THE OHIO RAIL DEVELOPMENT COMMISSION

As a result of these cuts, ORDC staff has decided, upon Commissioners’ approval, that Maumee & Western and RJ Corman will be the only two projects to be considered to receive grant monies for rehabilitation. These two projects were identified by ORDC staff as being the two most necessary projects to complete at this time. A total of eight rehabilitation projects were previously presented at the January Commission meeting. The remaining six projects that are currently not being considered for funding have been notified via letter from Director Seney.

Chairman Betts asked for a motion to approve the revised FY ‘04 budget to accommodate Governor Taft’s Executive Order 2004-03T. Commissioner Clark moved to approve and Commissioner Creighton seconded. Roll was taken and the motion was passed with eight votes in the affirmative.

QUIET ZONE RULES

Susan Kirkland, Manager of ORDC’s Safety Section, reported on the Federal Railroad Administration’s (FRA) proposed rule for the use of locomotive horns at highway rail grade crossings (quiet zones). Ms. Kirkland indicated that the FRA was requested by Congress to draft Quiet Zone rules, which they have done, but that as a result of these rules the ORDC has presented comments to the FRA to provide for greater safety at these crossings where horns would be prohibited from sounding. A short discussion followed with Commissioner McOwen commending ORDC staff on its attempts to increase safety in these areas. Ms. Kirkland reported that the FRA and the Federal Highway Administration (FHWA) have differences of opinion over what a motorist will encounter when approaching a grade crossing in a quiet zone. She indicated that the FHWA feels that the FRA is encroaching on its authority with regard to highway signage because the rules address signage at grade crossings in a quiet zone. Director Seney reminded everyone that all federal rules would preempt any ruling made by a state, but that it was the goal of the ORDC to have the Ohio Legislature pass the Quiet Zone legislation to use as a policy guideline should the state ever become involved in funding safety devices within a quiet zone. This would allow the ORDC to investigate the project as a safety project and not a quiet zone project. ORDC desires to have control over this so safety is made the top priority in these areas.

Chairman Betts asked what the next steps would be if ORDC’s comments would be approved by the Commission and forwarded on to the FRA. Ms. Kirkland reported that all current indications suggest the FRA’s initial rules will be approved and implemented in December of 2004. ORDC’s attempt to have these rules revised may be a futile effort, but we would be remiss as an agency if we did not voice concerns with the initial rules with regard to highway safety.

Chairman Betts asked for a motion to “authorize ORDC staff to submit the comments to the FRA regarding the proposed rule on quiet zones.” Commissioner McOwen moved to approve the motion and Commissioner Roberts seconded the motion. Roll call was taken and the motion was approved with eight votes to the affirmative.

PROJECTS

Resolution 04-03 - City of Marion CSX Mainline Industrial Connector

Lou Jannazo, ORDC’s Chief Planner, briefed the Commissioners on the City of Marion’s request for a $600,000 loan to build a turnout and spur to connect the Dofasco Steel plant with the remaining portion of the Dual Rail Industrial Park. Mr. Jannazo introduced Dave Claborn, Executive Director of Marion Can Do!, who briefed the Commissioners on the additional details of the project. Dofasco will be adding an additional 132,000 s.f. of space to its tube mill in order to increase its ability to handle larger steel orders. This connection will assist the company in reaching its suppliers and customers more economically.

Chairman Betts asked for a motion to approve Resolution 04-03. Commissioner Wolfe moved to approve the motion and Commissioner Sowers seconded the motion. The motion was approved with seven votes in the affirmative. Commissioner Jackson abstained from the vote.

Resolution 04-04 - Maumee & Western Track Rehabilitation Grant

Lou Jannazo introduced two representatives of the Maumee & Western Railroad (MAW) who presented an overview of their proposed project. Mr. Spence Wendelin, President, and Mr. Pete Bell, General Manager, of the MAW spoke on their request for a $168,405 grant to assist with the four rehabilitation projects the railroad has planned in the Napoleon, Defiance, Oklona/Jewell and Cecil areas. This grant is in conjunction with a loan request by the company for the Cecil area.

This railroad serves companies located on 51 miles of track between Woodburn, Indiana and Liberty Center, Ohio. The majority of the track (47.7 miles) is located in Ohio. The line between Cecil and Defiance is currently out of service. When the railroad acquired this line from the Indiana Hi-Rail Railroad in 1998, the MAW also acquired deferred maintenance issues. Poor track conditions are preventing the railroad from adequately taking advantage of the economic development opportunities along this line. The rehabilitation will assist the MAW to provide better service for its customers with the potential for increased business.

Commissioner McOwen inquired about the types of derailments that are occurring in the areas where the track is bad. Mr. Bell responded by indicating that the problems are mostly tie-related and that the overall cost of the derailments is approximately $100,000 annually. A short discussion followed. Mr. Wendelin reported that three additional companies have expressed an interest in the use of the line if the maintenance issues are resolved. One of the three companies projects an estimated usage of 600-700 cars per year. Commissioner Sowers moved to approve Resolution 04-04 and Commissioner Clark seconded the motion. The motion was approved with eight votes in the affirmative.

Resolution 04-05 - Maumee & Western Railroad Liberty Center to Napoleon Rehab Loan

Lou Jannazo spoke on the MAW’s request for a $206,000 loan to rehabilitate the easternmost six miles of the railroad’s Woodburn, Indiana to Liberty Center, Ohio line. A short discussion followed with Commissioner Wolfe moving to approve the loan and Commissioner Creighton seconding the motion. The loan was approved with eight votes in the affirmative.

Note: Due to a previous commitment, Commissioner Clark departed prior to Resolution 04-06.

Resolution 04-06 - RJ Corman-St. Mary’s Line

Mr. Jannazo briefed the Commissioners on the RJ Corman’s request of $259,722 in grant funds to assist with rehabilitation projects along the St. Mary’s line. RJ Corman is requesting to receive $213,032 in ORDC state grant funds and $46,690 in ORDC federal grant funds for a total of $259,722. Mr. Jannazo asked Beverly Lee, ORDC Planner, to continue to brief the commissioners on this project. Ms. Lee reported that these grants will assist with improving the line to prevent an increase in crew and fuel costs due to slower operations on the line. Rebecca Lowden, RJ Corman Grants Administrator, was present to answer any questions from the commissioners. Ms. Lowden reported that this grant will be “an excellent start for them for rehabilitating the line.” Mr. Jannazo reported that slower train speeds reduce profits and the ability of the railroad to serve its customers effectively which may prevent additional rail business. The rehabilitation will enable RJ Corman to maintain train speed and potentially increase its profitability. The line is only marginally profitable at this point, so cash flow for maintenance along the line has been an issue. Over the next three years, approximately $1.3 million in track work will be necessary.

Commissioner Wolfe asked for a motion to approve Resolution 04-06. Commissioner Creighton moved to approve the motion and Commissioner McOwen seconded it. The motion was approved with six votes in the affirmative and one abstention.

Note: Due to a previous commitment, Chairman Betts had to depart early and asked Commissioner Wolfe to chair the remainder of the meeting. As voting continues, please note there are two voting members absent rather than one.

APPROVED PROJECT BRIEFINGS

McDermott Industries, LLC

Ms. Beverly Lee reported on the $25,000 grant request to assist McDermott Industries with the cost of a Prentice Truck to be used to transload lumber products on and off rail cars in Portsmouth.

Commissioner McOwen asked for additional information on the project and how this truck will be used. Mr. Carl Pertuset, owner of McDermott Industries, spoke about the company’s need for this equipment as lumber products will be transloaded on and off the truck and will also be transported from the site to the car (approximately 12 miles). McDermott Industries cannot get rail service at its facility because Norfolk Southern (NS) has taken its line from Winchester, Ohio to Portsmouth, Ohio out of service. The company has an agreement with NS to load at a Portsmouth site. A short discussion followed.

Sun Coke/Haverhill North Coke Company

Mr. Jannazo reported on Sun Coke/Haverhill North Coke Company’s plans to invest over $1.6 million toward the construction of 13,800 feet of new siding tracks to serve a new coke plant currently under construction at its facility in Scioto County near Portsmouth. ORDC has committed to provide a $25,000 grant toward the costs of this improvement. An ORDC grant is being provided as part of a State incentive package. A total of 64 new, full-time positions will be created as a result of this project. The company reports that $130 million will be invested and over 10,000 rail cars will be generated annually in Phase I of the project.

Director Seney asked if barge traffic will be generated as a result of this project. Mr. Stan Wash, Vice President and General Manager, responded by indicating that barge traffic is currently not a part of the project. Commissioner McOwen asked where the coal was coming from for the company. Mr. Wash reported that the coal arrives by rail from West Virginia.

Tower Products

Mr. Jannazo reported that in January 2002, Tower Products requested a $50,000 grant to assist with a rail spur at its Bellevue, Ohio plant to accommodate the Ford Ranger operations that the company had proposed to move from its Milwaukee, Wisconsin location. The grant was approved and encumbered. In December of 2003, management at Tower decided that moving operations of the Ford Ranger frame line from Milwaukee to Bellevue was a “discretionary” improvement and not a core improvement that the company absolutely needed to make. Tower Products had already invested $6 million of the proposed $20 million investment to the plant to prepare for the Ranger line. The rail spur was constructed and inspected by ORDC in December. As a result, ORDC has slightly amended the terms of the grant, but still intends to provide the $50,000 initially approved because Tower, in good faith, applied for the funds based on the increased business from the new line. Because the spur is already in place, Tower will be able to attempt to secure new business to help recoup the $6 million already invested in the plant. The company has been extremely cooperative. ORDC feels the worst case scenario will be that the jobs and car loads committed will not be met and the grant, in effect, will become a three-year loan that the company would repay beginning in January of 2007.

McGrann Paper Spur

McGrann Paper has requested a $25,000 grant to assist with the construction of a 600-foot rail spur at its new plant and headquarters located in Canton, Ohio.

Mr. Jannazo briefed the commissioners on the company’s need for the spur. McGrann has outgrown its Canton facility. During the process of seeking to expand the facility, McGrann decided to move its current headquarters from Watertown, New York to Canton to more efficiently serve its customers. McGrann plans to spend approximately $3.3 million to purchase and expand a building that has over 100,000 s.f. of space and is located right next to the NS mainline through Canton. The availability of rail was a vital factor in the company’s decision to move its headquarters. The ORDC grant is part of a larger state incentive package the company is receiving from the Ohio Department of Development. Mr. Jannazo distributed a diagram of the proposed new rail spur. Mr. Bill Leishman, Plant Manager, McGrann Paper, was present to answer any questions. A short discussion followed.

OLD BUSINESS

Commissioner Roberts asked about the current status of the Cleveland Hub study. Director Seney responded by indicating the study is almost finished. He reported that a delay was experienced because of maintenance cost projections on the 100 mph portion of the system. The Class I railroads disputed the projections so another opinion was sought from a second consultant. An additional independent study was also done by Amtrak. All three numbers are different, thus invoking the Federal Railroad Administration to become involved. Director Seney indicated that ORDC is currently in discussions with ODOT for the use of planning money for the project. ODOT has not responded yet. The report is in the final process of review and should be printed and ready sometime in July. Director Seney also reported that cooperation from the Class I railroads has been excellent. Discussion followed.

Commissioner Wolfe asked if a retreat was being planned, due to the current budget issues. Director Seney responded that a one day retreat will be held sometime this year.

NEW BUSINESS

None.

PUBLIC COMMENT

Mr. Michael Connor, Vice-President of Ohio Central Railroad (OC), spoke about some new business the railroad will be getting soon from a bio-fuel plant in Coshocton. Mr. Connor also spoke about an underground coal mine in Dennison, Ohio that will be opening soon. He also commented on the fact that 65% of OC’s traffic (excluding coal traffic) originates and terminates within 350 miles. Mr. Connor stated that by deferring maintenance and allowing track to decay it is, in effect, “signing a death warrant” for the shortlines, Class II and III carriers. Lastly, Mr. Connor reported that the Dennison Depot Museum is having its 15-year anniversary and will be celebrating by co-sponsoring “Train Festival 2004" in late July. This will most likely be the largest assembly of steam locomotives and railroad equipment in the U.S. this year.

Pat McCune, consultant for the Wheeling & Lake Erie Railway, conveyed the company’s thoughts on the vital role the ORDC plays in economic development for all railroad companies and pledged their support/assistance to get that message out to the public.

Art Arnold, President, Ohio Association of Railroad Passengers, wanted to recognize and commend the ORDC Safety Staff on the quiet zone issues on both the state and federal levels and its attempt to allow for greater safety measures in the legislation’s language. He also commented on the commitments made at the meeting to RJ Corman and the MAW and commended the Commission on its efforts to invest in railroads and attempt to return freight hauling from trucks back to rail. He commented on the increased need to focus more dollars on rehabilitation.

Jim Ong, Brotherhood of Locomotive Engineers, thanked the Commission for forwarding the safety comments on to the Federal Railroad Administration for quiet zones. He also commented that the Teamsters Union feels that the Commission is a very important entity to the industry and the State of Ohio and thanked the Commission for its efforts.

Commission Meeting - March 25, 2004

Page Seven

Commissioner Wolfe echoed his comments and thanked everyone for coming and being interested in the issues that effect the rail industry.

ADJOURNMENT

Commissioner Wolfe asked for a motion to adjourn the meeting. Commissioner McOwen moved and Commissioner Creighton seconded the motion. Motion approved. The meeting adjourned at 12:20 p.m.

MARCH 25, 2004