Madison officials insist that line lures industry, jobs
By DAVID McGINTRY
Madison, Ind. - As railroads go, the publicly owned Madison Railroad
doesn't go far - only about 26 miles from this lovely Ohio River community
to North Vernon, where it connects with a major rail line run by CSX Corp.
But those 26 miles, say Madison officials, are vital to the city's efforts to lure and keep major businesses.
That short stretch is also something else - a multimillion-dollar drain on the public purses.
The railroad, which is lightly used for transporting goods and has been operated as a public line for 19 years, has never broken even. Every year it loses money, and every year it is kept alive by contributions and grants from local, state and federal governments.
The railroad has become a public issue in Madison, where William Helton, a former railroad official who is now a consultant on short-line railroads, has circulated a petition calling for removal of the railroad's management and board of directors because of the money the line has lost.
In the last year, two of the railroad's five employees have quit. One of them, Jeff Lockridge, said he and other employees had begun to doubt the usefulness of the railroad.
For Years we've wondered, "why are we still here?"
Madison officials defend the management of the railroad.
Mayor Al Huntington, who appoints the nine members of the board that oversees the railroad, said he has confidence in the operation. "I think they do a good job," he said.
During the last 10 years, the city of Madison has pumped about $450,000 into the railroad. Since 1993, the government of Jefferson County has kicked in another $56,000, and North Vernon, in neighboring Jennings County, has given about $48,000.
In 1995, the last year for which financial statements are available, the railroad received $569,000 in grants from the federal government and the state of Indiana. That money, used to rehabilitate deteriorating bridges and rail, was obtained even though the railroad may not have met the eligibility requirements for grants.
Without these contributions and subsidies, the railroad would be in dire straits, if not defunct. State audits from 1986 through 1995 show the expenses of running the railroad exceeded the money it made from operations by more than $2 million.
Yes the subsidies support a rail line that is little used, especially by madison businesses. At the moment the line has only two customers, Meese Orbitron Dunne, which makes plastic products in Madison, and Sonoco Plastics in North Vernon. According to the railroad's figures, since 1990 it has handled from 209 to 321 carloads a year - an average of roughly four to six cars a week.
IN A YEAR, only about 20 of those carloads actually travel between Madison and North Vernon. The remaining carloads, more than 90 percent of the line's annual traffic, travel only the mile and a half of track in North Vernon that connects Sonoco to the CSX line.
The citizens of Madison and Jefferson County have contributed between $40,000 and $70,000 annually to a rail line that, on average, transports less than one car every two weeks in their county.
Because, Madison officials say, the line helps keep jobs in or brings jobs to the city. Although they have done no studies to verify the railroad's economic value to the community, officials say that in the last 10 years several businesses have located in town that would not have come had there not been railroad service.
The most recent, Century Tube, which makes steel tubing, will bring about 100 jobs to Madison and invest $10 million in a local plant, said Jan Vetrhus, executive director of the city-county industrial development corporation.
"When they were doing their search (for possible locations), they had to have rail, and they had to have barge." Huntington said. "Had we not had rail, we would not even have been considered."
Century Tube will not use the railroad initially, but its presence "was certainly a major factor in our considerations," said Gary Reynolds, Century Tube's vice president for operations.
Huntington and others say companies want rail lines nearby because the lines give them added leverage when negotiating rates with other haulers.
"It gives companies a bartering chip, if you will, in dealing with trucking haulers," said David Koenig, executive director of economic development for Jennings County.
Thanks to the railroad, Jennings County and North Vernon have two major companies, Sonoco and Lowe's, Koenig said.
Sonoco, a manufacturer of plastic products that employs about 230, is the track's best customer.
Lowe's a major retailer of building materials, built a distribution center in North Vernon in 1983 that employs about 600. It does not use the track but would not have located in North Vernon if it had not had rail access, according to company spokesman David Oliver.
| James Papke, an economic-development expert at Purdue
University, said there are methods for determining the economic value of
a rail line to a community, but he does not find the arguments made for
the Madison Railroad persuasive. "So much of it is based on subjective
judgment," Papke said. "The business says, 'I have to have it,' and
then the municipally says they have to have it in order to get more business,
but nobody really knows. You have to find some objective measure."
The best measure of whether a railroad is important to a company, Papke said, is simple --- does the company use it? "It's the height of absurdity to say, "We don't use the railroad, but we located here because it was there.' " he said. "That's specious reasoning, at best, and has no merit."
The rail line used to belong to Penn Central, which was going to shut it down when, in 1978, Madison leased it to keep it going. In 1984 the city acquired the line by condemnation, and has owned it since.
IN A SIMILAR CASE, Perry and Spencer counties united several years ago to take over a rail line between Cannelton and Lincoln City that was going to be abandoned. That railroad, which owns 20 miles of track and leases another 23, provides a link between a riverport in Tell City and the Norfolk Southern rail system.
|THE RAILROAD'S apparent failure to obtain guarantees of enough
new business may mean it obtained grant money for which it was not eligible.
Indiana Department of Transportation officials have refused to provide
documents that might clear up the matter, and Federal Railroad Administration
officials are still considering a Courier-Journal request to examine the
It is not certain whether the railroad would have to return any grant money for which it did not quality.
Railroad officials have said they would need two to three times their current business to break even. Whether they have any expectation of reaching that goal is a mystery. According to an article last Oct. 25 in the Madison Courier, Hale said she was confident the railroad would be self-sufficient within a year.
This article appeared June 30, 1997 in The Courier-Journal
and is reprinted here with their permission.
Copyright 1997. All rights reserved.