Short-line rail operators say cut to sustainability grant a hit to economy

Saskatchewan short-line railways say the chance to buy provincially owned rail cars doesn’t offset the loss of a $900,000 annual sustain-ability grant they would no longer receive .

Perry Pellerin, president of the Western Canadian Short Line Railway Association, said the 13 short lines could use the cars but he doesn’t know if they could afford them. As well, the cars have only 14 years of life left, according to the Association of American Railroads rules.

The province announced in its budget released last week that 900 provincial cars would be sold and short-line rail companies are first in line.

However, Pellerin expressed worry about other costs.

He said the revenue from the cars, which the province leased to railways, paid for a sustainability grant offered on a cost-shared basis to short lines. It paid for maintenance and track infrastructure upgrades.

“If you take their $900,000 we used to have to match that, that’s almost $2 million that went back into the local economy and that’s all gone now,” he said.

According to the corporation’s 2015-16 annual report, lease revenue from the cars was a record $2.7 million. Slightly more than half the cars were leased to Canadian Pacific Railway and 46 percent were leased to Last Mountain Railway as of July 31, 2016.

Since the corporation purchased 1,000 cars in 1981 for $55 million, it paid $20.5 million in dividends to the general revenue fund. Hopper car total revenue was $35.2 million.

One hundred cars were taken out of service after they were destroyed.

The government said the cost to-day to replace all 1,000 cars would be about $100 million.

Highways Minister David Marit wouldn’t say how much the re-maining cars are worth. The book value in the annual report is $6.3 million. He said short-line operators were aware in November that they would be offered the cars.

“They were positive on that they were going to be able to do their financing and we did offer a mechanism for them to do that,” Marit said.

The decision to cut the sustain-ability grant was difficult, he said, because it levered two-to-one dollars. The province has promised to help find money for the short lines through federal environmental programs that would reward moving traffic off roads and onto rail.

Pellerin said with only 14 years to use the cars, the government might as well have hung onto them.

He said short lines have significant expenses coming from new crossing and bridge regulations.

He also questioned how the government would reach a decision if bids for the cars from a short line and from another bidder are close.

“Would they take a little hit?” he asked. “They haven’t told us.”

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