RALEIGH, N.C. (AP) — The North Carolina Railroad Co. offers rail transportation but owns no locomotives. It’s a private corporation, but the state is its one shareholder, representing millions of taxpayers.
The railroad is indeed a strange bird, one created in 1849 by the Legislature to capitalize on the rapid development of train traffic to move goods and passengers.
Today, it owns 317 miles of rail and land from Charlotte through Greensboro and Raleigh to the Morehead City port and operates largely on the $14 million annually it receives from Norfolk Southern Corp., for use of the rails for freight traffic. Amtrak trains also use the tracks daily.
“It’s unique that the state owns stock in a private railroad corporation,” railroad President Scott Saylor said in an interview. Unlike other state governments that may own their own rails, he added, North Carolina is different because it owns “a railroad franchise.”
Lawmakers at the General Assembly appear to want the state to become more active owners nearly 15 years after the last private shareholders were bought out. Key legislators sound on board with a proposal for next year’s session that would place more oversight upon the railroad and demand the state receive direct cash dividends again for company shares.
The Program Evaluation Division, the Legislature’s state government watchdog agency, said the state has contributed greatly to the fiscal health of the railroad company. But lawmakers have few avenues for keeping watch.
A recent division report on the railroad recommends lawmakers require the N.C. Railroad provide a one-time $15.5 million dividend in 2013 and resume annual dividends in 2014, expected to be at least $3.7 million. Current law makes a cash dividend optional. The railroad last gave a cash dividend to the state in 2005 of about $10 million.
The railroad “would still have the lion’s share of the money for economic development and track improvements. I don’t think that we’ve gutted their revenue,” said Rep. Edgar Starnes, R-Caldwell. “The state owns the railroad, so (we’re) just trying to have a reasonable dividend, to get the benefit of the ownership.”
The economic downturn, the lack of state revenues and the rise of the Republican majority in the Legislature caused some lawmakers in 2011 to consider whether selling the railroad assets made sense. The division report offered several reasons against the idea, but added now “the state is not profiting financially from being the sole shareholder of the corporation.”
Railroad leaders say they’ve been providing alternatives to dividends in recent years that benefit the state. The railroad’s profits have been sown back into replacing aging bridges, doubling tracks in high-congestion areas and improving safety for pedestrians. N.C. Railroad track also will be used later this decade to extend Charlotte’s light rail.
Saylor said requiring regular cash dividends could make it more difficult to reach the railroad’s goal of completing $437 million in capital improvements, when funds from governments and Norfolk Southern are added. The railroad has saved $70 million toward its $95 million share for the projects.
Saylor said he hopes the railroad one day could help assemble an industrial site along the railroad corridor that could attract an automobile manufacturer. Better rail means companies along the route can grow new firms attracted to the region, according to Saylor, adding the railroad has contributed to creating thousands of jobs.
“The goal of these resources is to give North Carolina a competitive advantage in recruiting industry to the state,” Saylor said.
The division’s report said the state has contributed nearly $200 million to the N.C. Railroad since 1998, mostly in the form of Department of Transportation spending for capital improvements within the railroad’s corridor. The Legislature eased repayment of a $61 million loan it gave to the railroad to complete the private shareholder buyout in 1998.
Draft legislation considered by lawmakers would require the railroad to disclose more information to lawmakers, hold a strategic plan and explain why objectives weren’t met. The railroad also would give the state 14 tracts of land to sell that are providing little or no income.
None of the legislators reviewing the proposal balked at the proposal of the dividends, although lawmakers in 2013 are likely to differ on whether dividends should go to the state’s general coffers, pots of transportation money or for rail-specific projects
Sen. Fletcher Hartsell, R-Cabarrus, who uses the railroad when he takes Amtrak from Kannapolis to Raleigh for legislative business, said he understands the importance of the company toward rehabilitating the Piedmont’s manufacturing corridor. But he also said it helps to have clarity about the relationship between the company and its only shareholder.
“If the state’s going to own it and have the risk of owning it, there ought to be some … direct shareholder benefit to the state,” he said.
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