Passenger Rail Update

Introduction

This edition of the Commuter Rail Update delves into a recent decision issued by the Surface Transportation Board (“STB”) concerning cost allocation between Regional Transportation Authority’s Commuter Rail Division (“Metra”) and the National Railroad Passenger Corporation (“Amtrak”) for use of Amtrak’s Chicago Union Station. We also highlight New Jersey Transit’s award of a $1.6 billion contract to conduct a much-needed replacement of the Portal North Bridge connecting New Jersey to New York City.

Surface Transportation Board Issues Decision in Dispute Between Amtrak and City of Chicago Over Access to the Chicago Union Station

On August 17, 2021, the STB issued a decision determining the amount of compensation that Metra owes to Amtrak for use of Chicago Union Station (“CUS”), which Amtrak owns and which both Amtrak and Metra use for their respective passenger rail services.

Pursuant to federal statute, Amtrak has the authority to make agreements with other carriers and commuter agencies for freight and commuter service over rights-of-way acquired by Amtrak. See 49 U.S.C. § 24903. In the event the parties fail to agree on terms for the use, federal law also provides the STB with authority to determine compensation for use of Amtrak’s property. Under federal law, the calculation of compensation must not allow for cross-subsidization between commuter rail passenger and intercity rail passenger and rail freight transportation. The Board is authorized to assign costs Amtrak incurs only for the benefit of itself, plus a proportionate share of all other costs of providing transportation for the common benefit of Amtrak and the other carrier.

The dispute between Amtrak and Metra arose in the lead-up to renegotiation of the previous longstanding agreement between the parties governing use of CUS, which was set to expire in 2019. When the parties were unable to reach an agreement, Amtrak filed a petition pursuant to federal statute with the STB to determine compensation governing Metra’s use of CUS.

Before arriving at its decision regarding compensation, the STB addressed the preliminary issue of the burden of proof. Metra had argued that Amtrak bears the burden of proof as the party bringing the case to the Board. Amtrak in contrast argued that both parties carried an equal burden of proof because of the particular nature of the STB’s authority to determine compensation under 49 U.S.C. § 24903, including that neither party may cross-subsidize the other. The STB agreed with Amtrak, finding that neither party bore the sole burden of proof. Instead, the STB stated that it would determine the matter of compensation by equally weighing the arguments and evidence submitted by both parties to determine the most reasonable cost allocation consistent with the statutory requirements.

Regarding compensation, the STB considered both parties’ arguments regarding the application of applicable factors. In doing so the STB rejected Metra’s argument that some costs should not be attributed to Metra at all because of their “marginal utility” to Metra, but rather that all costs benefiting Metra to any extent needed to be apportioned. The STB also rejected Metra’s argument that it should apply a standard from a different section of the federal statute (49 U.S.C. § 24308(a)). At the same time, the STB rejected Amtrak’s argument that the cost allocation policy adopted by Amtrak and commuter rail operators in the Northeast for the Northeast Corridor should apply, agreeing with Metra that this dispute involved a different set of factors and considerations.

The STB also determined that it did not have authority to settle terms of the contract not specifically related to compensation. While Amtrak argued that the STB must set specific contract terms, Metra argued that the STB’s role was limited to setting compensation and potentially providing guidance on disputed contract terms. On this issue the STB sided with Metra, stating that its jurisdiction under Section 24903(c) was narrow and extended only to setting compensation, not other terms and conditions.

The STB went on to address disputed compensation categories of (1) station operations and maintenance (“SOM”), (2) policing, (3) capital expenses, and (4) ground power, as well as applicable general and administrative expenses addition amount and the inflation index that applied to multiple cost categories. The STB determined that other disputed categories would require the STB to opine on agreement terms that addressed matters other than compensation, and therefore would not be reviewed.

Some of the highlights regarding the STB’s application of the cost allocation principles for each category of cost addressed include the following:

  • General and administrative expenses: the STB excluded a number of costs related to general and administrative expenses asserted by Amtrak for which the STB determined Amtrak did not supply sufficient detail for determining the actual benefit to Metra. Cursory statements such as “indirectly support” of organizational high-level management for CUS were not sufficient, for example. The STB did include expenses related to emergency management and corporate security, however, stating the benefit to Metra for these generalized expenses was more obvious without need for additional detail required by other general and administrative services.
  • Inflationary index: the STB followed its previously stated preference for “the index that is most closely related to the type of costs being indexed,” and accordingly assigned different industry-specific indexes to different types of costs.
  • SOM: With respect to designation of “common benefit areas” of the CUS for which costs are divisible between the parties, the STB adopted Amtrak’s proposed allocation, finding Metra’s arguments that its lesser use of many areas generally unsupported. However, the STB also determined that Amtrak’s attempt to exclude lesser used portions in its own use on the basis that these areas required far lower maintenance.
  • Policing: The STB adopted neither party’s methodology for allocating police costs, and instead allocated policing costs according to the same square footage equation that the parties agreed to apply to the SOM expenses.
  • Capital expenses: The STB rejected Amtrak’s proposal to move from determining capital cost contributions on a case-by-case basis negotiated between the parties to a set contribution for different categories of construction. Reviewing the history of capital projects, the STB determined that Amtrak failed to satisfy the burden in demonstrating that a change was needed.

The STB’s cost allocation in this case sets the framework for cost allocation disputes between Amtrak and commuter rail operators under 49 U.S.C. § 24903 going forward. More broadly, it sets precedent for anticipating how the STB could determine cost allocation disputes between Amtrak and commuter rail operators.

New Jersey Transit Awards $1.6 Billion Contract for Portal North Bridge

A key component of the massive Gateway Program, which will double rail capacity between Newark, NJ and New York, NY, took a critical step forward on October 12 with award of a $1.6 billion construction contract to rebuild the Portal North Bridge along a 2.44 mile segment of the Northeast Corridor crossing the Hackensack River in New Jersey. Skanska/Traylor Bros Joint Venture of Queens, New York was selected the winner out of four pre-qualified bidders, two of which submitted proposals on September 2.

The existing Portal North Bridge, a swing bridge constructed 110 years ago, has become a major source of commuter delays on this busy portion of the Northeast Corridor. The new bridge will be a modern two track, high level, fixed-span bridge with clearance enough to allow marine traffic to pass underneath without interrupting rail traffic. The project, which is expected to take five and a half years to complete, is funded by the U.S. Department of Transportation, NJ Transit, and Amtrak. Of the total project cost, $766.5 million will be provided through the Federal Transit Administration.

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