As Rail Cars for Michigan Commuter Services Sit, Some Question Spending Millions on Leasing Them

They sit in waiting in Owosso, Mich., but aren’t likely to see any use for at least two more years.

Five years ago the Michigan Department of Transportation leased 23 bi-level ex-Metra commuter rail cars for use in commuter service between Detroit and Ann Arbor, and between Ann Arbor and Howell.

But the cars have yet to operate and are costing Michigan taxpayers $1.1 million a year.

In the meantime, the cost of starting up the commuter service is nearly $12 million and rising.

Some Michigan lawmakers are concerned about the expenditures .

“They’re betting on something that might not even come to fruition,” said Rep. Marilyn Lane, D-Fraser, who is minority vice-chair of the House Transportation and Infrastructure Committee.

“I’m mad,” Lane said. “If we have these dollars to peel off, we should be fixing the roads. For MDOT to jump so far out front on this is concerning.”

Sen. Goeff Hansen, R-Hart, chairman of the Senate Appropriations Subcommittee on Transportation, said he doesn’t want to say much until he has more information on the contract.

The deal was signed during the administration of former Gov. Jennifer Granholm, a Democrat, but amended four times during the administration of Gov. Rick Snyder, a Republican — each time to increase the contract’s maximum cost.

“Any lease that we’re not using for something does concern me,” Hansen said. “I need to find out at the end of the day what are their plans, what is the time frame, when are the cars going to be used.”

Tim Hoeffner, director of MDOT’s Office of Rail, agreed that the commuter rail project is “costing us more money than we wished it would.”

“I’m not going to try and spin this,” Hoeffner told the Detroit Free Press. “Would we have liked to have gotten the service up and running sooner? Absolutely. Would we have liked to have timed the lease and the overhaul of the equipment to better fit with the start of the services? Absolutely.”

But Hoeffner said he doesn’t think MDOT made a mistake because there is a long lead time need to get equipment.

He said MDOT was correct to acquire equipment before other needed items were in place.

Hoeffner said a poor economy kept the commuter rail services from starting more quickly.

He said that the project has been a boost to Michigan workers and businesses because much of the money spent to renovate the cars was spent in-state.

“Monday morning quarterbacking, hindsighting this, yes, we could have done a lot of things differently,” Hoeffner said. “Based on the available information, and based on the estimated risks, we made sound decisions,” and “time will tell … whether or not we have failed miserably or been great visionaries.”

The 1950s and 1960s-era cars are owned by Great Lakes Central Railroad. MDOT has paid $7.6 million to overhaul the cars and another $2.7 million in lease charges. The cars were previously used in Chicago and sold by Metra.

The per-car lease costs more than doubled in 2013 and 2014 as refurbishments were completed and the cars were certified as rail-worthy.

The contract with MDOT required it to start paying “in-service” rates that total about $3,000 a day, even though the cars are just sitting in a yard in Shiawassee County about 30 miles northeast of Lansing.

MDOT has paid another $1.1 million to its consultant on the rail car project, Pennsylvania-based Quandel.

Hoeffner said it can cost $2 million to $3 million per car to purchase new cars, and $400,000 to $500,000 per car to purchase new equipment.

On that basis, the cost of the project — which now approaches $500,000 per car when renovation costs are included — is not out of line, he said.

“Without having firm dates as to when these services are going to start and what all of that is, I believe that it is prudent to question what we’ve done,” Hoeffner said.

The cars are sitting because there is no funding or operator for the commuter operation. Also, the required environmental studies are not complete.

The tracks to be used between Detroit and Ann Arbor service, which are also used by Amtrak, are about to undergo a rebuilding.

The $11.4 million that MDOT has spent to date on the commuter rail project has come from Michigan’s $300-million Comprehensive Transportation Fund. The money in this fund comes largely from fuel taxes and vehicle registration fees, and is mainly used to pay for transit and rail.

Under state law, at least 10 percent of appropriations from the fund must be allocated for intercity passenger services, which includes rail projects.

Michael Frezell, a spokesman for MDOT, said the project money came from that allocation and could not have been spent on roads, although it could have been spent on other eligible projects such as a bus service between two Michigan cities or another rail-related project.

The project costs are small when compared to the $1.2 billion that Gov. Snyder wants to raise for additional road repairs through a May 5 ballot proposal that would raise the sales tax to 7 percent.

MDOT could have leased and overhauled just 15 of the 23 cars and Hoeffner said that in hindsight it would have made sense to have done that.

He estimates that only five cars, including a spare, need to be allocated to a Howell-Ann Arbor commuter service.

That service, he said, is likely to go into operation before the Ann Arbor-Detroit service.

MDOT has been moving the cars around for display in places such as Ann Arbor and Dearborn to drum up interest in the commuter services.

The state agency is also looking for temporary and short-term uses for some of the cars.

One ideas is to assign them to Amtrak’s Chicago-Grand Rapids Pere Marquette, which MDOT helps to underwrite. 

Hoeffner said that would require the cars to have handicapped-accessible restrooms. Initially, Hoeffner opted to refurbish the cars without restrooms but has since reconsidered.

MDOT recently spent $300,000 to equip two of the cars with handicap restrooms and may pay to put similar restrooms in other cars.

Michigan Auditor General Doug Ringler has also been looking into the commuter rail expenditures and will report to the Legislature soon.

Carmine Palombo, deputy executive director of the Southeast Michigan Council of Governments, has been working with local officials on developing the commuter rail services.

He said there’s enthusiasm for the projects all along the proposed lines, but the best bet for the Detroit-Ann Arbor service might be if the new Regional Transit Authority of Southeast Michigan decides to include the proposed service in a four-county transit-related ballot proposal planned for November 2016.

Rail upgrades are under way for the next two construction seasons on the state-owned former Michigan Central route to Ann Arbor.

Hoeffner and Palombo said they don’t want to start commuter rail service during that construction period because it could cause delays.

“The real key on both of these services is that without a commitment from the local communities to provide funding to help cover the operating deficits of the service, they’re not going to get moving,” Palombo said.

Michael Cicchella, a former supervisor of Northfield Township in Washtenaw County, said he worked hard on promoting the commuter service in 2007 and 2008 before stepping aside in frustration.

He cited resistance in Livingston County for the project not proceeding when he thought it should have.

Cicchella said commuter rail service between Howell and Ann Arbor could save lives by taking thousands of commuters a day off heavily congested U.S. 23.

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