kept Madison Railroad
alive in lean years
MADISON, Ind. (January 2003) This year, Madison
Railroad, a part of Indianas 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 citys
petition to run the railroad, according to the railroads attorney,
Spencer J. Schnaitter.
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 Centrals 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 authoritys 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.
Hale, Madison Railroad director
Penn Central appealed the purchase price, and the court
set the matter for jury trial. It wasnt 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 Centrals 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 doesnt 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 railroads 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,
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 railroads 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 railroads income, a substantial portion.
Hale credits the income from the storage space with the railroads
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 governors 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
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
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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