By Jeanne Sager
SULLIVAN COUNTY — January 18, 2005 – The future is closing in fast for towns along the Norfolk Southern Railroad line.
Central New York Railroad began a lease early this month for 123 miles of railway, 30 miles of which run straight through Sullivan County.
And now they’re looking to the Sullivan County Industrial Development Agency (IDA) for tax relief to get their projects off the ground.
IDA Executive Director Jennifer Brylinski says it was only a matter of time – New York State is one of the few places in the country that taxes railroads.
In fact, Brylinski said, the state passed a law in 1999 that would reduce taxes on all railroads over a 10-year period.
The goal was to give taxing authorities such as towns and school districts some time to prepare for the loss in revenue.
Now Central New York is looking to cash in on the new law early – their first request was for a complete exemption this year.
Now the IDA is exploring a plan to decrease the railroad’s taxes by 20 percent each year until the state’s program is completely phased in – essentially they’d save 20 percent in 2005, 40 percent in 2006 and so on.
“In an attempt to preserve this line, we’re looking for a little bit of help,” explained Nathan Fenno, vice president of Central New York.
The four towns which tax railroad property in Sullivan County have already begun feeling the crunch – Town of Delaware Supervisor Bill Moran said they’ve had to pay back money to track owner Norfolk Southern in the past because of reassessments on the line.
Moran said he hasn’t heard a lot of hard facts about the Central New York proposal or the IDA’s plans.
If they’re looking for a full exemption, he said the town would likely vote against it.
He’s heard that if the towns didn’t agree, the railroad would “take their tracks up.” In the Town of Delaware, that’s about 129 acres of assessed railroad land.
What does the town have to lose by voting against a full abatement?
“If they shut it down, we get nothing . . . but we’d get nothing anyway,” Moran said.
On the other hand, if Central New York is only asking for a percentage off their tax bill each year, which will let them off the hook gradually, it could be a little easier to swallow.
Although Moran said he couldn’t speak for his board, he did say a tax abatement plan would work better than a full exemption.
“It would be minimal as opposed to the railroad closing,” he said.
But Moran said he needs hard facts.
“I’m a little leery of being told something without having something on record,” he said. “We have to have something in writing to say, ‘This is what we signed onto.’”
Town of Cochecton Supervisor Sal Indelicato was in the same boat last week.
He’s heard different numbers bandied about, but nothing definite.
But he’s got constituents who are served by the railroad – Cochecton Mills has its own drop-off spot – so it’s a top priority.
Indelicato said he’s hoping the IDA will make a formal presentation to the Cochecton board at some point.
The town has lost money in recent years with the Norfolk Southern reassessment and the overall economy.
“We’ve lost so much in tax assessment in our town over the last 10 years,” he said. “We’ve had a decrease in our tax base because of utilities and the railroads.”
Although he didn’t have any numbers, Indelicato said any figure is significant if it has to be picked up by the remainder of the town’s taxpayers.
Town of Tusten Supervisor Ben Johnson is still working on limited information – just like his neighbors in Cochecton.
But he’s got constituents on the 7 miles of railroad in Tusten to worry about too.
“We’re kind of in a unique situation because we do have people who are served by the railroad,” he said. “We do have to weigh that.”
Johnson said he understands the ultimate decision on tax abatements is up to the IDA, but he’d like to hear from them before they make a move.
The IDA wants to hear from the towns too – they’ve set a February 17 public hearing at the Fremont Town Hall to solicit comment.
Brylinski said the IDA has been looking at this from the viewpoint of what the county has to lose – in this case, an entire rail system.
Fenno said that if a deal cannot be met with the IDAs in Sullivan, Delaware and Broome counties, they will walk away from the deal with Norfolk Southern.
“If we can’t make a go of it, it will go back to Norfolk Southern, and they will do what they have to do,” he said.
“Worst case scenario?” Fenno pondered. “This line gets shut down, tracks get pulled up and the taxes go down anyway.”
Norfolk Southern declined to comment on the future of the tracks if the deal with Central New York were to fall through.
“We haven’t gotten that far yet,” said Rudy Husband, director of public relations in the company’s Philadelphia office.
He said if Norfolk Southern had any plans, they would announce them to the public.
The biggest problem for the IDA, the towns and Central New York right now is taxable status day – March 1.
According to Brylinski, a company’s status on that day determines how they are taxed for the year.
If Central New York’s taxes have not been abated by that point, Fenno said they lose a year of savings.
Currently, Fenno said, the real estate taxes on the line “far exceed” the revenue.
In total, over the three counties, taxes for 2004 were about $1 million.
But Central New York needs to sink about $1 million into the line each year to do some necessary improvements – maintenance-wise and customer service-wise.
“Our plans are to try to continue and improve the rail service to the few local customers on the line,” Fenno said. “We see potential for more local customers. . . . Currently, the vast majority of rail traffic is just passing through.”
Fenno said there are just seven customers on the line, including two in Sullivan County, and service to them hasn’t been the best over the years, just as maintenance programs have sagged.
“It’s been a money-loser for many years,” he said. “This is sort of a last chance.”
Although the deal with Norfolk Southern was finalized on Dec. 31, Central New York can still get out of their $1 lease of the line, Fenno said.
“One of the benchmarks is that we get the taxes reduced by half,” he explained.
The deal went through with some questions hanging in the balance because of an act that passed Congress in October offering tax credits to small railroad companies for maintenance – provided a deal was in place by Dec. 31.
If they hadn’t acted quickly, Central New York could have lost what amounts to about $500,000 a year in business tax credits, Fenno said, money which is going to be used for the maintenance of the line.
“We put together a deal in a number of days with a number of issues to be dealt with later,” he explained
That’s why the company didn’t approach the IDA sooner, Fenno said.
But now they’re up against another time crunch – the March 1 taxable status day.
“If we don’t hit that date, we lose a year,” Fenno said.
The company’s status on March 1 will determine the tax bill from school districts for the 2005-06 school year and the tax bills from local towns for 2006.
The company is looking for the same deal from Broome and Delaware counties – but each is acting independently to come up with a decision.
In Sullivan County, Brylinski said the board is weighing the danger of losing a railroad with the needs of the towns.
“What the board felt is that a lot of times you lose a railroad and that’s the end,” Brylinski noted.
The IDA will hold its public hearing on the matter on Thursday, February 17, at 3 p.m. at the Fremont Town Hall in Fremont Center.