NJ Transit preps to sell junked rail cars destroyed by Sandy. But it may still owe the feds for them

NJ Transit preps to sell junked rail cars destroyed by Sandy. But it may still owe the feds for them

If NJ Transit earns more than $5,000 per car, it will have to “reimburse FTA approximately 72% of the proceeds of the sales of each,” according to a March 2013 decision.
January 10, 2022

By Larry Higgs, nj.com

A fleet of old Comet III rail cars that NJ Transit sidelined for 13 years in a train yard in Bay Head — and were destroyed by Hurricane Sandy — are about to make their last trip to the scrap yard.

Before that happens, NJ Transit received a parting gift from the Federal Transit Administration. The state agency won’t be assessed for the FTA financial interest in the railcars that the federal administration helped purchase because of the damage sustained by Sandy while parked at the end of the North Jersey Coast Line.

On Jan. 19, NJ Transit is scheduled to take bids on the fleet of 44 Comet III trains that the agency said are “not in operating condition” and must be removed “by truck or dismantled on site,” according to the documentation of the request on the agency’s procurement page.

The fleet of Comet III railcars was retired in 2008 after the first multi-level railcars were bought in 2006. But four years after they were parked in Bay Head, they were damaged by flooding during Hurricane Sandy in October 2012.

A total of 49 Comet III railcars were purchased for $44.3 million in 1990 with $31.9 million in federal assistance. Based on that investment, the FTA had a 72% interest in the Comet III cars, said Stephen Goodman, FTA Region 2 Regional Administrator.

However, because the railcars — which were entered into service in 1991 and were retired before the 25 years of useful service life that the FTA has for the equipment— were damaged by the storm, the FTA waived the useful life requirement, Goodman said in a statement.

“For the damaged 46 Comet III rail cars for which FTA waived the useful life and for the three undamaged Comet III rail cars that met their useful life, there is no further federal interest beyond the disposition requirements,” he said.

This means NJ Transit won’t be assessed for the remaining financial interest the FTA has in the equipment. But if NJ Transit earns more than $5,000 per car, it will have to “reimburse FTA approximately 72% of the proceeds of the sales of each,” according to the March 2013 decision.

Typically, transit agencies sell retired equipment by auction soon after it is replaced. That was the case last December when NJ Transit listed 20 retired Neoplan articulated buses that were replaced with newer vehicles in 2020.

That’s also what companies and agencies do with surplus equipment, said Jon Peters, College of Staten Island finance and data analytics professor in an earlier interview.

“You want to use it or dispose of it, you do not want it hanging around,” Peters said about equipment. “If you’re not using it, dispose of it and do it in an orderly fashion to get value out of it.”

NJ Transit held on to the Comet III fleet while their replacements were being delivered and put in service, officials said.

“The Comet III rail cars were kept as a reserve fleet going through the acceptance and later introduction of the Multilevels, said Jim Smith, an NJ Transit spokesman.

NJ Transit could have been responsible for the federal interest. The agency faced a similar situation with a fleet of 32 ALP-44 electric locomotives that were purchased for about $150 million in the 1990s but were retired before 25 years. In that case, the FTA still had a $24.5 million federal interest that was resolved once the interest was transferred to 113 new multi-level self-powered rail cars ordered in December 2018. Those calls will be delivered in 2023.

The ALP-44s, however, are still parked in the woods of western Morris County, rusting and covered in graffiti.

NJ Transit was spared from a similar obligation on the Comet IIIs.

The remaining Comet III railcars that weren’t damaged have surpassed their 25-year useful life, officials said. NJ Transit is exploring the possibility of donating the remaining cars not being offered for sale, Smith said. He did not identify the recipients.

NJ Transit officials said the agency had potential buyers interested in the Comet IIIs and the FTA is aware of the pending disposition.

“FTA is working with NJT to identify and resolve any issues resulting from the disposition of these vehicles,” an FTA spokesman said.

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Larry Higgs may be reached at lhiggs@njadvancemedia.com.

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