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State releases documents in decision to change railroad operator

State awarded points for accommodating passenger service to company that does not provide passenger service
By Daniel Dunkle | Dec 31, 2015
Photo by: Daniel Dunkle Maine Eastern Railroad parent company Vice President and Chief Operating Officer Chuck Jensen, left, and General Manager Harmony Llanto were busy Dec. 3 preparing the company to cease Rockland operations by Jan. 1. The state awarded the contract for the Rockland branch to another railway company, which will not offer passenger service.

Rockland — The Maine Department of Transportation awarded points for "accommodating passenger service" to a company that does not provide passenger rail when it made the decision to change the railroad operator on the Rockland branch. As a result of that process, a new company is taking over railroad operations in 2016, passenger rail will not be offered and five local railroad employees have lost their jobs.

In September, the state awarded the contract to run freight service along the 58-mile Rockland branch from Brunswick to Rockland to Central Maine & Quebec Railway, which said in its proposal that it would not provide passenger rail service. The state chose Central Maine & Quebec over Maine Eastern Railroad, which has been providing passenger and freight service in the Midcoast for about 12 years.

Asked why the state changed railroad companies, Nathan Moulton, director of MDOT's Rail Program, said the proposals were judged based on the scores they received on a specific ranking system, which was graded by four people independently when the decision was made in September.

The Courier-Gazette made a Freedom of Access request for the proposal documents from the Maine Department of Transportation and the state has released the documents along with the scores for the two companies. See attached table.

In the state's request for proposals, it was stated: "...One criterion by which proposals submitted ... will be evaluated will be respondent's experience operating scheduled passenger rail service."

In its proposal, which ultimately won the award, Central Maine & Quebec states: "CMQ does not intend to operate passenger service on the Rockland sub."

Maine Eastern Railroad, which has been providing passenger service, offered options to continue providing passenger service and to provide daily connection service for the Downeaster in Brunswick, which provides trips to Boston.

When it came time to score the proposals, the state awarded Maine Eastern 54 points for accommodating passenger service operators and Central Maine & Quebec 31 points.

That contributed to the total points for all the criteria in which Central Maine & Quebec had 331 points and Maine Eastern had 309.

Chuck Jensen, vice president and chief operating officer of Maine Eastern's parent company, Morristown & Erie Railway, said he does not understand how the state awarded Central Maine & Quebec any points for passenger service. He also pointed out that those points made the difference between Maine Eastern's winning and losing the 10-year contract.

Moulton argues it is not that simple.

"The criteria is not providing passenger service, it is 'Terms for accommodating passenger service operators (15 points),' which is required as part of a proposal to operate the freight service per the RFP. This includes things like prioritization, coordination, dispatching, maintenance etc. and the per-mile rate to be charged to the passenger operator, etc. etc. ... CMQR received the 31 points for their proposal and terms for accommodating a passenger operation," he said in an email.

In its proposal, Central Maine & Quebec said it had experience hosting passenger operations and had fostered many positive relationships with passenger rail operators. It offered to work around the needs and schedules of a third party company that could come in and provide passenger service in the future.

When the state awarded the contract, it looked at it in two parts, freight, which was the primary service, and passenger rail operations, which have been aimed at promoting tourism. Since Central Maine & Quebec was the successful company on freight, another company could still come in and provide passenger service in the future.

Jensen, however, questioned whether that is likely to happen.

He explained, in previous comments, the railroad has not been making its money on the passenger service. It has only been able to provide the passenger service because of the synergies created by its having control of the railroad and having the freight business as well.

Now that Central Maine & Quebec has the freight contract, any passenger service would have to pay a fee to it to provide passenger trips on the Rockland branch. Central Maine & Quebec proposed a fee of $1 per unit per track mile.

"Example: 2 locomotives and 5 passenger cars = 7 units. These 7 units making a round trip between Brunswick and Rockland (116 miles) would generate a fee of $812 to be paid to CMQ from the (passenger service operator)."

Jensen said that Maine Eastern has been able to provide passenger service because it was operating the rail line and wouldn't have to pay such a fee.

"Without the passenger operation, I'm already profitable," he said.

The documents show that the two companies painted different financial pictures of the next three years for the railroad.

Maine Eastern predicted that annual expenses on the passenger side of the operation would exceed $1.6 million, due to the state's requirement that the railroad make expensive upgrades to passenger cars. These expenses would exceed ticket sale revenues by more than $700,000.

Jensen said the state was requiring that all passenger cars meet a stricter standard than the railroad had been required to meet in the past. This would include making all of the passenger cars ADA-compliant, wheelchair accessible, and that they have bullet-proof glazing and meet special standards for handling G-forces without furniture flying around the car in the event of a crash.

He said that for tourist excursions, which Maine Eastern has been providing, this was not required, adding that some of the company's equipment dates back to between the 1940s and the 1960s. The stricter requirements are usually applied to intercity commuter trains.

The upgrades could cost up to $600,000 per car, the Maine Eastern proposal states. Jensen said the state would have to pay for those upgrades to make it financially viable for Maine Eastern.

In the proposal, Maine Eastern also raised concerns about the freight side of the operation, predicting the state will be required to subsidize freight operations on the Rockland branch in the near future.

"The Maine Eastern's freight traffic is wholly dependent upon the largest customer on the line, Dragon Products," the proposal states. "Dragon represents 90 percent of the revenue base of the railroad, and the shipped product is extremely rate-sensitive."

In an interview Jensen stated it more simply: "If there's no Dragon, there's no railroad."

The Maine Eastern proposal states that Dragon's fleet of company-owned rail cars will be 50 years old in the next two years, and regulations prohibit use of rail cars beyond that age. The company could seek annual extensions, but they would not be guaranteed.

"Therefore, all of Dragon's outbound cement shipments will be forced to cease if Dragon does not purchase or lease new equipment," the proposal states.

A call to Dragon Cement for comment was not returned.

Maine Eastern would continue to seek new customers for freight traffic, the proposal notes, including "movement of seaweed by container from the Port of Portland to FMC Corporation in Rockland, the shipment of fuel-related products to the Damariscotta area and inbounding raw materials to Dragon Cement by rail instead of by truck.

Maine Eastern also predicted the need for a three-year project to replace the railroad ties on the the entire Rockland branch that would cost more than $1 million.

Jensen said this is a significant piece of the story, because the state could put off that project for much longer if the branch were freight only. With freight, in which speed is not as vital on a 58-mile stretch, the state could downgrade the track and lower the speed limit to avoid the costly repairs. The limit is 45 mph now.

However, with passenger service, a specific schedule must be met and the track must be maintained to a higher standard and higher speeds.

"You just saved $1 million right there," he said of the state's decision.

Central Maine & Quebec Railway predicts in its proposal that its revenue in year one will be more than $1.1 million, compared to Maine Eastern's projected freight revenue of $675,000. This revenue estimate includes $22,000 in passenger track usage fees, even though there is currently no passenger rail provider.

In the third year, Central Maine & Quebec predicts its railroad will earn a profit of $178,964.

In the scores under cost/revenue to MaineDOT, Central Maine scored 64 points to Maine Eastern's 42.

Jensen argues that in terms of running a railroad, up to $2 million a year in state subsidy is not a lot of money to maintain the passenger service and continue to promote tourism. He also said he based everything in his proposal on what he knows from running this branch for the past 12 years.

Jensen added that he does not have a problem with Central Maine & Quebec Railway. He said the company put in a proposal in good faith and it was the state's decision.

Score Chart

The proposals to the state from Maine Eastern Railroad and Central Maine & Quebec Railway were scored by four representatives of the Maine Department of Transportation and Northern New England Passenger Rail Authority independently based on the following weighted criteria:

- Respondent's operating and management experience, available expertise, and overall ability to perform the services described in the proposals (35 points)

- Cost/revenue to MaineDOT (20 points)

- Terms for accommodating passenger service operators (15 points)

- Respondent's financial condition (10 points)

- Maintenance proposal by respondent (10 points)

- Operating equipment being provided by respondent (10 points)

Each category scoring total is the combined sum of the total points given by each of the four scorers in each of the scoring criteria. Source: Maine Department of Transportation.

 

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Comments (5)
Posted by: Betsy Baxter Rich | Jan 01, 2016 10:01

No one seems to have factored in what this will do for traffic for our festivals either.......attendance, parking, hotel room. All one big A$$ nightmare. Thank you our Scrooge in Augusta.

 



Posted by: Betsy Baxter Rich | Jan 01, 2016 10:01

No one seems to have factored in what this will do for traffic for our festivals either.......attendance, parking, hotel room. All one big A$$ nightmare. Thank you our Scrooge in Augusta.

 



Posted by: Richard McKusic, Sr. | Jan 01, 2016 02:15

Appreciate the great job Maine Eastern has done. Sorry to see them go. Glad to have had the opportunity to take the trip to Brunswick a couple of times.



Posted by: Martha Johnston-Nash | Dec 31, 2015 16:52

If passenger service is to be a priority, the criteria and process is flawed.



Posted by: Francis Mazzeo, Jr. | Dec 31, 2015 14:21

Who are these four people and what was the criterion for the choices? Since the demise of Paul Harvey it is hard to get the rest of the story.



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