CA: Santa Cruz County RTC to review deal separating it from current operator without litigation

Staff at the Santa Cruz County Regional Transportation Commission have struck a deal to facilitate a “smooth and orderly” transition of common carrier obligations for the Santa Cruz Branch Rail Line and will seek formal approval from the commission’s board at its meeting Thursday.

The meeting’s consent agenda also discloses a pair of letters exchanged between the commission and Roaring Camp Railroad in which the agency’s leaders attempt to alleviate concerns Roaring Camp raised about impacts it could suffer due to proposed strategies for continued Coastal Rail Trail development.

As part of an effort to reassert control over the rail line’s right of way so it can advance priority transportation projects, the commission moved to cut ties with the current operator, Saint Paul and Pacific Railroad, a subsidiary of Progressive Rail Inc., in January. The commission was seeking to declare a portion of the line temporarily inoperable so it could establish a bicycle and pedestrian trail at the center of the corridor while preserving ongoing freight operations in South County as well as recreational use by Roaring Camp Railroads in North County and passenger rail service long term.

Saint Paul and Pacific would not agree to the plan, causing the commission to terminate its contract with the operator prematurely in February. While the Minnesota-based rail company initially refused to cooperate in the termination process and raised the possibility of litigation, the commission’s staff wrote that earlier this month it was able to negotiate terms for a separation agreement and mutual release that would effectively end their ties.

To further its cause, the commission agreed at its March 19 meeting to form a nonprofit rail subsidiary called Santa Cruz County Coastal Rail. The nonprofit could assume common carrier status and operational responsibility, while leaving it the option to subcontract another organization to manage freight operations in Watsonville.

The termination agreement, as proposed to the commissioners in an agenda report published ahead of a 9 a.m. meeting Thursday, would require Saint Paul and Pacific to transfer operations and common carrier obligations to a new rail operator for the southern portion of the line from Milepost 0.433 to Milepost 3, where freight operations are still active. The current operator would also have to file for discontinuance of the rail line from Milepost 3 to Milepost 31.39, and cooperate in transferring the freight easement and related documents to the new operator and the commission’s newly created rail subsidiary. This process would be subject to review and approval by the federal Surface Transportation Board.

Discontinuance of rail service is a temporary status relieving the carrier of its common carrier obligations on a line while keeping the line contingent upon federal Surface Transportation Board jurisdiction and preserving the line for future reactivation for freight service, commission staff wrote. This designation would allow for implementation of the Coastal Rail Trail segments from Santa Cruz to Aptoswhile the commission pursues the Zero Emission Passenger Rail and Trail project long term. It would also let existing services in Watsonville and Santa Cruz continue uninterrupted, the commission’s staff reasoned.

According to the agenda report, Saint Paul and Pacific will be compensated $450,000 to carry out the obligations of the agreement, which will be paid in three installments of $150,000. The funds will come from the Santa Cruz County Coastal Rail Trail Segment 10 and 11 project right-of-way funds.

To complete the administrative maneuver, commission staff have also recommended a new organization that could take over common carrier obligations in South County, referred to as the “Watsonville Branch Line,” so freight use can continue without issue.

After releasing a request for proposal from potential new operators, the commission carried out a review, conducted interviews and has recommended awarding the new operator agreement along the Watsonville Branch Line to Mississippi-based Chicago Rock Islandand Pacific Railroad LLC. The company would become responsible for operations and customers between Milepost 0.433 and Milepost 3 and the agreement would last for a 10-year period.

Letter exchange

Including within the commission’s consent agenda, which is typically adopted in one motion and only lightly discussed, are a pair of letters exchanged between commission leadership and Roaring Camp Railroads.

The correspondence began with a March 3 letter from Roaring Camp CEO Melani Clark expressing several concerns about the commission’s plans to establish at least three segments of the Coastal Rail Trail — where the rail tracks currently run — and the impacts of those plans on Roaring Camp’s operations.

Specifically, Clark expressed fear that the commission’s pursuit of trail construction could cut off Roaring Camp’s Felton Branch Linefrom the national railroads network, disrupt potential freight service along the Santa Cruz Branch Rail Line and interfere with the company’s ability to move two locomotives it owns from Watsonville to Felton where they can be added to Roaring Camp’s fleet.

“Before taking any action towards discontinuance or embargo, the RTC must disclose and quantify the financial burden it is creating for the future implementation of rail service through removal or coverage of trackways and any other measures that will require additional construction or property acquisition to restore rail service,” Clark wrote.

Commission Executive Director Sarah Christensen responded to Clark in a March 27 letter that attempted to alleviate Clark’s concerns and clarify “the factual record.”

Christensen wrote that the commission remains committed to the long-term vision of preserving the rail corridor’s right-of-way for future freight and passenger rail service that is integrated with a multimodal trail. She added that the commission has not initiated abandonment proceedings, nor has it taken action to permanently remove the corridor from potential rail use.

No freight shipments have moved between the Santa Cruz Branch Rail Line and Felton Branch since approximately 2010, according to Christensen. Due to the apparent lack of freight service demand north of Watsonville in an environment of scarce grant funding opportunities, Christensen wrote that the commission can’t commit financial resources to rebuild sections of the line that have long been in suboptimal condition for non-existent freight service.

“Our shared interest should be preserving the corridor responsibly, protecting future rail opportunities, and ensuring that public resources are used prudently to serve the broader community,” Christensen wrote.

Regarding the locomotive issue, Christensen wrote that, “RTC remains open to discussing practical and legally compliant options within the constraints of infrastructure condition, funding availability, and regulatory requirements.”

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