MDOT grilled over costly rail cars

LANSING – The Michigan Department of Transportation was harshly criticized by state lawmakers Tuesday over a Detroit Free Press report that showed the agency was spending $1.1 million a year to lease passenger rail cars it can't use.

Now, the department is considering options that include terminating the lease or trying to negotiate less-expensive terms.

The Free Press reported Feb. 1 that MDOT has spent close to $12 million on refurbishment, lease and consulting fees for 23 double-decker passenger cars that are proposed for commuter-rail services between Ann Arbor and Detroit, and Ann Arbor and Howell. The Ann Arbor-Howell line is known as WALLY, or the Washtenaw Livingston rail line.

The leases alone cost the state about $3,000 a day, but the cars are sitting in a rail yard in Owosso with no operators and no funding in place for the proposed commuter services.

Required environmental studies still aren't completed, and in the case of the Ann Arbor-Detroit service, even the tracks won't be ready for two more construction seasons.

"As a former executive, if I went to my board of directors to say we're going to sink $12 million into something we don't know whether it's going to happen or not, I'd be fired," Rep. Jeff Farrington, R-Utica, told MDOT Director Kirk Steudle at a meeting of the House Transportation and Infrastructure Committee.

Steudle said it's easy to criticize the situation in hindsight, but said he believes his officials made the correct decisions when they signed a lease and refurbishment for the former Chicago commuter train cars in 2010. There was a big push at the time to get commuter-rail service started in southeastern Michigan, and there's often a long lease time to secure railcars, Steudle said.

He stressed the money spent on the project could not have been spent on Michigan's battered roads or crumbling bridges, because the money came from the Comprehensive Transportation Fund, which is allocated for intercity transit and rail projects.

The department is now considering its options, including canceling its lease with Great Lakes Central Railroad, which owns the 1950s- and 1960s-era rail cars and has been paid about $7.6 million to refurbish them. Steudle said other options include trying to negotiate a cheaper lease rate or maintaining the status quo.

In addition to the refurbishment charges, MDOT had spent more than $2.7 million in lease charges as of Dec. 31, and had paid $1.1 million to its consultant on the project, Quandel.

According to Metra, which operates the Chicago transit system, a Metra-related suburban rail service sold the 23 cars — plus 26 similar cars — in 2004 to a company affiliated with Great Lakes Railroad for $5.6 million. Each coach car cost the railroad about $101,000 and each cab car cost about $125,000, Metra spokesman Michael Gillis told the Free Press.

Farrington wasn't satisfied with Steudle's explanations, noting that MDOT had the option to refurbish and lease just 15 cars but opted to go with 23. He also pointed out that the department has amended its contract with Great Lakes Central Railroad five times since 2011 — most recently on Feb. 3 — to extend the lease and/or increase the total cost.

"You spun a nice story," Farrington said, expressing frustration that the department wouldn't admit a mistake when "it's so clear that you perhaps should have waited a while."

"Would you use your own money on a decision like this?"

Steudle said unforeseen changes ensued after the contract was signed in 2010, including changes in what branch of the federal government MDOT had to deal with and what federal studies were required. He said the costs are not out of line when one considers a new railcar can cost as much as $3 million.

State Rep. David Rutledge, D-Ypsilanti, came to Steudle's defense, saying "whether something is a debacle or not is really kind of in the eye of the beholder," and "at the core of the discussion is whether or not you believe commuter rail is going to happen, or even whether it's important or not."

Commuter rail service could dramatically reduce traffic congestion near Ann Arbor on U.S. 23, and if the proposed services go ahead, MDOT's actions could be seen as "visionary and a wise decision," Rutledge said.

Louis P. Ferris, Jr., chairman and owner of Great Lakes Central Railroad, did not return a phone message Tuesday. An earlier message left with Executive Vic President and General Manager Chris Bagwell also was not returned.

But Rep. Marilyn Lane, D-Fraser, the minority vice chairwoman of the committee, bristled at Steudle's suggestion that he and other MDOT bureaucrats will decide what to do about the rail car lease.

"We're the ones to make that decision," Lane told Steudle. "We make policy."

While it may be true that the money spent on the rail cars could not have been spent on roads, it could have been spent on improving Michigan rail crossings, the Regional Transit Authority of Southeast Michigan, or the M-1 rail project in Detroit, Lane said.

Rep. Peter Pettalia, R-Presque Isle, the committee chairman, suggested members take a field trip with Steudle to the Owosso rail maintenance yard.

Paul Egan writes for the Detroit Free Press.