Preservation of the Santa Cruz Branch Rail Line
Following is the text of a memo from Guy Preston, Executive Director of the Santa Cruz County Regional Transportation Commission. The memo was included in the agenda for the September 2, 2021 meeting.
In the memo, Mr. Preston methodically documents the options available for the future of the Santa Cruz Branch Rail Line. A clear description of railbanking is included and how it might be used on the branch line.
This memo makes it clear that railbanking is not simply an option but a requirement if we are to preserve the corridor.
Also read Railbanking on the Santa Cruz Branch Rail Line.
AGENDA: September 2, 2021
TO: Santa Cruz County Regional Transportation Commission
FROM: Guy Preston, Executive Director
RE: Preservation of the Santa Cruz Branch Rail Line
RECOMMENDATION
Staff recommends that the Santa Cruz County Regional Transportation Commission (RTC) receive this informational item on preservation of the Santa Cruz Branch Rail Line (SCBRL).
BACKGROUND
Purchase of the SCBRL / Freight and Recreational Passenger Rail Service
The Santa Cruz Branch Rail Line (SCBRL) is a 32-mile long federally regulated freight railroad between Pajaro and Davenport. RTC purchased the SCBRL land and assets from Union Pacific in 2012. At the time of purchase, active freight on the line was declining and the line was falling into a state of disrepair with serious neglect to its 37 bridges and over 100 culverts and grade crossings.
RTC did not purchase the freight easement. A 20’ wide freight easement (centered on the existing tracks) was transferred directly by Union Pacific to a new short line freight operator (Santa Cruz & Monterey Bay Railway/Iowa Pacific), who became the Surface Transportation Board (STB) designated common carrier assuming the legal obligation of providing freight services to customers on reasonable demand. Iowa Pacific agreed to maintain the freight easement portion of the SCBRL in exchange for the rights to operate freight and recreational service as part of an Administrative Coordination and License (ACL) agreement with RTC.
The STB is the federal agency with regulatory jurisdiction over the interstate freight railroad network. The STB approved the purchase of the SCBRL by RTC, approved the transfer of the SCBRL freight easement, determined that RTC would not be considered a common carrier of the SCBRL (subject to the freight easement) by RTC, and approved entry into the ACL Agreement.
During Iowa Pacific’s tenure as Common Carrier, the line continued to deteriorate, and Iowa Pacific became non-responsive. In 2017, serious storm damage put the line out of service, a few miles north of Watsonville. RTC reached an agreement with Iowa Pacific to allow RTC to find a new freight operator. In 2018, the STB approved a new 10-year ACL agreement and the transfer of the freight easement to Saint Paul and Pacific Railroad (SPPR). SPPR commenced serving freight customers in Watsonville. However, the new ACL Agreement requires RTC to complete the 2017 storm damage repairs and make initial repairs to track, bridges and culverts that are needed for freight and recreational rail service beyond Watsonville. RTC has completed or is under contract to construct the remaining storm damage repair work, but significant work remains to repair bridges, culverts and track.
On May 27, 2020, SPPR notified RTC of its intent to terminate the ACL Agreement (Attachment 1). To terminate the ACL agreement, the STB would need to either transfer the federal common carrier freight obligations to another carrier, or the STB would need to approve either abandonment or railbanking of the SCBRL.
On November 11, 2020 (Attachment 2), SPPR submitted to RTC a 90-day notice of intent to abandon transportation service on the SCBRL. On March 18, 2020 (Attachment 3), SPPR notified RTC that it no longer plans to immediately terminate the ACL agreement by filing for abandonment but reserves the right to do so without additional notice. In that letter, SPPR requests that RTC modify the ACL, if needed, to assign the ACL to another operator, in lieu of abandonment.
On March 25, 2021, Roaring Camp issued a press release (Attachment 4) indicating that they have reached a separate agreement with SPPR to provide freight service in Watsonville and is currently serving those freight customers. RTC does not have a contract with Roaring Camp.
The Coastal Rail Trail
In addition to freight and recreational rail service, RTC has been moving forward with development of the coastal rail trail on the SCBRL. In February 2014, RTC completed the Monterey Bay Sanctuary Scenic Trail (MBSST) Master Plan, which studied a trail adjacent to the rail line, assuming continued freight and recreational rail service on the line. The Plan located the trail outside of the existing freight easement.
Recreational Rail Service
Iowa Pacific implemented recreational rail service with Train to Christmas Town from the Santa Cruz Boardwalk to Wilder Ranch State Park in 2012 and from Watsonville to south of Manresa in 2013 through 2015 and Polar Express from the Boardwalk to south of New Brighton State Park in 2016. Roaring Camp continues to provide recreational rail service between Felton and the Boardwalk and new recreational rail service is contemplated as part of the ACL Agreement with SPPR.
Commuter Rail Service
In February 2021, RTC completed the Transit Corridor Alternative’s Analysis (TCAA) to determine the best type of commuter transit for the line, which represents a fourth potential use of the line. Funding needed to advance commuter rail on the SCBRL has not been secured and appears unlikely in the short term. Commuter Rail remains in the RTC’s Regional Transportation Plan (RTP), but on the financially unconstrained list of projects, due to the lack of identified and likelihood of available funding to the region for a commuter rail project. Measure D revenues do not include funding for any new train/rail service.
DISCUSSION
Preserving the Corridor with Continued Freight and Recreational Rail Service
RTC’s approach to preserving the SCBRL has been to maintain the corridor for heavy freight and recreational passenger rail service, while developing a trail adjacent to the freight easement. When financially viable, it has been assumed that RTC would environmentally clear, design, and construct a light commuter passenger rail system that would co-exist with heavy freight and recreational passenger rail.
RTC negotiated the ACL agreement with SPPR, such that SPPR assumes the maintenance of the freight easement in exchange for the rights to operate heavy freight and recreational rail. However, RTC is responsible for the 2017 storm damage repairs as well as initial repairs to bridges, culverts, and track, before SPPR will assume maintenance and provide freight and recreational service beyond Watsonville. Although RTC has made progress on initial rail preservation work up to Milepost (MP) 7 completing phase I of the ACL, additional work is still needed north of MP 7.
RTC expects to be reimbursed for the 2017 storm damage projects; however, project costs are exceeding FEMA’s initial obligations. It is possible RTC may not receive full reimbursement. If so, the only funding source currently available for rail preservation is Measure D. Measure D provides 8% of revenue (~$1.6 Million/Year) for rail infrastructure preservation. This Measure D funding is currently being used for initial repairs to infrastructure, such as bridges, culverts, and track. Due to the extent of repairs needed on the branch line, staff anticipates a shortfall in funding. To complete all initial repairs, RTC may need consider directing other regional funding to the rail line and/or securing grant funds. While it is possible to secure competitive grant funds, not much is available for rail lines that do not have very much freight service on them. The RTC did receive freight rail grant funding for repairs to the Pajaro River bridge in Watsonville but grant funds for other bridges would be more difficult to secure due to the high cost of repairs needed and the fact that there is no service beyond Watsonville.
SPPR continues to want out of the ACL agreement. In their letter of March 18, 2021, SPPR claims that they cannot make the operations of the freight easement profitably work under the terms of the existing ACL agreement. They also suggest that the current terms of the ACL agreement do not provide a viable structure for the engagement of a passenger rail operator.
RTC has analyzed the viability of other parties that have shown interest in assuming freight rail service on the line, including local railroad Roaring Camp, and has not found a suitable replacement operator willing to assume the existing ACL agreement. Roaring Camp is currently providing freight service to Watsonville customers, under a separate agreement with SPPR, but has not indicated a willingness to fund the maintenance of the full SCBRL freight easement, as required by the existing ACL agreement.
Preserving the Corridor with a Public Private Partnership (P3)
There has been interest by a small hydro-electric streetcar manufacturer called TIG/m. TIG/m would like to form a public private partnership (P3) for right to develop passenger rail on the line. Staff has researched the viability of a P3 on the SCBRL. P3 are built on the concept that private money would help pay for some of the upfront cost. It is assumed that these upfront costs will be paid back over time on revenue generated by the project. In the case of a transit project, revenue can be earned from ticket sales or land rights for development. Staff concluded that it is not recommended to enter a P3, until a project has been properly defined as part of the environmental process. This keeps major decisions that are important to the community in the control of local public officials, as opposed to in the hands of a private for-profit enterprise.
Additional public funds will be needed to make any future consideration of a P3 arrangement work on the SCBRL, especially considering that the community expects ticket prices to be affordable. An agreement of this nature would not be a straight assignment of the ACL agreement and might not need to include freight (see railbanking discussion below). Staff recommends that the Commission defer seeking additional interest in a P3 arrangement until a time when passenger rail planning is better defined, including an understanding of the source of local funding needed for the public contribution.
Roaring Camp has partnered with TIG/m to conduct a demonstration on the SCBRL. The Commission authorized the Executive Director to issue a license agreement for a demonstration, which is under negotiations. The demonstration is planned to be from Watsonville to just before the Watsonville Slough railroad bridge for two days and from the Boardwalk to Capitola for three days. The demonstration does not include traveling across the Capitola or Seascape Trestles, which are out of service. From RTC’s perspective, the purpose of the demonstration is to allow the community to see an example of a modern electric rail vehicle on two small sections of the branch line track. This demonstration will not alter staff recommendation that the timing of a potential P3 arrangement should align with the completion of environmental studies for rail transit.
Although RTC made track improvements in 2019 that are required as part of the obligations under the ACL, RTC will not expend additional funds for this demonstration. There has been and will be staff time needed to draft a license agreement and meet with the parties coordinating the event. Roaring Camp is currently inspecting bridges, signals, and track at these two isolated locations and will be responsible for making any additional repairs needed for the demonstration. FRA approval is pending, and a date for the demonstration has still not been confirmed.
Preserving the Corridor by Railbanking
Another strategy to preserving a freight rail corridor is called railbanking. Railbanking allows a freight railroad corridor that would otherwise be abandoned to instead be preserved under federal legislation that was designed to protect the property rights associated with a freight rail corridor. If a line becomes abandoned and the railroad properties consist of easements for rail purposes, the use of those properties will revert back to the underlying property owners, under California law. Railbanking prevents easement rights from reverting to underlying property owners.
Most people associate railbanking with projects that remove the rails and repurpose infrastructure for a multi-use trail. This is not surprising, considering that the legislation that allows for railbanking is called the Rails- to-Trails Act. Unfortunately, this has led to confusion as to when it might be beneficial for an agency to railbank. Railbanking facilitates rails-with-trails projects, such as the MBSST with commuter passenger rail, while also making rails-to-trail projects feasible.
When a railroad owns easements, the same property rights issues exist, regardless as to whether the trail replaces the rail or is built adjacent to the rail. Underlying landowners of rail easements can claim that rail easements do not include land rights for the purpose of a trail. However, if the corridor is railbanked, a trail can be built either adjacent to or in place of the rail line, without the threat of easements reverting to underlying property owners. A decision as to where to build the trail is separate from railbanking.
Developing potential passenger rail service on the SCBRL also has compatibility challenges with freight. Active freight lines have special protections. Commuter rail cannot unreasonably interfere with freight service. Freight rail standards are designed to support the size and weight of freight trains, which are larger and heavier than light rail cars. Although freight and commuter rail often share corridors, repurposing the SCBRL for both heavy rail, light rail and a trail will require more infrastructure and right-of-way than what would be needed for only light rail and trail. Continued freight rail on the SCBRL will add cost and complexity to any future rail transit project. Railbanking does not prevent any rail option from proceeding, but will ease restrictions, lower costs, and facilitate future operations of any future rail transit on the SCBRL, especially light rail. Railbanking would allow the SCBRL to be repurposed for commuter passenger rail without needing to meet federal standards for freight, as long as repurposing does not prevent the future potential reactivation of freight rail.
On a day-to-day basis, RTC expends a significant amount of time and expense coordinating to satisfy freight requirements, including meeting freight rail safety, insurance, and operational requirements. Federal freight rail requirements have and will continue to complicate approval and add cost for virtually every operation and development opportunity that RTC considers for the SCBRL, as long as freight rail is required by the STB on the SCBRL.
Railbanking designates a trail sponsor, who becomes responsible for maintaining and preserving the corridor, in a manner that does not preclude future potential re-activation of freight rail. Rails and ties are permitted to be removed but could also remain in place. Some literature has stated that existing bridges and culverts cannot be removed. The legislation does not specifically state these limitations, and freight rail bridges have been removed from railbanked corridors and replaced with non-freight bridges.
It would be prudent for a trail manager to consider potential reactivation before commencing work affecting major infrastructure. Infrastructure, such as bridges, that would otherwise need to be replaced, could possibly be removed, provided that the work, including potential new rail transit or active transportation bridges, does not jeopardize the integrity of the rail line for future freight re-activation.
The best way to railbank the line would be through a direct abandonment proceeding. If SPPR files for abandonment, RTC as the trail sponsor would have 30-days to seek authority to negotiate a railbanking agreement, subject to the approval of the STB. The parties would then have an initial one-year period to negotiate an agreement. The ACL agreement requires that SPPR cooperate with efforts to railbank the corridor, in lieu of complete abandonment. Railbanking by a direct abandonment proceeding can be streamlined when there is no opposition.
Another approach would be for a third party, such as RTC, to petition the STB for an adverse abandonment. Adverse abandonment is more complicated and comes with a heavier burden to demonstrate that the public convenience and necessity require that the operator’s common carrier obligations be extinguished. Adverse abandonment is not preferred.
Railbanking can be prevented by another freight operator who is willing to assume the financial liability of the line by providing an Offer of Financial Assistance (OFA) to assume the freight easement, the associated common carrier responsibilities, and the maintenance obligation of the line. Due to the significant cost of work needed to restore freight on the line, a legitimate OFA seems unlikely.
Railbanking can also potentially be prevented by objections by freight rail customers or the owner of a potential stranded line. The Felton Branch Line is part of the national rail network and would become stranded from the main line if the SCBRL were railbanked. STB will not refuse to issue a railbanking order based on third-party objections about the desirability or appropriateness of the proposed use. A portion of a rail line can be railbanked, such as the section of the line beyond Watsonville, where there are no active freight rail customers. The best path to railbanking is to have the mutual support of all affected parties, including the freight operator, affected freight customers, and owners of potential stranded lines.
Misconceptions about railbanking continue to persist in social media posts, letters to the editor and public comments to the Commission. Railbanking preserves the right-of-way and prevents easement rights from reverting to underlying property owners. RTC staff has produced a fact sheet to dispel some of these misunderstandings (Attachment 5).
Railbanking should not cause the RTC to payback any funding used to purchase the SCBRL. Funding was conditioned on initiating recreational passenger rail service and continuing freight rail service for as long as it is required by the STB. Recreational passenger rail service was initiated and continues at the Santa Cruz Boardwalk. STB’s approval of railbanking would temporarily suspend freight allowing the corridor to be preserved for other transportation uses, including potential future freight rail re-activation, consistent with the intended use of the corridor.
Future potential funding needed to construct rail and trail projects also should not be jeopardized. These fund sources are competitive. As for freight funding, RTC would not compete well for freight rail funds where the is no or very low volumes of freight customers. Since there are no restrictions against awarding Federal or State commuter rail funding or active transportation (trail) funding to projects on railbanked corridors, RTC can continue to apply for and compete for this funding.
SUMMARY
Staff continues to preserve the SCBRL as a freight and recreational passenger railroad in accordance with the ACL agreement. Due to limited funding, staff is prioritizing initial repair projects based on safety and potential damage to property. The rail operator (SPPR) desires to terminate the ACL agreement, but prefers to do so by assigning the ACL agreement to another freight operator, with a modified ACL agreement.
There is no action needed by the Commission today; however, staff recommends that the Commission receive this report as well as community input on RTC’s approach and options for preserving the rail corridor.
ATTACHMENTS
Also in the Attachments but not numbered: