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ACR's fate rests in the province's hands.

The future of the Algoma Central Railway (ACR) is in the hands of the Ontario government, and a decision on the rail corridor between Sault Ste. Marie and Hearst is expected imminently.

One proposal is for the province to take over the railbed and rail for a new company that would be structured to operate the rolling stock and services of the railway.

An inter-ministerial committee of government is examining that and other scenarios for the ACR restructuring. Since 1987 ACR's freight division has required annual government assistance.

The Sault-Hearst passenger train has been operating with a federal subsidy since 1975, while the Agawa Canyon tour lost money this year and in 1991.

Sault Ste. Marie MPP Tony Martin favors the proposal. In a recent interview he called it a "legitimate starting point" that could restructure the operation in a way that includes all vested interests.

Martin stressed that no commitment has been made and that the government would have to examine the cost implications in light of the provincial expenditure strategy.

Martin said track-maintenance expenses would cost the government eight to ten million dollars annually, and that additional capital investments are required to upgrade rails and rolling stock.

According to ACR president Stan Black, track maintenance constitutes about 20 per cent of the ACR's costs. Maintenance of equipment such as motor power and rail cars consumes about 26 per cent. Transportation costs, including running and dispatching trains, represent about another 20 per cent.

Black has doubts about the practicality of transferring rail ownership to the provincial government. He said railways are federally regulated under the National Transportation Act and Railways Act and changes in ownership must be approved by the National Transportation Agency.

Moreover, there is the issue of striking a deal acceptable to ACR's nine labor groups which have been without new contracts since December 1991 because of the uncertainties about the company's future.

"If the province owns the roadbed, what happens with all our track maintenance people? What's going to happen to the employees on the rolling stock?" Black asks. The ACR employs 500 people.

Black said his company has been looking at all options to make the railway viable, including reduced labor costs. In 1991 ACR workers were asked to take a 13.6-per-cent wage reduction.

Martin said all of the vested interests are anxious about the railway's future, and that employees in particular need to be assured of protection.

"The government will have to bring to the table some leadership and resources around that negotiating process," he said.

Despite some daunting challenges, Martin remains optimistic about the proposal. If the railway became profitable, the government could recover track maintenance expenses through tolling the rail carrier, Martin suggested. In addition, with the use of the "best technology that is available" the railway could reduce costs through greater efficiency.

Martin referred to "exciting" prospects from private-sector interests looking at the opportunity of running the rail service. He would not name the firms, but said they are companies already in the railroad business which are making money despite current tough times.

Martin recently chaired the government task force that assessed the beleaguered ACR. The task force developed alternatives for the railway's future based on consultations with interested stakeholders including ACR employees, industries along the rail corridor, the tourism industry and community groups.

Under another takeover option the province would pay nothing for the line, and the market would dictate freight rates at levels to cover the cost of operations. But that would spell the demise of the company, according to Black.

"We believe that, if there are not any grants, then the rates we would have to charge would result in business being withdrawn," Black said at a two-day stakeholder's meeting in Wawa in August. "Lower business levels mean that the cost of moving the remaining business increases, and rates have to go even higher."

Martin does not want to see the ACR fold and its future determined by market forces.

"In my mind that's rather drastic in the short term and will bring a whole lot of pain to some industrial sectors that don't need it now," Martin said.

A third scenario would see the Ontario Northland Transportation Commission (ONTC) take over and run the ACR. The commission operates the provincially owned Ontario Northland Railway.

"My feeling is that it's taking a problem that's there now and moving it into the lap of ONTC," Martin said.

But according to Black, a merger with the Ontario Northland Railway would offer the synergy available from combined operations. And the province would benefit from the use of pre-tax dollars for capital work, whereas ACR has to pay with after-tax dollars, Black said.

Whatever the province's future role in the ACR, it has been a key player in keeping the line open to date. In 1990 the provincial government granted ACR $5 million. An additional $5 million grant was given in 1991, followed by a commitment of $9.8 million this year, for a total of $19.8 million during the tenure of the NDP government.

"It's pretty serious money," remarked Martin. "That's $20 million that didn't go to other things."
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Title Annotation:Report on Transportation & Travel; restructuring of financially strapped Algoma Central Railway
Author:Smith, Guy K.M.
Publication:Northern Ontario Business
Date:Dec 1, 1992
Previous Article:Municipal budgets strained by winter's demands.
Next Article:Transportation policy report due by Jan. 31.

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