Los Angeles plays legal hardball with Santa Fe over railway lines
October 21, 1991
By CHIP JACOBS AND TODD WHITE
In a move that could aid local transit agencies in their efforts to build a coastal commuter rail, Los Angeles County transportation officials this week hope to launch a series of aggressive legal tactics designed to break Santa Fe Railway’s hold on 240 miles of track.
As part of a four-prong, hardball legal strategy, the Los Angeles County Transportation Commission plans to file a petition with the federal Interstate Commerce Commission in Washington, D.C., on Oct. 21 to gain access to 25.5 miles of key track owned by Santa Fe in eastern Los Angeles County.
Simultaneously, Southern California transit officials will seek congressional sponsorship for changes in federal transportation law that they claim currently favors railroad land holdings.
Although the ICC petition does not pertain to any of the 88 miles of track that local transit agencies hope to buy from Santa Fe, officials here said the move could pressure the railroad giant back to the bargaining table.
“They’re laying out some interesting legal groundwork here, and we’ll be watching,” said Michael Zdon, senior transportation planner with San Diego’s Associaton of Governments. “It’s hopefully a way to get Santa Fe back to the bargaining table.”
Talks between the coalition of five transit agencies and Santa Fe broke down in August. Santa Fe left the table clinging to an $800 million asking price for 240 miles of rail right-of-way in Southern California.
The transit agencies have offered $300 million, plus track modifications valued at $150 million that will improve Santa Fe’s freight operations in Los Angeles.
If the LACTC’s efforts on the federal front fail, it will consider playing its trump card — the forced sale of rights of way through condemnation proceedings in the courts.
In addition, the LACTC may seek the regulatory clout of the California Public Utilities Commission.
“Unfortunately, the railroad has not come forward with a deal that’s fair to the tax-paying public,” said LACTC Executive Director Neil Peterson.
However, Santa Fe negotiator Mickey Kantor, a partner in the influential Westside law firm Manatt, Phelps and Phillips, said Santa Fe’s price is equitable and based on land assessment methods used successfully by other railroads.
“Santa Fe is clearly cognizant that, on one hand, it has a fiduciary responsibility to its 150,000 shareholders and also a corporate responsibility to operate in the public interest,” Kantor said. “However, we can’t, and won’t, give away the rights of way, and no one should expect us to.”
Kantor added that Santa Fe’s original asking price was $1.3 billion — a tab LACTC Chairman Ray Grabinski labeled “train robbery in reverse” last April in an apparent attempt to mount public pressure on Santa Fe.
The LACTC, through a newly formed body called the Southern California Regional Rail Authority, is spearheading the efforts of Los Angeles, Orange, Riverside, San Bernardino and San Diego counties to acquire the future commuter-rail land.
The more cheaply and quickly the transit agencies can buy the property, the sooner they can begin erecting commuter rail systems to move tens of thousands of people between their jobs, homes, recreation and shopping.
As local traffic and smog problems have worsened in recent years, congestion has been vaulted into the mainstream of political and business agendas. A study by the Southern California Association of Governments in the late 1980s estimated that traffic-related problems — wasted employee time and higher freight charges — have cost Southland industry $4 billion to $5 billion a year.
On a related front, LACTC officials said they believe that they can find sponsorships within the Southland’s congressional delegation for changes in federal transportation law modifying the powers of the Interstate Commerce Commission. If the federal body can be convinced that Santa Fe’s rights of way serve “public convenience and necessity for public transit,” it can order the two sides to negotiate for a sale or access agreement.
Furthermore, transit officials are confident that Southern California congressional members will be eager to front such legislation. Last June, in a rare show of political unity, 24 Southland congressmen wrote a letter to Santa Fe Chairman Robert Krebs saying “alternative solutions” to the impasse will be sought if talks reached a stalemate.
The LACTC also is in the “preliminary stages” of asking the state’s Public Utilities Commission to intervene on its behalf, Peterson said. Under state law, the PUC regulates intrastate rights of way and track if it involves health and safety issues to the general public.
Also in the background looms transit agencies’ powers to use eminent domain — literally condemning and seizing land in the public interest while its owners are paid “just compensation” determined by the state courts. Condemnation has been used to build many major highways and public-works projects.
Copyright Los Angeles Business Journal