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Pataki approves rail property tax cuts

(The following article by Eric Durr was posted on The Business Review’s website on January 31.)

ALBANY, N.Y. -- New York Gov. George Pataki has approved legislation slashing railroad property taxes by 45 percent.

Approval of the legislation removes a roadblock to construction of a second rail line along the CSX right-of-way between the Rensselaer Rail Station and Schenectady. Completion of a second line is considered critical to implementing high-speed passenger rail service on the Empire Corridor that runs from Niagara Falls, through Schenectady and Albany, N.Y., to New York City.

On Friday, the governor announced that he had signed the "rail infrastructure investment act of 2002" into law.

The legislation reduces railroad property taxes by about 45 percent by changing the way the property is taxed. The legislation also exempts railroad capital improvements from local taxation for 10 years.

To compensate for revenue lost to local governments and school districts, the bill requires the state to set aside $70 million to be paid out to these entities over a 10-year period. Local governments will get $4.7 million in 2003 to 2004.

At the end of that time, these taxing entities would have to find other ways to make up for revenue they're no longer collecting from railroad property.

The measure has been proposed by the Governor for the past two years.

"We fought for this initiative because we know how important it is to our efforts to continue spurring economic growth and job creation in upstate New York," Pataki said. "This measure will encourage the expansion of new rail lines across the State -- a key factor in economic growth and expansion -- helping to bolster our efforts create new jobs from Buffalo to Binghamton, and from to Albany to Auburn."

Locally, the new law paves the way for major improvements at CSX's Selkirk railyard, and on the tracks that run along the Hudson River, said John Casellini, CSX's resident vice president in New York.

New York's higher property taxes made it harder for CSX's New York operations to win corporate capital for improvements, Casellini said.

The tax break law also removes CSX's major objection to plans to lay down a second track on the Schenectady to Rensselaer route. While New York state and Amtrak were to pay for the second track, CSX would have been left paying property taxes on the improvements, Casellini said. CSX agreed to allow the construction if the rail property tax break went through, he said.

But while CSX has dumped its objections to the second rail line, Amtrak officials say they can't afford to build the second track now. It would cost about $28.7 million to install the 18-miles of track along the route.

CSX Corporation President Michael J. Ward praised Pataki for pushing for the legislation. "Governor Pataki has completed the effort he began to open the door welcoming railroad investment and activity back into New York," Ward said. "This action signals a renewed and vital partnership between the State and CSX that will result in increased opportunities for economic development and growth."

Norfolk Southern Corporation Chairman, President and CEO, David R. Goode, also promised that the change in tax policy would spark future investment by his railroad.

The Norfolk Southern Railroad took control of lines in the southern part of the state which were originally held by the Pennsylvania Rail Road. CSX now owns the tracks once operated by the New York Central.

Business Council of New York State President Daniel Walsh, said the new law will "provide for greater enhancements in freight and passenger rail infrastructure."

Historically, property taxes on railroads, specifically in upstate New York, have stymied railroad expansion and rail service preservation, a key factor in creating and retaining jobs, Pataki said.

The initiative will simplify and modernize the method of assessing rail properties for local taxation and exempt all new capital improvement projects that have been approved by the state Department of Transportation from property taxation for 10 years from the date of completion.

Monday, February 3, 2003

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