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One of the refurbished commuter railcars on display in Ann Arbor in June 2013.
(Ryan Stanton | The Ann Arbor News)
LANSING, MI -- The Michigan Department of Transportation is considering plans to sublease rail cars or cut its losses after spending millions preparing for commuter rail lines that have yet to materialize.
Director Kirk Steudle, testifying Wednesday afternoon before a rare joint meeting of three separate House committees, told lawmakers that the department will make a decision within the next 30 days.
"Do we have some viable options to sublease and get these off our books? If not, we terminate the lease and then they're gone," Steudle said. "All options are on the table."
Steudle's testimony came on the heels of an official state audit concluding that MDOT "did not effectively and efficiently oversee the lease and refurbishment" of the rail cars, first acquired in 2010.
As of May 2014, MDOT had spent $9.5 million to lease and refurbish the seven cab and 16 coach cars and is still on the hook for another $2.7 million, according to the audit. Planned restroom upgrades for some of the cars could cost an additional $3.7 million.
MDOT's Office of Rail contracted with Great Lakes Central Railroad of Owosso to lease the cars in April 2010. They were intended for use on two separate commuter rail lines planned to run out of Ann Arbor to Detroit and Howell.
Both projects have been tied up in red tape after oversight was transferred from the Federal Highway Administration to the Federal Rail Administration, per MDOT, and neither commuter line is likely to be up and running until at least 2017.
Lawmakers grilled Steudle and other MDOT officials over the lease, questioning whether taxpayers can trust a department poised to receive additional funding if voters approve a major road funding proposal set to appear on the May 5 ballot.
"We're all twitter-pated by this right now because it was brought up by an audit," said Rep. Ned Canfield, R-Sebewaing. "Are there other skeletons in the closet, so to speak?"
Steudle noted the lease money came out of a restricted mass transit fund that could not have been spent on roads. He said the audit served its purpose by prompting the department to make a decision on the rail cars, which had been the subject of ongoing internal discussions.
"It's now show-up time," he said. "It's less about talk. It's what are we really going to do with these?"
The department subleased the rail cars for two separate events last year, including a "real-life" Polar Express exhibit put on by the Steam Railroad Institute in Owosso. But Steudle said the department is now seeking a longer-term sublease and could send the cars out of state for two or three years until they are needed in Michigan.
Carmine Polombo, deputy executive director of the Southeastern Michigan Council of Governments, said it would be a mistake to terminate the rail car lease this far into the process.
His organization, which has been working with MDOT on the project, remains committed to getting the commuter rail lines up and running in the next two years, he said.
"I think at this point, given where we're at, if we can find a way to sublease these for a couple years and make up a little revenue, we can get them back in good shape," Polombo told MLive after the hearing.
"Because we fully intend on running service. I think that's a prudent way to go. Getting rid of them all together? I don't think that's a good idea."
While several lawmakers on the joint committee criticized the rail car lease, several left the hearing hopeful that MDOT can still make the most of the situation.
"It's a rock and a hard place," Rep. Ken Goike, Ray Township, told MLive. "It's a sad deal, but if the timeline would have went without the federal stuff, they'd have been heroes, because they saved money by getting refurbished cars at a discounted rate. But now they're sitting around for four years, and it's like, what?"
Rep. Marilyn Lane, D-Fraser, suggested MDOT take 60 or 90 days to consider various options on the rail cars -- as opposed to 30 days -- suggesting that a rash decision could jeopardize the prospects of the commuter rail projects, which she supports.
Steudle agreed that it's important to keep the "larger vision" in mind but said the department wants to "stop the bleeding" first.
"You really can't do this in a vacuum," he said. "At the same time, these cars are costing us money right now and we need to figure out how to stop that."
The joint committee -- comprised of House panels on Oversight and Ethics, Transportation and Infrastructure, and the transportation appropriations subcommittee -- is expected to meet again in roughly 30 days to continue discussing the MDOT rail lease and a separate audit on maintenance warranties.
Rep. Joe Graves, R-Argentine Township, said he was frustrated by transparency at MDOT but left the hearing unsure whether terminating the commuter rail car lease would be the best option at this point.
"Without a real thorough report, we can't answer that, and I don't trust them to make a decision on it," Graves said. "But this is something that was planned for years, so why did it take them so long to get to this point? In the private sector, you would have known two years ago."
Jonathan Oosting is a Capitol reporter for MLive Media Group. Email him, find him on Facebook or follow him on Twitter.