HOUSE BILL No. 6532 December 3, 2002, Introduced by Rep. Shackleton and referred to the Committee on Transportation. A bill to amend 1976 PA 295, entitled "State transportation preservation act of 1976," by amending section 10 (MCL 474.60), as amended by 1998 PA 235, and by adding section 10h. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 10. (1) In weighing the varied interests of the resi- 2 dents of this state, the department shall give consideration to 3 the individual interest of any person, public or private corpora- 4 tion, local or regional transportation authority, local govern- 5 mental unit, private carrier, group of rail users, state agency, 6 other public or private entity, including a port authority estab- 7 lished under the Hertel-Law-T. Stopczynski port authority act, 8 1978 PA 639, MCL 120.101 to 120.130, or any combination of these 9 entities, expressing a desire to acquire or lease or secure an 10 easement for the use of a portion or all of the real property 05947'01 MRM 2 1 owned by a railroad company. The property acquired by the 2 department under this act may be conveyed or leased to an entity 3 or combination of entities listed in this subsection with appro- 4 priate reimbursement, as determined by the department. 5 (2) The department may begin divestiture or offer 10-year 6 leases to the current operator of the properties described in 7 this subsection within 180 days afterthe effective date of the8amendatory act that added this subsectionJULY 3, 1998. The 9 department shall accomplish divestiture or create leases, without 10 partitioning a segment or a portion of a segment, in the follow- 11 ing order from the smallest segment first to the largest segment 12 last, of the following defined segments of state-owned rail 13 property: 14 (a) Lenawee county system means the rail lines owned by the 15 state between Adrian and Riga, between Grosvenor and River Raisin 16 and Lenawee Junction. 17 (b) Hillsdale county system means the rail lines owned by 18 the state between Litchfield and the Indiana state line and 19 between Jonesville and Quincy. 20 (c) Vassar area system means the rail lines owned by the 21 state between Millington and Munger, between Vassar and Colling, 22 and at Denmark Junction. 23 (d) Ann Arbor and Northwest Michigan system means the rail 24 lines owned by the state between Durand and Ann Arbor, between 25 Owosso and Thompsonville, between Cadillac and EMMET STREET IN 26 THE CITY OF Petoskey, between Walton Junction and Traverse City, 05947'01 3 1 between Grawn and Williamsburg, and between Owosso and 2 St. Charles. 3 (3) The specific terms of a sale will be as determined by 4 the department except for the following required conditions: 5 (a) Each purchase agreement shall require that the purchase 6 price shall be not less than the net liquidation value of the 7 rail line or lines. 8 (b) Each purchase agreement shall require that the purchaser 9 provide at a minimum the average level of service adjusted for 10 traffic levels for 3 years after the date of sale unless other- 11 wise mutually agreed upon between the purchaser and shippers that 12 existed on that line on the effective date of the amendatory act 13 that added this subsection, and that rates on the segment pur- 14 chased from the state will not increase more than the average 15 percentage increase in the Detroit consumer price index for the 16 12-month period each year for the base rate in effect on 17 January 1, 1996 for 3 years after the date of sale. 18 (c) Trackage in the segments sold by the state shall be 19 maintained at not less than the federal railway administration 20 class of track standards for each segment as of January 1, 1998. 21 (d) In the case of the sale of the segment described in sub- 22 section (2)(d), the purchaser shall be required to charge reason- 23 able freight rates for that section between Durand and Ann Arbor 24 and honor all existing freight rate agreements and trackage 25 rights for 3 years after the date of sale. 26 (e) Any existing lease or agreement for operation of a 27 segment in effect on the effective date of this act shall be 05947'01 4 1 extended at the same terms and conditions until a sale or lease 2 is executed. 3 (4) If there are no acceptable offers to purchase, the prop- 4 erty shall be offered for a lease of not less than 10 years, by 5 the department to the following parties in descending order: 6 (a) Current operator. 7 (b) Current shippers on that segment. 8 (c) Governmental entities. 9 (d) Other railroad companies. 10 (5) If the purchaser or lessee fails to comply with the con- 11 ditions of sale or lease, the property shall revert back to the 12 department and shall then be offered for sale or lease to the 13 following parties in descending order: 14 (a) Current shippers on that segment. 15 (b) Governmental entities. 16 (c) Other railroad companies. 17 (6) Before the execution of a purchase agreement, the poten- 18 tial purchaser shall submit to the department its most recent 19 financial statement and a proposed operation plan including trib- 20 utary lines and including known potential sublease agreements. 21 As used in this subsection, "tributary lines" means spur rail 22 lines that only intersect with a rail line owned by the state on 23the effective date of the 1998 amendments to this section24 JULY 3, 1998. 25 (7) If during the first 10 years after purchase the pur- 26 chaser abandons service and sells the segment or any portion of 27 the segment that does not involve main line track, or any rails, 05947'01 5 1 ties, or ballast, excluding normal salvage, 95% of the proceeds 2 from the sale shall be returned to the state as additional pur- 3 chase price. A segment or a portion of a segment may be sold 4 with the approval of the department. 5 (8) A party aggrieved by the performance or failure to per- 6 form under the terms of a purchase agreement may bring an action 7 in the circuit court where the party resides or where the prop- 8 erty is located for appropriate relief. 9 (9) The specific terms of a lease will be as determined by 10 the department except for the following required conditions: 11 (a) Each lease agreement shall require that the lessee pro- 12 vide at a minimum the average level of service adjusted for traf- 13 fic levels for 3 years after the date of the lease agreement 14 unless otherwise mutually agreed upon between the lessee and 15 shippers that existed on that line on the effective date of the 16 amendatory act that added this subsection, and that rates on that 17 segment leased from the state will not increase more than the 18 average percentage increase in the Detroit consumer price index 19 for the 12-month period each year for the base rate in effect on 20 January 1, 1996 for 3 years after the date of the lease. 21 (b) Not less than 50% of trackage rights revenues shall be 22 reinvested in eligible expenditures. As used in this subdivi- 23 sion, "eligible expenditures" includes the material and direct 24 expenses required for the installation of railroad ties, track, 25 ballast, crossing improvements, ditch and drainage repair or 26 improvements, brush trimming, and the expenses required to 05947'01 6 1 conduct track and signal inspections as specified in federal 2 regulations. 3 (c) Trackage in the segments leased by the state shall be 4 maintained at not less than the federal railway administration 5 class of track standards for each segment as of January 1, 1998. 6 (d) In the case of a lease of the segment described in sub- 7 section (2)(d), the lessee shall be required to charge reasonable 8 freight rates for that section between Durand and Ann Arbor and 9 honor all existing freight rate agreements and trackage rights 10 for 3 years after the date of sale. 11 (10) A party aggrieved by the performance or failure to per- 12 form under the terms of a lease agreement may bring an action in 13 the circuit court where the party resides or where the property 14 is located for appropriate relief. 15 (11) Upon acquisition of a right-of-way, the department may 16 preserve the right-of-way for future use as a railroad line and, 17 if preserving it for that use, shall not permit any action which 18 would render it unsuitable for future rail use. However, if the 19 department determines a right-of-way or other property acquired 20 under this act is no longer necessary for railroad transportation 21 purposes, the department may preserve and utilize the 22 right-of-way for other transportation purposes or may dispose of 23 the right-of-way or other property acquired under this act for 24 the purposes described in section 6, or may dispose of or lease 25 the right-of-way or other property for other purposes, as 26 appropriate. However, the department shall not dispose of or 27 lease a right-of-way without first offering to transfer the 05947'01 7 1 right-of-way to the department of natural resources. If the 2 department of natural resources desires to lease or purchase the 3 right-of-way, the department of natural resources must indicate 4 their desire within 60 days and accept the offered transfer 5 within 1 year after the offer is made. If the department of nat- 6 ural resources does not indicate their desires within 60 days, 7 the department may dispose of or lease the right-of-way as other- 8 wise provided for in this act. If the department of natural 9 resources does not accept the offered transfer within 1 year 10 after indicating their desire to lease or purchase the 11 right-of-way, the department may dispose of or lease the 12 right-of-way as otherwise provided for in this act. When appro- 13 priate, a right-of-way or other property shall be transferred or 14 leased to a public or private entity with appropriate reimburse- 15 ment, as determined by the department. 16 (12) In preserving a right-of-way for future rail use, the 17 department may do 1 or more of the following: 18 (a) Develop the right-of-way for use as a commuter trail 19 where the use is feasible and needed or lease the right-of-way to 20 a county, city, village, or township expressing a desire to 21 develop the right-of-way as a commuter trail. The lease shall be 22 for an indefinite period of time, cancelable by the department 23 only if the right-of-way is needed for rail usage. The trails, 24 unless leased to a county, city, village, or township, shall 25 remain under the jurisdiction of the department. 26 (b) Transfer, for appropriate reimbursement, the 27 right-of-way to the department of natural resources for use as a 05947'01 8 1 Michigan trailway pursuant to part 721 of the natural resources 2 and environmental protection act, 1994 PA 451, MCL 324.72101 to 3 324.72112, if the deed includes restrictions on the use of the 4 property that assure that the property remains viable for future 5 rail usage, and includes a clause that provides that the depart- 6 ment of natural resources shall transfer, for appropriate reim- 7 bursement, the right-of-way to the department, upon a determina- 8 tion of the director of the department that the right-of-way is 9 needed for use as a railroad line. 10 (c) Lease the right-of-way to the department of natural 11 resources, or upon approval of the department of natural 12 resources, to a county, city, village, or township for use as a 13 recreational trail. The lease shall be for an indefinite period 14 of time, cancelable by the department only if the right-of-way is 15 needed for rail usage. A recreational trail shall be reserved 16 for non-motorized forms of recreation or snowmobiling only. 17 Snowmobiling shall not be allowed on more than 50% of the mileage 18 of the recreational trails established pursuant to this act. 19 (d) In cases where a trail serves both a significant com- 20 muter and recreation function, authorize the joint development of 21 the trail by the department and the department of natural 22 resources, or the department and any interested county, city, 23 village, or township. Administration of the trail shall be 24 determined jointly by the department and the department of natu- 25 ral resources. 26 SEC. 10H. NOTWITHSTANDING ANY OTHER PROVISION OF THIS ACT, 27 THE DEPARTMENT, IMMEDIATELY UPON THE EFFECTIVE DATE OF THE 05947'01 9 1 AMENDATORY ACT THAT ADDED THIS SECTION, SHALL OFFER FOR SALE TO 2 THE CITY OF PETOSKEY THAT PORTION OF ABANDONED STATE OWNED RAIL 3 PROPERTY LOCATED IN THE CITY OF PETOSKEY BETWEEN EMMET STREET AND 4 THE NORTH CORPORATE LIMIT OF THE CITY OF PETOSKEY. THE CITY OF 5 PETOSKEY SHALL AGREE TO USE THE PROPERTY FOR PARK OR RECREATION 6 PURPOSES OR RAIL OR OTHER TRANSPORTATION PURPOSES. 05947'01 Final page. MRM