HB-4004, As Passed House, February 17, 2011

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 4004

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1976 PA 295, entitled

 

"State transportation preservation act of 1976,"

 

by amending section 10 (MCL 474.60), as amended by 2008 PA 570.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 10. (1) In weighing the varied interests of the residents

 

of this state, the department shall give consideration to the

 

individual interest of any person, public or private corporation,

 

local or regional transportation authority, local governmental

 

unit, private carrier, group of rail users, state agency, other

 

public or private entity, including a port authority established

 

under the Hertel-Law-T. Stopczynski port authority act, 1978 PA

 

639, MCL 120.101 to 120.130, or any combination of these entities,

 

expressing a desire to acquire or lease or secure an easement for

 

the use of a portion or all of the real property owned by a

 


railroad company. The property acquired by the department under

 

this act may be conveyed or leased to an entity or combination of

 

entities listed in this subsection with appropriate reimbursement,

 

as determined by the department.

 

     (2) The department may begin divestiture or offer 10-year

 

leases to the current operator of the properties described in this

 

subsection within 180 days after July 3, 1998. Except as otherwise

 

provided in this act, the department shall accomplish divestiture

 

or create leases, without partitioning a segment or a portion of a

 

segment, in the following order from the smallest segment first to

 

the largest segment last, of the following defined segments of

 

state-owned rail property:

 

     (a) Lenawee county system means the rail lines owned by the

 

state between Adrian and Riga, between Grosvenor and River Raisin

 

and Lenawee Junction.

 

     (b) Hillsdale county system means the rail lines owned by the

 

state between Litchfield and the Indiana state line and between

 

Jonesville and Quincy, excluding that portion of the segment

 

located in Jonesville from Beck street to the St. Joseph river.

 

     (c) Vassar area system means the rail lines owned by the state

 

between Millington and Munger, between Vassar and Colling, and at

 

Denmark Junction.

 

     (d) Ann Arbor and Northwest Michigan system means the rail

 

lines owned by the state between Durand and Ann Arbor, between

 

Owosso and Thompsonville, between Cadillac and Petoskey excluding

 

the portion of the segment located in Petoskey north of Emmet

 

street, between Walton Junction and Traverse City, between Grawn

 


and Williamsburg, and between Owosso and St. Charles.

 

     (3) The specific terms of a sale will be as determined by the

 

department except for the following required conditions:

 

     (a) Each purchase agreement shall require that the purchase

 

price shall be not less than the net liquidation value of the rail

 

line or lines.

 

     (b) Each purchase agreement shall require that the purchaser

 

provide at a minimum the average level of service adjusted for

 

traffic levels for 3 years after the date of sale unless otherwise

 

mutually agreed upon between the purchaser and shippers that

 

existed on that line on July 3, 1998, and that rates on the segment

 

purchased from the state will not increase more than the average

 

percentage increase in the Detroit consumer price index for the 12-

 

month period each year for the base rate in effect on January 1,

 

1996 for 3 years after the date of sale.

 

     (c) Trackage in the segments sold by the state shall be

 

maintained at not less than the federal railway administration

 

class of track standards for each segment as of January 1, 1998.

 

     (d) In the case of the sale of the segment described in

 

subsection (2)(d), the purchaser shall be required to charge

 

reasonable freight rates for that section between Durand and Ann

 

Arbor and honor all existing freight rate agreements and trackage

 

rights for 3 years after the date of sale.

 

     (e) Any existing lease or agreement for operation of a segment

 

in effect on July 3, 1998 shall be extended at the same terms and

 

conditions until a sale or lease is executed.

 

     (4) If there are no acceptable offers to purchase, the

 


property shall be offered for a lease of not less than 10 years, by

 

the department to the following parties in descending order:

 

     (a) Current operator.

 

     (b) Current shippers on that segment.

 

     (c) Governmental entities.

 

     (d) Other railroad companies.

 

     (5) If the purchaser or lessee fails to comply with the

 

conditions of sale or lease, the property shall revert back to the

 

department and shall then be offered for sale or lease to the

 

following parties in descending order:

 

     (a) Current shippers on that segment.

 

     (b) Governmental entities.

 

     (c) Other railroad companies.

 

     (6) Before the execution of a purchase agreement, the

 

potential purchaser shall submit to the department its most recent

 

financial statement and a proposed operation plan including

 

tributary lines and including known potential sublease agreements.

 

As used in this subsection, "tributary lines" means spur rail lines

 

that only intersect with a rail line owned by the state on July 3,

 

1998.

 

     (7) If during the first 10 years after purchase the purchaser

 

abandons service and sells the segment or any portion of the

 

segment that does not involve main line track, or any rails, ties,

 

or ballast, excluding normal salvage, 95% of the proceeds from the

 

sale shall be returned to the state as additional purchase price. A

 

segment or a portion of a segment may be sold with the approval of

 

the department.

 


     (8) A party aggrieved by the performance or failure to perform

 

under the terms of a purchase agreement may bring an action in the

 

circuit court where the party resides or where the property is

 

located for appropriate relief.

 

     (9) The specific terms of a lease will be as determined by the

 

department except for the following required conditions:

 

     (a) Each lease agreement shall require that the lessee provide

 

at a minimum the average level of service adjusted for traffic

 

levels for 3 years after the date of the lease agreement unless

 

otherwise mutually agreed upon between the lessee and shippers that

 

existed on that line on the effective date of the amendatory act

 

that added this subsection, and that rates on that segment leased

 

from the state will not increase more than the average percentage

 

increase in the Detroit consumer price index for the 12-month

 

period each year for the base rate in effect on January 1, 1996 for

 

3 years after the date of the lease.

 

     (b) Not less than 50% of trackage rights revenues shall be

 

reinvested in eligible expenditures. As used in this subdivision,

 

"eligible expenditures" includes the material and direct expenses

 

required for the installation of railroad ties, track, ballast,

 

crossing improvements, ditch and drainage repair or improvements,

 

brush trimming, and the expenses required to conduct track and

 

signal inspections as specified in federal regulations.

 

     (c) Trackage in the segments leased by the state shall be

 

maintained at not less than the federal railway administration

 

class of track standards for each segment as of January 1, 1998.

 

     (d) In the case of a lease of the segment described in

 


subsection (2)(d), the lessee shall be required to charge

 

reasonable freight rates for that section between Durand and Ann

 

Arbor and honor all existing freight rate agreements and trackage

 

rights for 3 years after the date of sale.

 

     (10) A party aggrieved by the performance or failure to

 

perform under the terms of a lease agreement may bring an action in

 

the circuit court where the party resides or where the property is

 

located for appropriate relief.

 

     (11) Upon acquisition of a right-of-way, the department may

 

preserve the right-of-way for future use as a railroad line and, if

 

preserving it for that use, shall not permit any action which would

 

render it unsuitable for future rail use. However, if the

 

department determines a right-of-way or other property acquired

 

under this act is no longer necessary for railroad transportation

 

purposes, the department may preserve and utilize the right-of-way

 

for other transportation purposes or may dispose of the right-of-

 

way or other property acquired under this act for the purposes

 

described in section 6, or may dispose of or lease the right-of-way

 

or other property for other purposes, as appropriate. However, the

 

department shall not dispose of or lease a right-of-way without

 

first offering to transfer the right-of-way to the department of

 

natural resources. If the department of natural resources desires

 

to lease or purchase the right-of-way, the department of natural

 

resources must indicate their desire within 60 days and accept the

 

offered transfer within 1 year after the offer is made. If the

 

department of natural resources does not indicate their desires

 

within 60 days, the department may dispose of or lease the right-

 


of-way as otherwise provided for in this act. If the department of

 

natural resources does not accept the offered transfer within 1

 

year after indicating their desire to lease or purchase the right-

 

of-way, the department may dispose of or lease the right-of-way as

 

otherwise provided for in this act. When appropriate, a right-of-

 

way or other property shall be transferred or leased to a public or

 

private entity with appropriate reimbursement, as determined by the

 

department.

 

     (12) In preserving a right-of-way for future rail use, the

 

department may do 1 or more of the following:

 

     (a) Develop the right-of-way for use as a commuter trail where

 

the use is feasible and needed or lease the right-of-way to a

 

county, city, village, or township expressing a desire to develop

 

the right-of-way as a commuter trail. The lease shall be for an

 

indefinite period of time, cancelable by the department only if the

 

right-of-way is needed for rail usage. The trails, unless leased to

 

a county, city, village, or township, shall remain under the

 

jurisdiction of the department.

 

     (b) Transfer, for appropriate reimbursement, the right-of-way

 

to the department of natural resources for use as a Michigan

 

trailway pursuant to part 721 of the natural resources and

 

environmental protection act, 1994 PA 451, MCL 324.72101 to

 

324.72113 324.72115, if the deed includes restrictions on the use

 

of the property that assure that the property remains viable for

 

future rail usage, and includes a clause that provides that the

 

department of natural resources shall transfer, for appropriate

 

reimbursement, the right-of-way to the department, upon a

 


determination of the director of the department that the right-of-

 

way is needed for use as a railroad line.

 

     (c) Lease the right-of-way to the department of natural

 

resources, or upon approval of the department of natural resources,

 

to a county, city, village, or township for use as a recreational

 

trail. The lease shall be for an indefinite period of time,

 

cancelable by the department only if the right-of-way is needed for

 

rail usage. A recreational trail shall be reserved for non-

 

motorized forms of recreation or snowmobiling only. Snowmobiling

 

shall not be allowed on more than 50% of the mileage of the

 

recreational trails established pursuant to this act.

 

     (d) In cases where a trail serves both a significant commuter

 

and recreation function, authorize the joint development of the

 

trail by the department and the department of natural resources, or

 

the department and any interested county, city, village, or

 

township. Administration of the trail shall be determined jointly

 

by the department and the department of natural resources.

 

     (13) As a term of conveyance, the department may require

 

restrictions on the use of the property that assure that the

 

property remains viable for future rail use and that the rail line

 

is made available by the purchaser for future freight or passenger

 

rail uses and that the property shall revert to the department if

 

the purchaser fails to maintain the property so that it remains

 

viable for future rail use.