Overshadowed by heated campaigns was the fact that northern Maine businesses and communities avoided a shutdown of the region’s railroad. With a significant investment by state and local government, the line owned by Montreal, Maine & Atlantic Railway will remain operational. To ensure the line remains viable, however, the companies that use it will have to increase their financial support.
Late last month, MMA and the state announced an agreement to keep trains running on more than 200 miles of track in northern Penobscot and Aroostook counties. The state will pay $20 million for 233 miles of freight rail tracks between Millinocket and Limestone. A company will be found to manage the railway.
Funding for the purchase includes $7 million from a June 2010 bond, $4 million from a November 2009 bond that is being repurposed, $7 million from state reserve accounts and $1.1 million from rail balances from canceled projects. The state will get another $10.5 million, from a federal grant, for track improvements.
Users of the railroad, including 22 manufacturers, said it would have been disastrous to the state’s economy if the tracks were lost. The purchase will preserve more than 1,700 jobs, Aroostook County economic development officials said.
Despite this rhetoric, only one major shipper on the line — Irving Woodlands — contributed to the purchase. The company allocated $1 million to the purchase because using trucks rather than rail cars would have cost more, caused more wear and tear on local roads — a burden for local taxpayers — and caused more pollution.
To make the line viable, other shippers will have to increase their financial stakes, primarily by committing to ship more by rail.
No matter who owns the rails, the underlying problem remains — the revenue generated by shipments on the line doesn’t cover its costs. MMA says it has been losing between $4 million and $5 million a year on the route.
The railroad sought to abandon the line because it was losing money. MMA President Robert Grindrod said traffic dropped by about 40 percent over last year. In a letter earlier this year, he wrote: “MMA, as a private company, cannot continue to sustain the level of financial loss which is currently ongoing, with little or no prospect of improvement.”
An industry standard says that a railroad should earn between $50,000 and $60,000 per mile annually. MMA is earning about $20,000 on these lines. The only way to earn more is to get more companies shipping more freight on these lines.
The state has taken the important first step to maintain the rail corridor. A second, more difficult one is to develop a plan to make the route financially sustainable.