferson County, a modest amount by most standards but evidence nonetheless that the railroad made a profit.
Hale and railroad supporters also contend that the operation provides a valuable economic contribution to the city by attracting and retaining industry. One of the railroad’s biggest freight clients, the Madison manufacturing company of Meese-Orbitron-Dunne, supports such a theory. Marilyn Flancher, purchasing manager for the manufacturer, said that the company uses the railroad service to obtain resin pellets, which they use in a rotational molding process at the plant. Flancher said that access to rail service is important to her company because it keeps the price per pound of resin down due to the large amount that can be brought in on rail car.
For example, a single rail car can transport 190,000 pounds of the resin pellets, compared to a truck, which can carry only 40,000 pounds. The ability to purchase the resin in such large quantities is a major advantage, Flancher said.
Another advantage is convenient scheduling. Due to the volatile price of resin, sometimes the company nearly depletes their supply before ordering more. “The railroad is really good about making sure we have the shipment when we need it,” Flancher said.
Hale added that the railroad gives companies an alternative to trucking, and this keeps transportation prices competitive. “Nobody wants to be held captive to trucks,” said Hale.
Although the railroad no longer needs subsidies from the city and county, Hale said she still occasionally applies for grants for which the railroad may qualify. The most recent grant was completed a year and a half ago for $2.7 million. It was provided through Transportation Enhancement Application in the 21st Century (TEA-21), Federal Highway Administration, Economic Development Administration, U.S. Department of Commerce Industrial Rail Service Fund, Multimodal Division and the Indiana Department of Transportation. As a result of the grant, the railroad was able upgrade and improve the track.
A large part of the railroad’s recent success can be attributed to its location at Jefferson Proving Ground, just north of Madison. In 1997, the railroad acquired a 10,000-square-foot engine house at the former U.S. Army installation, as well as 17 miles of track and a perpetual easement for the land beneath it and approximately 10 miles of track that the railroad uses for storage. The railroad was the first entity to have a deed to property at the proving ground.
According to Hale, acquiring the facility at JPG was a definite coup for the railroad. To reproduce the building itself, which features a 15-ton overhead crane, would cost at least a half million dollars, and the scrap value of the rail alone is approximately $400,000, said Hale. Additionally, the storage space at JPG accounts for approximately 50 percent of the railroad’s income, a substantial portion.
Hale credits the income from the storage space with the railroad’s financial rebound. She said that the railroad has an average of nearly 900 empty cars in storage at any given time. The cars are clean and contain no hazardous materials, Hale added.
Now that the railroad seems to be on more level financial footing, it faces yet another predicament: the struggle to meet the heavy axle-load challenge. Hale is a governor’s appointed rail representative for the State of Indiana and part of the American Short Line and Regional Railroad Association. She said that means that Madison Railroad and other short line and regional railroads in the state face the challenge of upgrading the infrastructure, particularly bridges, to support higher-capacity rail cars.
Madison Railroad, whose track crosses five major bridges, has a 263,000-pound capacity rating, which would not meet standards for 286,000-pound capacity cars that could soon become the industry norm. Upgrading the track to support heavier rail cars would involve major capital expenditures.
Frank Turner, president of the American Short Line and Regional Railroad Association, said the 286,000-pound capacity cars are “the darkest cloud on the short line and regional railroads’ horizon.”
Hale said that Class I railroads, such as CSX Transportation Inc. and Norfolk Southern Corp, already have adopted the 286,000-pound capacity rating but that the 263,000-pound rating is typical for short line railroads in the state. According to the Indiana Railroad Transportation Group, Indiana has 39 short line and regional railroads and five major rail systems.
Today, Madison Railroad has five employees, including Hale; Casey Goode, office manager; Terry Fletcher, engineer; Robert Griffin, engineer; and Chris Brawner, engineer-in-training. A Department of Corrections crew maintains the track for the railroad.

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