After more than a year of lobbying to keep passenger service running between the Sault and Hearst, a local working group is now recommending the city not sign a funding agreement with the successful proponent.
In a report to council included in the agenda for Monday’s regular meeting, Tom Dodds, head of the Economic Development Corp. and interim chair of the passenger rail working group, recommends against signing a funding agreement with Railmark Canada at this time, citing the Wixom, Michigan company’s failure so far to provide proof it has the working capital necessary to proceed.
Dodds recommends “other options” be explored to secure a third-party operator for the Sault-to-Hearst passenger Service and that he and the mayor write a joint letter to the Minister of Transportation and CEO of CN requesting "their continued commitment" to efforts to find a short and long-term solution.
“As of June 16, 2015, the Stakeholder Working Group had received no confirmation that RCL had working capital financing, no confirmation of the equity that RCL would be injecting into the company, no draft term sheet from a working capital financier, nor does the Stakeholder Working Group have any written comments from RCL regarding the draft agreements - despite two prior written formal demands with delivery dates and consequences,” says the report to council.
The federal government announced at the end of March that it would provide a $5.3-million subsidy over two years, on the condition the funds flow to Railmark Canada through the city of Sault Ste. Marie.
A working group report to council earlier this year says CN selected Railmark to run the passenger line from among three competing bids in the fall, after which members of the local working group began pressing the Ministry of Transportation for funding.
This came after what the working group has described as a “thorough analysis of (Railmark’s) bid” prior to final negotiations with CN taking place in January and after “due diligence” being undertaken on CN’s part before it signed a deal with Railmark as a third-party operator in March.
City council has also lent its support to efforts to save the rail line, having sent letters to federal Transportation Minister Lisa Raitt in support of the working group’s earlier recommendations that Railmark be funded as a third-party operator.
It is unclear what happens if the city doesn’t agree to fund Railmark.
MP Bryan Hayes, who has lobbied his Conservative colleagues for funding to keep the line running, told SooToday last week that he expects the funding would still be in place if the city doesn’t sign an agreement with Railmark and that the ball would be back in CN’s court.
CN reiterated this morning that should the city and EDC not complete the agreement with Railmark, it has no plans of continuing to operate the passenger service.
“The company is clear that it is not prepared to operate the Hearst passenger train,” said Mark Hallman, CN's director of communications and public affairs.
CN will continue to operate the Agawa Canyon Tour Train after plans to have Railmark take over that service did not come to fruition.
CN will not be operating the Snow Train.
Dodds says in the report that Railmark Canada continued, as of Tuesday, with efforts to secure the required working capital and raises the possibility of a lawsuit should the city refuse to continue to negotiate with Railmark.
The report also notes that CN officials have been working with Railmark Canada earlier this week to help the company put a term sheet together for financing.
Dodds has said that if the Railmark deal does not come through, he hopes there would be an opportunity to find an alternative third-party operator.
According to the working group's report to council, Railmark Canada has been operating the Sault-to-Hearst passenger service throughout May and June three times a week at its own expense - estimated to total more than $200,000 since May 7.
CN employees continue to operate the train under Railmark's oversight, though Railmark employees are "gradually" taking their place, Hallman said.