Downgrading Warning Devices at Ohio Railroad Crossings:
Concerns About Safety and More
By: Dr. Harvey A. Levine

The wheels of government often grind without fanfare or public interest.  Federal, state and local bureaucracies form a network riddled with inherent complexities far beyond the grasp of average citizens, and people tend to be ambivalent toward what they don’t understand.  But apathy does not necessarily equate with unimportance.  For if investigated, seemingly mundane government actions can give rise to concerns that go to the role and ensuing practices of public agencies.  A case in point is the recent decision by an Ohio state agency – the Public Utilities Commission of Ohio (PUCO) -- to downgrade warning devices at three railroad crossings in the Bergholz-Amsterdam area of Jefferson County.  An investigation of the downgrades raised serious questions about the process that resulted in the action, the potential impact of the decision, and the roles of not only PUCO, but the Ohio Rail Development Commission (ORDC) – the owner of the crossing track -- and ultimately, the Ohio Department of Transportation (ODOT). 

If viewed from a narrow perspective – that is, the adequacy of protection for motorists at the three railroad crossings – concerns range from setting an inappropriate precedent, to fostering unsafe conditions.  If viewed from a broad perspective   – that is, the effectiveness and efficiency of government -- concerns range from wasting taxpayer monies to undermining motorist safety at railroad crossings throughout the state.   Encompassing both perspectives is the realization that discretionary public monies in Ohio can be expended on promoting and/or enhancing railroad safety.  When economics trumps safety, people’s lives are at risk.

A brief (summarized) chronology of the decision to downgrade the warning devices is as follows: 

May 18, 2007:  As required by state law, the Ohi-Rail Corporation (OHIC) applies to PUCO to eliminate flashing lights at three railroad crossings. The crossings are located on the Piney Fork Branch of the railroad and are commonly referred to as: (1 Country road 75A (2) Liberty Street, and (3) State Route 43. OHIC’s rationale is that over the past 20 years, limited traffic, inadequate revenue, and the lack of accidents have led to deterioration of the warning devices . . . to the point that the devices are no longer functional.

May 20, 2007: PUCO physically investigates the crossings.  

July 10, 2007: A PUCO report concludes that the proposed downgrades should be approved in that the crossings are used only 1-2 times a year by OHIC trains, and that the Jefferson County Engineer’s Office and the Mayor of Amsterdam did not take exception to the proposal.   The recommendation is conditioned on OHIC giving PUCO sufficient and reasonable notice prior to any increase in train traffic, while at the same time, providing flagging protection to the crossing during every train movement over the crossing.

September 4, 2007: ODOT supports the downgrades in a letter to PUCO.

September 14, 2007: The Mayor of Amsterdam supports the downgrades in a letter to PUCO.

September 21, 2007: The Jefferson Country Engineer supports the downgrades in a letter to PUCO.

October 30, 2007: ORDC supports the down-grades in a letter to PUCO.

November 20, 2007: PUCO formally approves the downgrades contingent upon OHIC providing flagging protection . . . and upon OHIC installing two crossbuck signs, one for each highway approach at each crossing, in accordance with the Manual of Uniform Traffic Control Devices.  PUCO states that it will monitor the crossings and if railroad traffic increases it will re-examine the adequacy of crossing protection. 

December 28, 2007: The lights are taken down and crossbucks, are installed.    

January 23, 2008: PUCO issues its final report after inspecting the crossings.

It is understandable that the downgrades drew no interest from the general public. First, there were no public hearings on the matter and apparently, little, if any, publicity that could stimulate public interest.  Second, since the lights were inoperative, any alternative warning device would appear on the surface to be an upgrade. (Obviously, crossbucks are a downgrade from operating lights.) In fact, part of PUCO’s approval of the downgrades was based on the active warning devices being in a state of disrepair. Third, local public officials did not protest the downgrades, and in fact, supported them. And finally, the action could have been viewed as an internal matter of the state government.  However, at the risk of being trite, “all that glitters is not gold.”

Presented below are questions (concerns) and related explanations regarding the downgrades, identified under two categories: (1) the downgrades, and (2) Ohio’s governing authorities. 

Aside from the general issue about the sensibility of the downgrades, it should be kept in mind that the process may have set a questionable, if not troubling, precedent.

After years of allowing the lighted warning devices to deteriorate at the three crossings, in 2003 OHIC asked American Electric Power to shut off the electricity to the lights.  It appears that OHIC took this action without the approval of PUCO – in violation of its lease agreement and state law.  The lease agreement states that:  Lessee further covenants and agrees that it will also assume any obligations and/or responsibility as may have been or may hereafter be imposed by ORDC or any Public Utility Commission or other government agency having jurisdiction for any and all bridge structures and grade crossings and their appurtenances, including but not limited to the removal, repair or restoration of same in accordance with the requirements of said commission or other government agency.  Furthermore, Section 4907.69 of the Ohio Revised Code states that no mechanical grade-crossing warning devices are to be abandoned or removed without the consent of PUCO.   Did ORDC and PUCO not know about the dismantling of the light systems at the crossings in 2003?  Did OHIC take this action without asking permission from PUCO?  Did ORDC not concern itself with the warning devices on property it owned?  Was OHIC fined for its action?  Did PUCO know about the inadequacy of warning devices before 2007 and ignored the deficiencies?  Or did PUCO not inspect the crossings between 2003 and 2007, or even before 2003?  By state law, PUCO is required to inspect railroad property, including crossings.  

Based on data published by the Federal Railroad Administration, U.S. Department of Transportation, it is well known that active warning devices such as flashing lights, are 3-4 times more effective than passive devices in preventing accidents at railroad crossings.  Thus, the overwhelming trend in this country has been to upgrade warning devices at railroad crossings from passive devices such as stop signs and crossbucks, to active devices such as flashing lights and especially, automated gates.   Active warning devices are especially important where there is overgrown vegetation that obstructs motorist views of approaching trains; this is apparently the case in regard to the three downgraded crossings.  Furthermore, the crossings are close to several elementary schools employing school buses.  Downgrades of warning devices should not be made to look like upgrades because of previous inappropriate maintenance.  The decision to downgrade warning devices should be based on adequately-maintained devices.  What makes the lack of functional warning devices even more alarming is that the state of Ohio is the owner of the track located within the OHIC-operated crossings. 

OHIC’s business is comprised of carload traffic (albeit scant on the Piney Fork Branch), trans-loading at the Minerva yard (north end of the line)  and freight-car storage, including storage near the downgraded crossings at Watheys, Bergholz and Phillips.  Car storage – essentially, warehousing freight cars of other railroads – requires car movement.  Doesn’t OHIC use switch engines to move stored cars?  Don’t these engines move through the downgraded crossings?  Why didn’t OHIC identify these movements in its application to PUCO?  Did PUCO explore switch-engine activity over the subject crossings?  If so, why were these movements not identified or discussed in PUCO’s decision to grant the downgrades?  Why was the issue not raised by ORDC?  Is it or is it not an issue?  A switch engine pulling empty freight cars can be as dangerous to motorists as a regular, diesel engine pulling loaded freight cars.

ORDC manages a program in which Buckeye Crossbucks replace old-fashion crossbucks at railroad crossings throughout the state.  The more contemporary Buckeye Crossbucks are reflectorized, thereby providing additional visualization to motorists approaching railroad crossings during evening hours.  It is curious as to why the more substantial and effective Buckeye Crossbucks were not installed at the three crossings.

Since the railroad had the responsibility to maintain its crossings to uniform and national safety standards, and to the extent that such standards were not complied with, OHIC would bear responsibility for such deficiencies.  But since ORDC owned the track, wouldn’t it have some culpability in not ensuring that its property was in a safe condition?  How about PUCO?  The Commission has the responsibility to inspect railroad track and grade crossings in Ohio.  If an accident had occurred in which an inoperative warning device was at issue, ensuing litigation could have looked for the “deepest pockets.” (Ohio)  Another possibility is that in such a case, everyone, and thus in a sense, no one, could have been held to be responsible.  If so, the victim of the accident would have suffered twice.  He or she could have been injured or killed, and the family would receive little, if any, compensation.  

II. OHIO’S GOVERNING AUTHORITIES

While PUCO had to approve the proposed downgrades, ORDC owned the crossing track. The roles and interrelations of these two Ohio agencies in effectuating the downgrades has opened up some related concerns about their involvement in railroad safety, as identified and briefly discussed below.

There are a number of ways that the value of the Piney Fork Branch railroad can be determined. One method – the salvage-value – was used by ORDC to establish a selling price of OHIC. A second method – market value – is what the railroad would be worth to an investor seeking an adequate return on investment. To have a perspective on the value of the railroad, two types of information are identified below: the known investment in OHIC since 1982, and the financial returns realized by ORDC (the owner).  Aside from the known investments, OHIC probably expended monies on improving the railroad that are not familiar to the author of this paper.  

A. Investment in Piney Branch Line

1.  $1,200,000: On July 30, 1982, Ohio paid $532,000 to Conrail (Consolidated Rail Corporation) for railroad track in Ohio, that mainly included: (1) the Piney Fork Branch, extending 34.0 miles from the Minerva Yard, south to just beyond Hopewell (2) the Wolf Run Branch, running 3.8 miles southeast off the Piney Fork Branch at Phillips, and (3) the Pekin Branch, extending 1.5 miles from Minerva, westward. This is track that otherwise would have been abandoned by Conrail. In current (2008) dollars, the purchase price amounts to about $1.2 million. At virtually the same time, ORDC entered into a lease agreement with OHIC.
2. $400,000: Since 1982, ORDC has invested additional hundreds of thousands of dollars into the OHIC operation, -- including over $350,000 in 2001, to rehabilitate track in and around Minerva Yard, and about $43,000 in 2007 to repair some bridges. 
3. $7,000,000: On October 11, 2005, the Surface Transportation Board (formerly the Interstate Commerce Commission), granted the Columbus & Ohio River Rail Road Company (C&OR), trackage rights over about eight miles of the OHIC, to serve the 1,285-acre Apex landfill in Springfield Township. Apex invested about $7 million to rehabilitate the eight miles of track.
4. $600,000: In 2005, the Ohio Central Railroad (OC) built a one-half mile of connecting track to the OHIC, reportedly expending $600,000 of its money on the track; the connection provided expanded market service to both the OC and OHIC.
5. Unknown: Monies invested by OHIC.

B.  Financial Returns                    

1.  $1,500: Payment to ORDC for 5-year lease.
2.  $142,000 annually: Under the trackage-rights agreement, C&OR pays $10 per-car to ORDC as long as ORDC owns the track.
3. $4,500 annually: Apex pays ORDC for an easement that the railroad uses for its side tracks.
4. Free maintenance: Under an agreement with Apex, and land-fill owner pays for the maintenance on about eight miles of track leading to its facility.
5. Unknown OHIC profit from line-haul operations.
6. Unknown OHIC profit from  trans-loading .
7. Unknown OHIC profit from car-storage service.

Given the investment in the Piney Fork Branch and the ensuing benefits, one could rationally surmise that the property would have a market value in the millions of dollars – that is, a railroad bidder would know that it would enjoy upgraded facilities, receive substantial annual revenue, and avoid paying maintenance expenses on a goodly portion of its track. 

On May 7, 2004, OHIC offered to purchase the Piney Fork Branch from ORDC based on an appraised value. OHIC paid for the appraisal, which set the salvage value at $1.282 million, based on $1.182 million for liquidating track and fixtures, and $.1 million for real estate. From ORDC’s perspective, the sale was contingent upon formal Commission approvals, and the successful negotiation of a purchase and sale agreement. Further . . . ORDC would need to follow standard procedures such as obtaining local public input and whatever administrative requirements apply. Given an estimated $9 million or more in investment, and benefits to the owner and operator of the Piney Fork Branch as identified above, surely the property is worth more than its salvage value.  Railroad business is surging throughout the country – in no small part, to increased fuel prices that work to the disadvantage of the trucking industry. Ohio can always realize the salvage value of the PineyFork Branch, so it would seem appropriate that before ORDC sells the track, that it undertake a comprehensive review of OHIC’s financial records over the past several years, as well as a market evaluation of the Piney Fork Branch.      

Since railroads constitute an industry that have been found to have a public nature and responsibility, it is essential that Ohio ensures that it leases railroad line to responsible parties who operate the railroads in the public interest. More specifically, railroads – which receive exclusive publicly-granted licenses to operate, and often receive public assistance – have the duty to serve the public, rather than to strive for short-term profits at the risk of longer-term insolvency.  Ownership of OHIC primarily resides with an investor living in California, who is not an expert in railroad matters, and thus relies on the railroad’s general manager to run the operation. On July 1, 2006, a new general manager was named to run OHIC.  According to “The News Leader” (July 20, 2006), the general manager stated that nobody has been fired, but the employee structure will be changed and some current positions will no longer exist.”  In reality, a number of full-time employees have been fired. These firings raise the issue of other possible changes – especially since effective June 25, 2007, OHIC entered into a five-year lease with ORDC, for the fixed sum of $1,500.  The new general manager previously ran a railroad system that in 1994 was admonished by the Interstate Commerce Commission (ICC). The ICC found the railroad to be over-charging for switching rail cars and for not filing required tariffs (Finance Docket No. 40857).  In a second proceeding in 1994, the ICC ordered the railroad to start honoring its labor contracts, or it would face enforcement action.  (Finance Docket No. 32523). Apparently, the railroad established a non-union entity primarily, if not solely, to avoid the higher costs of complying with union contracts.  Furthermore, in the late 1990s, four railroads owned by the new general manager went bankrupt, leaving the equity providers with losses of their investments.         

The United States is the only country in the world whose entire railroad system was developed as privately-owned-and-operated, for-profit entities. In 1970, the country’s intercity railroad passenger service was transferred to government ownership (Amtrak), but with relatively few exceptions freight railroads remain in private hands. Over the past 30 years, foreign countries have been privatizing their government-owned railroads. Thus, for Ohio to own freight railroads is somewhat against prevailing characteristics and trends of the freight-railroad industry.

There are several potential problems with Ohio’s ownership of railroads. First, it may be a bad investment. In the case of the Piney Fork Branch, Conrail was willing to abandon the property, and ORDC (Ohio) appears willing to sell the property for less money than it is worth. Second, and at the opposite end of the scale, government ownership of railroads can result in tax-payer subsidization. If a private company (railroad) is realizing profits, why should it be subsidized with public funds? Third, there is the potential for bias in ORDC’s allocation of public monies. Once it has invested capital in a railroad line, it is only logical that ORDC would not want to see the railroad infrastructure deteriorate and/or the railroad fail. Doesn’t this put ORDC in a position of favoring its lessees over other non-affiliated railroads? Finally, as stated above, there may a chance that the state has exposure to liability in case of an accident on its property.   

In its charge to promote and provide financial assistance to railroads operating in Ohio, ORDC could be viewed as essentially an arm of the railroad industry. Railroads are responsible to their shareholders, customers, employees, and society at large. The conflicts among these constituencies require a balance that sometimes pits profits against adequate safety. Is ORDC in the same mode? And if so, does it sometimes choose promotion over safety? A case in point is that in providing $42,924 to OHIC in 2007. ORDC justified the grant largely on the basis of improving safety, as the money was to be used for repairs to railroad bridges and employee walkways. But isn’t OHIC responsible for maintaining its bridges and walkways? Isn’t the grant really a maintenance subsidy? In a sense, virtually all maintenance has to do with safety, but maintaining an asset does not enhance safety; rather, it is the lack of maintenance that jeopardizes safety. 

Another conflict between railroad promotion and safety in Ohio relates to how ORDC expends public monies for upgrading warning devices at railroad crossings. As a condition for receiving federal funds for crossing upgrades, PUCO has established a Hazard Index that ranks each crossing in the state in regard to the probability of accidents occurring. For the most part, this index is used by states throughout the nation as the major determinant of where public funds will finance the installation of automated gates.  However, while ORDC employs the Index, it also makes decisions on gate installations in two other major ways: as part of its corridor program (where gates are installed at contiguous crossings along a rail corridor), and at crossings where fatal crashes occurred. The potential compromise of safety with these two programs is that in the first instance, economic considerations may trump safety, and in the second case, public persona may be the prime consideration. In both cases, it is likely that ORDC decisions are at odds with the rankings of PUCO’s Hazard Index. Thus, it would appear appropriate for the state of Ohio to re-examine its practice of assigning both railroad promotional responsibility and railroad safety responsibility to the same agency – and in fact, to an agency that appears to have little, if any, oversight.