Rail line focus of bond hearing testimony

Posted March 29, 2010, at 9:49 p.m.

AUGUSTA, Maine — Lawmakers heard testimony on Monday from supporters of bond proposals to fund road repair and to preserve a rail line that representatives from several northern Maine businesses described as critical to their success.

Two competing bond measures are pending before the Legislature.

The first, presented by Gov. John Baldacci, would seek voter approval for $79 million in bonds for road, rail and harbor projects as well as environmental and energy initiatives.

The second, which is sponsored by legislative leaders, proposes $99 million in voter-approved bonds for many of the same initiatives but includes more money for energy efficiency projects.

Both proposals are touted as job stimulus measures, creating or preserving more than 3,000 jobs, according to their sponsors. Each bond package also would leverage tens of millions of dollars in federal matching money.

While roughly half of the transportation money will pay for road repair or maintenance, much of the testimony to the Appropriations and Financial Affairs Committee focused on the effort to save the last major rail line into northern Maine.

Representatives from industries and communities throughout northern Maine urged committee members to support the use of bond revenues to purchase roughly 240 miles of railroad tracks between Millinocket and Madawaska.

Faced with annual operating losses of about $4.5 million, Montreal, Maine and Atlantic Railway Inc. has begun the regulatory process to abandon a rail line that serves more than 20 industries in northern Maine. Those include major agricultural companies, such as McCain Foods Ltd., as well as some of the largest forest products companies that provide fiber to mills throughout the state.

Ryan Bushey, human resources manager for Louisiana-Pacific in New Limerick, said rail service is “critical to the growth and success” of the mill.

Louisiana-Pacific has invested more than $150 million in the mill and now employs more than 70 workers. Employment at the mill could easily double when the housing market rebounds — with jobs starting at $15 an hour plus benefits — but the company depends on rail service to remain competitive, he said.

“These are wages that people can raise families on, plain and simple,” Bushey said.

Jim Mitchell, representing Irving Woodlands LLC, told committee members that the company’s transportation costs would increase between 20 percent and 50 percent — depending on the destination — if Irving were forced to switch from trains to trucks.

Theresa Fowler, executive director of the Presque Isle Area Chamber of Commerce, said while only 20-some companies now use the Montreal, Maine and Atlantic rail line, those large companies support the entire region.

“There is not one community north of Millinocket that would not suffer if that railway were to be abandoned,” Fowler said.

Under plans being developed by the Baldacci administration, Maine would purchase the 240 miles of tracks from Montreal, Maine and Atlantic Railway Inc. but would not run the railroad. Daily operations of the rail service would be leased to another company — potentially even Montreal, Maine and Atlantic.

During Monday’s public hearing, committee members pressed Montreal, Maine and Atlantic President Robert Grindrod for reasons the state would want to purchase an unprofitable rail line. Grindrod said the government would not inherit the railway’s debt on the tracks, thereby freeing the state to re-invest the lease revenues into track maintenance and upgrades.

Grindrod estimated that the tracks would need $15 million in work — or $3 million to $4 million a year — in order to run trains at full speed. Speeds along the lines now are reduced because Montreal, Maine and Atlantic has been unable to keep up with maintenance, he said.

“I don’t want to see the railroad abandoned,” Grindrod said. “But this is a last resort and as a small company, we can’t continue to support this.”

Montreal, Maine and Atlantic will continue to operate the rail lines running south of Millinocket and west to Montreal as well as a profitable spur in northern Maine from Madawaska to Van Buren.

Other speakers urged the committee to support the highway and harbor improvements proposed by the bond measures.

Business and tourism officials from Portland spoke in support of a proposal to provide a deep-water port in the city in order to attract larger cruise ships. Other speakers said the highway money would help put people back to work while making much-needed repairs.

Sen. Dennis Damon, co-chair of the Transportation Committee, recounted a letter he received from a man who had traveled from Florida to Maine with his family in an RV. The man wrote to Damon that Maine was the family’s favorite state but had the worst roads.

“That is not the calling card that we want,” Damon said. “This is not going to bring people back here. That is going to jeopardize our future.”

Supporters of the bond measures pointed out that Maine has a low debt ratio when compared with other states.

According to the State Treasurer’s Office, Maine had roughly $1 billion in tax-supported debt at the end of December 2009. That figure included about $500 million in general obligation bonds — the type discussed Monday.

The rating agency Standard & Poor’s has ranked Maine as 42nd in the nation in tax-supported debt per capita. Maine’s tax-supported debt equaled roughly $743 per person in the state, compared with an average of $865 in tax-supported debt per capita in other states.

The Appropriations Committee is expected to hold a work session on the bond bills this Wednesday. The proposals are expected to generate intense debate from lawmakers leery of taking on additional state debt during a recession.

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