'No doubt' South Shore sale was discussed, railroad officials says

CHESTERTON | South Shore Line officials say there is no doubt that the governor's transportation chief asked the South Bend-to-Chicago commuter railroad to look into privatization options.

But federal restrictions and financial concerns make a lease or sale improbable, if not impossible, board members of the Northern Indiana Commuter Transportation District said during a special meeting Friday.

The meeting was called after the state Department of Transportation and Gov. Mitch Daniels denied Times reports earlier this month that state Transportation Commissioner Tom Sharp asked NICTD General Manger Gerald Hanas to explore privatization possibilities.

"It takes away any doubt that the conversation happened," Dennis Burke, a NICTD conductor appointed to the board by Daniels, said after the meeting. "It gives employees and riders a peace of mind."

Hanas told the NICTD board that Sharp said the railroad, "should explore any kind of P3 (public-private partnership) available to us."

The suggestion, Hanas said, came during an Aug. 3 meeting in which Sharp said the state likely could not meet the railroad's request for $31 million in federal infrastructure funds. An INDOT spokesman has denied that the conversation turned to privatization, and Sharp has not responded to interview requests from The Times.

"We didn't think it was a big deal, except it was denied," said David Niezgodski, the South Bend Democrat who chairs the NICTD board. "I don't think any one of us here have understood why there has been such a denial of that statement."

The state's only response Friday came in the form of a letter responding to earlier questions from state Rep. Scott Pelath, D-Michigan City.

Gov. Daniels has "absolutely zero interest" in privatizing the South Shore Line, the letter from INDOT said, reprising earlier statements.

"Unfortunately, at today's meeting of the governing board for NICTD, the facts pointed to a different conclusion," Pelath said after the meeting.

NICTD board members made similar remarks.

"I think (this meeting) clears up doubt (that a privatization discussion took place)," said Al Steele, a Porter County Council Republican. "It brings it out into the light, so the public can make its own decision. It will no longer be a question to them."

Hanas said NICTD has explored some leasing options, but concluded that federal regulations prevent a full lease or sale of the railroad. The South Shore doesn't make money either, relying on the state for roughly a third of its $30 million annual operating budget.

Hanas said Sharp called the South Shore's request for a multi-year stream of $31 million in capital improvement funds  "optimistic" and that Sharp advised NICTD to request dollars from the Northwest Indiana Regional Development Authority. The state, officials said, has yet to say how much federal money might be available to the railroad.

NICTD is heading into the private market to investigate financing in a possible 15-to-20-year municipal lease agreement to purchase at least a dozen new rail cars, said John Parsons, NICTD's marketing director.

Parsons said the agreement would resemble a bond deal, and "Isn't in any way, shape, or form a concession or a P3," in the sense that NICTD would not receive any money, but the private investor would assume the risk for future federal funding.

Times Statehouse Bureau Chief Patrick Guinane contributed to this report.