REPORT OF HEARING EXAMINER
APRIL 30, 2007

Karl T. Blank Office of General Counsel
Railroad Retirement Board

This is the Report of the Hearing Examiner to the Railroad Retirement Board, pursuant to section 258.6 of the Board’s regulations (20 CFR 258.6), containing the Examiner’s findings of fact, conclusions of law, and recommended decision on the question as to “whether there has been a change in the operations of Herzog Transit Services, Inc., which would affect its status as an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts, as determined in Board Coverage Decision 94-109.”

RECOMMENDED DECISION

Based on the findings of fact and conclusions of law set forth in this report, I recommend that the members of the Railroad Retirement Board render the following decision with respect to the status of Herzog Transit Services Inc.:

1. The changes in the passenger service operations of Herzog Transit Services Inc. since the Board issued B.C.D. 94-109 do not render Herzog Transit a rail carrier employer covered by the Railroad Retirement and Railroad Unemployment Insurance Acts (the Acts) because it is not subject to the jurisdiction of the Surface Transportation Board under part A of subtitle IV of title 49, United States Code, and does not meet the conditions for coverage of commuter operations specified by 49 U.S.C. 10501(c)(3).
    
2. The changes in the operations of Herzog Transit Services Inc. since the Board issued B.C.D. 94-109 do not render Herzog Transit an employer covered by the Acts as a non-carrier affiliate which is under common control with a rail carrier employer because Herzog Transit Services Inc. does not provide services to its affiliated rail carrier company.
    
3. Since the Board issued B.C.D. 94-109, Herzog Transit Services Inc. has contracted to operate the Trinity Railway Express in Dallas-Fort Worth, Texas, over a rail line which is directly or indirectly owned by Dallas Rapid Transit. The dispatching of interstate freight and passenger trains which Herzog Transit performs for Dallas Rapid Transit as part of this contract constitutes active rail carrier operation of the Dallas Rapid Transit rail line as the owner/lessor. The employees of Herzog Transit Services Inc. who dispatch train service must be reported to the Board as in the service of a rail carrier employer under the Acts. The Board should render an separate initial decision regarding whether Herzog Transit or Dallas Rapid Transit is the employer required to report the employees who perform this service.

SUMMARY OF EXAMINER’S REPORT

The body of this Report consists of four segments: Course of Proceedings, Findings of Fact, Conclusions of Law, and Discussion and Analysis.

The first segment, Course of Proceedings, provides a chronology of the actions taken by the various offices of the Board leading to the decision of the Board in B.C.D. 94-109, the employee requests which lead to Board Order 06-12 appointing me as Hearing Examiner, and steps I have taken to hold the hearing and produce this Report.

The Findings of Fact segment contains 41 numbered paragraphs, organized under four sub-headings. Each numbered paragraph summarizes my finding as to evidence of record concerning an aspect of this matter. In order to provide a basis for comparison between the operations of Herzog Transit before and after the Board rendered B.C.D. 94-109, paragraphs 1 through 12, under the heading “Formation and Operation of South Florida Regional Transportation Authority”, recount the history of commuter service in the Miami, Florida area before Herzog Transit Services assumed the operation, describe the physical property operated, and the relationship with the State of Florida, CSX Transportation, and Amtrak. Paragraphs 13 through 23, under the heading “Herzog Transit Operations for South Florida Regional Transportation Authority”, describe how Herzog Transit now conducts the rail passenger operation for SF RTA. Paragraphs 24 through 32 , under the heading “Herzog Transit Operations Outside Florida”, describe the new business the company began since 1994 in other states. Paragraphs 33 through 41, under the final heading “Operations of Other Herzog Companies Outside Florida”, describe the rail carrier operations of Herzog Transit affiliates Transit America LLC and Transit America Services, Inc.

The third segment of the Report, Conclusions of Law, states the legal standards applied to reach the recommended decisions. These standards define intra-state passenger rail carrier, services necessary for coverage as a non-carrier affiliate company covered as an employer under the Acts, and conduct of train dispatching as rail carrier operation in the context of a leased rail line.

The fourth segment of this report, Discussion and Analysis, sets forth my analysis of the statutes, court cases and prior agency decisions from which I derived the foregoing legal standards, and applies these standards to the facts of record to explain my recommended decision. The Discussion and Analysis segment is divided into three parts, corresponding to the three recommendations of this Report.

Part I of the Discussion and Analysis segment explains why Herzog Transit is not a rail carrier employer under the RRA and RUIA, using a two-part formula applicable to intrastate passenger commuter operations which is specified by section 10501(c)(3) of U.S. Code, Title 49. Herzog Transit fails the first step because none of the commuter operations it conducts were previously operated by a rail carrier subject to the RRA and RUIA. Herzog Transit fails the second step because its commuter operations do not meet the standards applied prior to the ICC Termination Act of 1995 to determine Interstate Commerce Commission jurisdiction over intrastate passenger service.

Part II of the Discussion and Analysis segment explains why Herzog Transit is not an affiliated non-carrier employer under the RRA and RUIA by reason of the track and signal maintenance services Herzog Transit performs for Trinity Railway Express in Texas and for Rail Runner Express in New Mexico, and the car repair services it performs for New Jersey Transit Rail Operations and North Carolina Department of Transportation “Piedmont” passenger service. Though the General Counsel determined in 1971 in Staten Island Rapid Transit Operating Authority, that track maintenance and other services performed by an intrastate commuter operator for an unaffiliated freight rail carrier also using the rail line constituted services in connection with railroad transportation, the Board’s 1993 VMV Enterprises decision requires the non-carrier provide “more than minimal” services to a rail carrier affiliate. Because Herzog Transit performs no service to an affiliated rail carrier, it does not perform “services” under the Acts.

Part III of the Discussion and Analysis explains why the interstate freight train dispatching which Herzog Transit performs as operator of Trinity Railway Express for rail line owner Dallas Area Rapid Transit is rail carrier service under the RRA and RUIA. Prior Board decisions in Railroad Ventures and Southern California Regional Rail Authority Dispatching Department require that train dispatching over DART’s rail line constitutes active operation of that line by either DART or Herzog Transit as a “lessor” rail carrier. Because this Report is focused on Herzog Transit’s Miami operation for SF RTA, however, I recommend a separate initial determination be rendered as to whether this service is attributable directly to rail line owner DART, or indirectly through line operator Herzog Transit.

Following the Conclusion, I have provided a Table of Authorities cited in the Report, which includes a list of the agency coverage decisions, most of which I have also included as exhibits in the administrative record. Finally, I have prepared as the Appendix two charts which summarize the commuter operations of Herzog Transit, and the ownership structure of relevant Herzog Transit companies.

COURSE OF PROCEEDINGS

The Board’s Deputy General Counsel determined1 in Notice No. 89-35, dated April 19, 1989, (Exhibit 53) that the operation by Tri-County Commuter Rail Organization, (now known as South Florida Regional Transportation Authority), under contract with UTDC Transit Services, Inc., was not an employer covered by the Acts because Tri-County and UTDC conducted only intrastate commuter service, and interstate freight service remained with CSXT.

Approximately five years later, on March 31, 1994, the General Chairperson of the United Transportation Union wrote to the Chief of the Board’s Employment Accounts Section, stating that Tri-County now operated commuter rail service through a contract with Herzog Transit Services Inc., and requested that the Board consider whether the employees providing passenger service now performed creditable railroad service under the Acts. (Exhibit 3). On May 13, 1994, Mr. Robert A. Scardelletti , International President of the Transportation Communication International Union, also wrote to inform the Chief of the Board’s Audit and Compliance Division that Herzog Transit had bid on operation of a commuter operation in California. (Exhibit 4).

On December 5, 1994, the Board determined Herzog Transit not to be a covered employer under the Acts. See: Herzog Transit Services, Inc, B.C.D. 94-109. (Exhibit 1). The Board found that although the commuter rail operation rendered Herzog Transit a rail carrier, it was not engaged in interstate commerce.

Beginning November 2003, a number of Herzog Transit employees began writing letters requesting that the Board reopen its prior decision. (Exhibits 8, 10, 13, 14, 18, 20, 22, 29, 30, 32, 33). Mr. Joseph A. Santangelo also individually claimed in a letter received in December 2003 that his operation of a locomotive for SF RTA actually constituted service as an employee of CSXT Transportation. (Exhibit 15). On December 17, 2003, the Board directed the Chief of the Audit and Compliance Section to review whether Mr. Santangelo’s service would be creditable under the Acts. (Exhibit 16).

The Chief of Audit and Compliance wrote to the SF RTA and to Herzog Transit. The Deputy Executive, Jack L. Stevens, responded by letter dated March 8, 2004. (Exhibit 36). Herzog Transit replied by letter dated July 22, 2004, from Vice President Norman Jester. (Exhibit 38). After review of the information from the employees, from SF RTA and from Herzog Transit, on February 2, 2006, the Board by Board Order 06-12 appointed the undersigned, Karl T. Blank, to serve as a Hearing Examiner pursuant to section 258.1 of the Board’s regulations (20 CFR 258.1). The Board directed the Examiner to conduct a hearing for the purpose of obtaining testimony and documentary evidence, and to prepare a recommendation as to “whether there has been a change in the operations of Herzog Transit Services, Inc., which would affect its status as an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts, as determined in Board Coverage Decision 94-109.”

The Hearing Examiner on February 2 notified Herzog Transit Services that the Board had determined a hearing should be held. On March 23, 2006, the Examiner provided a copy of 63 Exhibits, constituting the documentary evidence in the administrative record and related agency coverage rulings, to counsel for Herzog Transit and to employees and the UTU as designated by the Board in B.O. 06-12. Notice of the hearing was published in the Federal Register on April 27, 2006, (71 Fed. Reg. 24875), and the hearing was held in the Federal building at 51 SW 1st Avenue in Miami, Florida on May 16, 2006. Both Herzog Transit and the United Transportation Union appeared and were represented by counsel. Mr. Richard C. Beall and Mr. Joseph A. Santangelo testified on behalf of the employees, and Mr. Robert J. Smith testified for Herzog Transit. At the hearing the employees presented Exhibits 64 through 76, and Herzog Transit submitted Exhibits 77, 78 and 79.

Following the hearing, the Hearing Examiner added prior agency coverage decisions as Exhibits 80 and 81. Herzog employee Richard Beall submitted a letter and 20 additional photographs on May 30, 2006, which was entered as exhibit 85. Counsel for Herzog as agreed at the Hearing, provided a complete copy of the current Herzog Transit/SF RTA contract (Exhibit 82), the STB decision regarding purchase of the right of way for the New Mexico commuter operation (Exhibit 84), and a corporate organization chart and list of corporate officers (Exhibit 86). The Hearing Examiner furnished a copy of the hearing transcript on June 27, 2006 to counsel for both Herzog Transit and UTU, and to the designated Herzog employees. The employees added two letters (Exhibits 87 and 88). Counsel for UTU and Herzog Transit submitted post-hearing briefs on August 1, 2006 and July 31, 2006, respectively. The Hearing Examiner then added as the final Exhibit copies of the Board Coverage Decisions cited by Herzog Transit in its brief (Exhibit 89), and notified Herzog Transit, the UTU, and the employees that the record closed on August 18, 2006.

FINDINGS OF FACT

1. Formation and Operation of South Florida Regional Transportation Authority.

1. On May 11, 1988, the Florida Department of Transportation (FDoT) began the groundwork for commuter rail service in the Miami area by purchasing from CSXT Transportation (CSXT) a total of 76.10 miles of track, from mile post 965 at West Palm Beach in the north to mile post 1041.1 at Miami in the south, with the right of way, track, signals, bridges and other fixed facilities, including the Hialeah rail yard. (R. 377, 382)2 The purchase agreement required CSXT to maintain all rail facilities, and permitted CSXT to retain “a perpetual use easement with the common carrier obligations.” Florida also purchased locomotives and passenger cars and constructed passenger stations on the line. (R. 381).
    
2. Florida formed Tri-County Commuter Rail Authority (Tri-County) to implement a complete rail and bus commuter system for Dade, Broward and Palm Beach counties. (R. 381) Effective July 2003, Tri-County was renamed the South Florida Regional Transportation Authority (SF RTA). See Florida Statutes §343.52(1) (2005). For simplicity’s sake, this Report will refer to the Florida authority established to conduct rail commuter operations by the abbreviation of its present name (SF RTA) both before and after July 2003.
    
3. On September 27, 1988, FDoT entered into a contract with UTDC Transit Services, Inc., to provide commuter rail operations between West Palm Beach and Miami. (R. 381). Commuter rail service over 66.46 miles (from mile post 970 in West Palm Beach running south to mile post 1036.46 at Miami) began January 9, 1989. (R. 382).
    
4. Neither FDOT, SF RTA, nor UTCC filed any notice with the former Interstate Commerce Commission regarding commencement of rail operations, in the belief that the commuter train service was an intrastate passenger operation not subject to the Interstate Commerce Act. (R. 382).
    
5. In June 1989, the United Transportation Union (UTU) and the Transportation Workers Union of America both filed petitions with the National Labor Relations Board (NLRB) to represent employees of UTDC pursuant to the National Labor Relations Act (29. U.S.C. § 151 et seq.). In a post-hearing brief before the NLRB, UTU stated that “it does not appear that the trackage rights or lease arrangements with CSX Transportation, Inc., are of such character so as to bring the employees and employer within the definitional provisions of the Railway Labor Act.” (R. 1201-02)
    
6. As a result of the UTU and TWU petitions, in September 1989 the NLRB requested the opinion of the National Mediation Board as to whether the UTDC employees were subject to the Railway Labor Act rather than the National Labor Relations Act. The National Mediation Board determined on August 6, 1990 that UTDC Transit did not conduct rail carrier service subject to the Railway Labor Act. (UTDC Transit Services, Inc., 17 NMB 343 (1990) (R. 385-410)
    
7. Passenger service by SF RTA has remained essentially the same since it began in 1989. (R. 141, 142, 149, TR. 20)3 . Passenger trains operate 365 days a year over 72 miles of the FDOT track to 18 stations. Twenty-eight passenger trains run on week days, 14 on Saturdays, and 12 on Sundays and Holidays. (R. 141). The SF RTA locomotive roster is ten General Motors Electro-Motive Division model F 40 diesel locomotives, and a passenger car fleet of 26 passenger coaches and coaches with cabs. (R. 1361) FDOT continues to own the track, which is designated as the “South Florida Rail Corridor”, and to contract with CSXT for freight service and maintenance of way. (R. 141, 229).
    
8. SF RTA uses two railroad yards. A yard in West Palm Beach is used exclusively by SF RTA as storage for rolling stock (TR 163). The railroad yard at Hileah is jointly used by SF RTA, CSXT, and Amtrak. Each entity uses its own section, with the CSXT portion being the largest. (TR 151-52). An aerial view of the yard would give the appearance of a unified operation. (TR 152) The Hileah facility includes a two-story office building occupied jointly by the SF RTA contract operator and by CSXT. (TR 105).
    
9. Amtrak interstate passenger trains run on the South Florida Rail Corridor track between the Miami station in Hileah, continuing northward off FDoT tracks toward Washington, D.C. and beyond (TR 163). SF RTA passengers may embark on or de-train from Amtrak trains at five stations: West Palm Beach, Delray, Deerfield Beech, Hollywood, and Ft. Lauderdale. (R. 149). Based on crew observations of passengers traveling with large amounts of luggage, an average of 5 to 10 passengers per commuter run are leaving for or returning from Amtrak travel. (TR 50). Three stations connect by bus shuttle to airports. (R. 51, 95).
    
10. When a passenger holding an Amtrak ticket misses the Amtrak train, the SF RTA train will on a regular basis honor the Amtrak ticket without additional fare if it is possible to get that passenger to the next Amtrak stop. (TR 67). Less frequently, a SF RTA passenger may mistakenly board an Amtrak train, and be allowed to travel on Amtrak to a station where transfer to SF RTA is possible. (TR 68). However, SF RTA has no agreement to issue tickets good for interstate travel on Amtrak, and Amtrak has no ticketing agreement with SF RTA. (R. 141, 150, TR 76).
     
11. CSXT interstate freight service continues to use the entire line, other than the passenger terminal. (TR 163).
     
12. FDOT, as owner of the rail line, separately contracts with CSXT to dispatch all trains on the rail line including CSXT freight, Amtrak interstate passenger, and SF RTA commuter trains. The CSXT dispatchers are located in Jacksonville, Florida. (R. 156, R. 220).

2. Herzog Transit Operations for South Florida Regional Transportation Authority.

13. On July 28, 1993, Herzog Contracting Corporation (Herzog Contracting) incorporated Herzog Transit Services, Inc., (Herzog Transit) as a Missouri corporation 90 percent owned by Herzog Contracting and 10 percent by Dr. William Ronan. (R. 8, 13). At the time, Herzog Transit and Herzog Contracting shared “some” officers and directors. (R. 8). Herzog Contracting and Herzog Transit are headquartered in St. Joseph, Missouri. (TR 173).
     
14. Herzog Transit purchased the assets of UTDC Transit Services and began passenger service operation under contract with SF RTA on January 7, 1994. At that time, Herzog Transit had no contract other than its agreement with Tri-County. (R. 8). The current contract between Herzog Transit and SF RTA took effect November 1, 2002, and runs through June 30, 2007. (R. 1279). Other than noted below, the current contract does not differ materially from the 1994 contract.
     
15. Herzog Transit must maintain equipment as required by SF RTA and the Federal Railway Administration (FRA), the Passenger Rail Equipment Safety Standards promulgated by the American Public Transportation Association, and other applicable standards and regulations. Herzog Transit formerly maintained passenger stations and adjacent landscaping, but was outbid for this work in July 2005. (R. 1372; TR. 151).
     
16. Herzog Transit is responsible for the operations of the commuter rail service in accordance with CSXT Transportation Operating Rules or other applicable Operating Rules designated by SF RTA; applicable federal, state and local laws and regulations; equipment operation instructions issued by or approved by SF RTA; SF RTA train schedules or timetables; and SF RTA passenger service policies as may be amended. (R. 1351).
     
17. Herzog Transit train and engine service employees must be qualified under FRA rules, and comply with FRA Drug and Alcohol testing requirements. They must meet any qualifications required by law, and must undergo continuing training programs. The train crew must also, pursuant to paragraph 3.12.9 of the contract, inspect each train, including brake systems and cable connections, prior to beginning the run. (R. 1354). They may also switch and couple cars in and out of the train consist, reconnect brake lines and electric cables, and change control cabins. (R. 1352).
     
18. Herzog Transit must conduct operations under the coordination of CSXT CSXT dispatchers, and maintain communication with CSXT, Amtrak, and SF RTA (R. 1356). All train movements in the Hileah yard are controlled by the CSXT yardmaster in the Hileah yard (TR 94, 105, 155), and all movement over the South Florida Rail Corridor, whether by Herzog Transit, by Amtrak, or by CSXT is controlled by CSXT dispatchers in Jacksonville using electronic signal lights. (TR. 156). In addition, the Herzog Transit crew is in direct radio contact with the CSXT dispatcher, and with Herzog Transit Operations Center. (TR. 160-161).
     
19. Herzog Transit is required to establish and staff on a 24-hour basis an Operations Center, which is located in the two story office building in the Hileah yard. (R. 1352, 1356, TR 163). The Operations Center monitors both SF RTA and freight traffic, and notifies the CSXT dispatcher when Operations Center instruments show freight interference will affect SF RTA trains. (TR 159). The Operations Center also announces service delays over the public address system installed at SF RTA stations. (TR 160). When a Herzog Transit crew observes an incident affecting train movement, the crew first notifies the CSXT dispatcher, then Herzog Operations Center. (TR 161). While the Operations Center may contact CSXT dispatchers or Amtrak officials, it is not authorized to directly contact CSXT or Amtrak trains, and it is unlikely to do so. (Id.) The Operations Center does not dispatch trains.
     
20. At the hearing, the Herzog Transit employees introduced series of documents which each train crew must receive: “CSXT System Bulletins” (Ex. 73, R. 1083-1133), “CSXT Jacksonville Division Bulletins” (Ex. 74, R. 1134-1175), and “CSXT Dispatcher’s Bulletins, Hileah Station” (Ex. 75, R. 1176-1198). While these documents convey specific information regarding track conditions or speed limitations over particular stretches of rail line, these do not constitute the authorization for train movement. Train movement is authorized only by the electronic signal system and CSXT dispatchers. (TR. 156-157).
     
21. At the hearing, Herzog employees introduced a collection of 113 letters to substantiate the claim that SF RTA and Herzog Transit engage in interstate rail carrier operations. (TR. 23, Ex. 64, R. 446-553). These letters include statements that SF RTA equipment is sent out of state for “major repairs and renovations” and that rail cars are delivered by CSXT with supplies for Herzog Transit use. (R. 462, 473, 476) On one occasion, CSXT work crews used two SF RTA locomotives for ballast work on the rail line (TR 93). Herzog Transit has also received equipment from other companies for repairs through the connection with CSXT. (R 509, 510, 513) Herzog Transit employees have also used SF RTA equipment to move disabled CSXT and Amtrak locomotives and trains on the shared South Florida Rail Corridor main line (TR. 92, Ex. 64, R. 480-482, 543). Herzog Transit employees have worked in the portion of the Hileah yard used by CSXT with CSXT equipment, washing, fueling and repairing SF RTA equipment. (R 550, 558, 555). SF RTA has installed a wheel-truing shop in the Hileah yard which has been used to repair equipment of interstate rail carriers (TR 153, R 509, 605).
     
22. Photographs by Herzog Transit employees show a locomotive from Colorado (the “Bombardier jet engine”) brought to the Hileah yard (R. 72, 74, TR 96, 98). With the locomotive, CSXT brought two flatbed freight rail cars used as “idlers” coupled between the inactive locomotive and the powered locomotive as buffers and to allow better visibility (R. 72, 77; TR. 97). The locomotive and flatcars have been stored for some years, and the locomotive remains. One of the “idler” flatcars had mechanical defects which were corrected by Herzog Transit mechanics to “get rid of it” (TR. 154).
     
23. Herzog Transit has no freight interchange agreement with any entity, and there is no evidence that any movement of freight rail cars has been accompanied by waybills or bills of lading. (TR 165).
     

3. Herzog Transit Operations Outside Florida.

24. Since the Board rendered B.C.D. 94-109 in December 1994, Herzog Transit has engaged in six new operations in other states. Four provide rail passenger service: Trinity Railway Express in Texas; Altamont Community Express and Waterfront Red Car Line in California; and Rail Runner Express in Albuquerque, New Mexico. The two other new operations only maintain rail passenger cars and locomotives: New Jersey Transit in Atlantic City and North Carolina DoT. (TR 127-131).
     
25. Herzog Transit began commuter rail operations in Texas in the Dallas-Fort Worth vicinity for Trinity Railway Express (Trinity) in late December 1996 (R. 314), two years after the Board’s decision in B.C.D. 94-109. Trinity is a cooperative service provided by the Fort Worth Transportation Authority (‘the T’) and Dallas Area Rapid Transit (‘DART’)”. (R. 314). DART, directly or through a subsidiary, acquired approximately 120 miles of track from the Southern Pacific Transportation Company and from the Missouri Pacific Railroad in 1988 and 1989. (R.332). Trinity links downtown Fort Worth, downtown Dallas, and DFW airport, using approximately 34 miles of track, and sharing the Fort Worth Intermodal Transportation Center and the Dallas Union Station with Amtrak intercity service. (R. 149, 314) Trinity operates 13 rail diesel cars, 6 diesel-electric locomotives, 10 bi-level coach cars, and 7 cab cars. (R. 314). Trinity carried approximately 176,000 passengers the first full year of operation in 1997, and reached 2.16 million passengers in 2004. (R. 314). Trinity has been determined not to be a covered employer subject to the RRA and RUIA. See Notice No. 91-66, Dallas Area Rapid Transit. (R. 321-322).
     
26. Herzog Transit initially only operated Trinity commuter passenger trains over the Dallas-Ft. Worth main line, while the Burlington Northern Santa Fe dispatched freight and passenger trains. Sometime after 2000, Herzog Transit assumed the dispatching services from a facility located in Irving, Texas which is owned by Trinity. Herzog Transit also assumed maintenance of way at that time. (TR 169, R. 1793, 1832). Herzog Transit commuter service uses and maintains the equipment provided by Trinity (R. 1804-1811), and runs on timetables approved by the transit authorities. Herzog Transit’s rail commuter operation is governed by applicable rules or regulations of the Federal Railroad Administration (FRA); the FRA-approved General Code of Operating Rules; Herzog Transit’s rules; and freight agreements, evidently between DART, the T, BNSF Railroad, Union Pacific Railroad, and a short line carrier. (R. 1799, 1831, 1841, TR. 167). Herzog Transit currently dispatches all trains, including freight and Amtrak interstate passenger service. (R. 151).
     
27. In October 1998, almost four years after the Board’s decision in B.C.D. 94-109, Herzog Transit began operating the Altamont Commuter Express (ACE) under an agreement with San Joaquin Regional Rail Commission (SJ Rail Commission) which has been extended through 2009. (TR. 170, R. 310-313). The SJ Rail Commission is the managing agency of the Altamont Commuter Express Joint Powers Authority, formed by the California counties of Alameda, San Joaquin, and Santa Clara, and funded by a regional sales tax and Federal grants. (R. 345). ACE provides rail commuter service over an 86 mile route which is owned by the Union Pacific Railroad and lies entirely in California, between Stockton and San Jose. (R. 311, 345, 348). The Union Pacific maintains the track. (R 311) ACE owns five F40PH diesel electric locomotives and 20 bi-level passenger coaches. (R. 311). Herzog Transit maintains this equipment. (R. 311, 349). At the Diridon station in San Jose, passengers may connect with Amtrak trains. (R. 150, 345; TR. 170). Freight service over the line is conducted by Union Pacific Railroad. (TR. 171). Union Pacific dispatchers control train dispatching of ACE, Amtrak and UPRR trains over all but 3 miles of the line from UPRR’s train dispatching center in Omaha, Nebraska; the remaining 3 miles are controlled by Amtrak dispatchers. (R. 151, 311, TR 172). The Board has not ruled on the status of ACE or SJ Rail Commission under the RRA and RUIA.
     
28. On or about September 6, 2002, Herzog Transit contracted with the Port of Los Angeles to operate the Port of Los Angeles Waterfront Red Car Line passenger service in San Pedro, California (Waterfront Red Car). (R. 1228, TR. 147). Operation began in July 2003, approximately eight and one-half years after the Board’s decision in B.C.D. 94-109. Waterfront Red Car uses one vintage restored electric trolley car and one new trolley car to carry passengers along the cruise ship terminal area over 1½ miles of track owned by the Port. (TR. 147-149). Herzog Transit maintains this equipment, including the catenary power line and track. (R. 1232-1233). Union Pacific Railroad conducts diesel electric locomotive freight service over the same line to international shipping docks in the Port (TR 147-149). Because the agreement between Port of Los Angeles and Herzog Transit refers to another document, it is unclear which entity dispatches trains over the line. (R. 1231). The Board has not ruled on the status of Port of Los Angeles or Waterfront Red Car as covered employers under the RRA and RUIA.
     
29. On or about September 1, 2005, Herzog Transit contracted with the Mid-Region Council of Governments, New Mexico (MR COG), to operate the New Mexico Rail Runner Express (Rail Runner Express) for the Mid-Region Transit District. (R. 411, 1211-1227). At the time of the May 2006 hearing by the Hearing Examiner in this case, Rail Runner Express was still in the mobilization phase (R. 411, TR. 129, 146). Service began over a 50 mile segment between Bernalillo and Belen, north of Albuquerque, on July 14, 2006. See: nmrailrunner.com/FAQ (Feb. 26, 2007). Additional segments will be phased into use over several years. The provisions of the MR COG/Herzog Transit contract are essentially the same as those of the SF RTA contract. (R. 1205-1227). Herzog Transit must maintain rolling stock and the right of way (R. 1213-1214). Dispatching for Rail Runner Express commuter trains, BNSF freight trains, and Amtrak interstate passenger trains will initially be provided by BNSF, but may be performed by Herzog Transit upon sufficient notice by MR COG. (R. 1210).
     
30. MR COG is composed of a number of local governments, including the City of Albuquerque. The Mid-Region Transit District is itself a political subdivision of New Mexico organized pursuant to the New Mexico Regional Transit Act (N.M. Stat. §§ 73-25-1 to -18)(2007)). During 2005 the state of New Mexico Department of Transportation (NM DoT) agreed with the BNSF Railroad to purchase on behalf of MR COG and for use by Mid-Region Transit approximately 297 miles of track between Belen, New Mexico, and Trinidad, Colorado. (R. 411) NM DoT built 9 station platforms, and purchased 5 diesel locomotives and 10 bi-level passenger coaches. (R. 411). On February 3, 2006, the Surface Transportation Board ruled that because BNSF transferred only the right of way but retained the obligation to provide freight service, the transaction was not subject to STB jurisdiction. New Mexico Department of Transportation—Acquisition Exemption—Certain Assets of BNSF Railway Company, STB Finance Docket No. 34793, (R. 1916). The Board has not ruled on the status of NM Dot, Mid-Region Transit District or Rail Runner Express as employers covered by the RRA and RUIA.
     
31. Herzog Transit has contracted with two State agencies to maintain equipment. (TR 149). Herzog Transit maintains modern diesel electric passenger coaches for New Jersey Transit at a Atlantic City location. Maintenance includes daily inspections, light running repairs, and cleaning. (TR 149-50). New Jersey Transit Rail Operations has been held a covered rail carrier employer under the Acts. See: Legal Opinion L-83-59, New Jersey Transit Rail Operations, Inc. (R. 439-432).
     
32. Herzog also has a contract to maintain equipment used by the “Piedmont” passenger service funded by the North Carolina Department of Transportation (NC DOT) (TR131, 149-150). The Piedmont conducts regularly scheduled passenger service between Charlotte and Raleigh in central North Carolina. Amtrak operates the service using traditional passenger coaches provided by NC DOT Rail Division. (TR. 149, see also the Piedmont service internet site bytrain.org/passengers/routes/piedmont, Feb. 27, 2007). The status of NC DOT as a covered employer under the RRA and RUIA has not been considered.
     

4. Operations of Other Herzog Companies Outside Florida.

33. The Herzog corporate family includes at least 21 companies (R. 1934). Six of these companies relate to the issue of whether Herzog Transit is a covered employer under the RRA and RUIA: Herzog Contracting Corporation; Herzog Stone Products, Inc.; Herzog Services, Inc.; Arkansas Central Railway Company; Transit America, LLC; and Transit America Services, Inc.
     
34. A coverage investigation by Board staff in 1989 found that Herzog Contracting Corporation owned Herzog Stone Products, Inc. (Herzog Stone), which operated a stone quarry at South Hatton in Polk County, Arkansas. Herzog Stone laid a 1.3 mile line of track in 1986 to connect with Kansas City Southern Railway. (R. 353, 355, 362). Mr. Randy Poggenmiller was Vice President of Herzog Contracting. (R. 356).
     
35. Herzog Services, Inc. was formed by Mr. Randy Poggenmiller as sole shareholder in 1988 or 1989 to engage in transportation-related activities. Herzog Services in turn formed the Arkansas Central Railway Company (Arkansas Central) as a wholly owned subsidiary to operate the 1.3 mile Polk County rail line owned by Herzog Stone. (R. 355-56) The Interstate Commerce Commission found Arkansas Central to be a rail carrier subject to the Interstate Commerce Act. Arkansas Central Railway Co., Inc.—Operation Exemption—Line of Herzog Stone Products, Inc. Finance Docket No. 31405, May 31, 1989. (R. 362-65). However, Arkansas Central was never determined to be a rail carrier employer covered by the RRA and RUIA because Herzog advised it never began operations. See Deputy General Counsel Coverage Decision L-90-80, Arkansas Central Railway Company, Inc. (R. 355-357).
     
36. Because Arkansas Central was not a rail carrier employer, Herzog Contracting was found not to be under common control with a rail carrier, and consequently not to be a covered employer under the Acts. See Deputy General Counsel Coverage Decision L-90-79, Herzog Contracting Corporation (R. 353-354).
     
37. In 2002, Herzog Transit and Stagecoach Rail North America, LLC, (Stagecoach) formed Transit America LLC under Missouri law as equal 50 percent interest owners. (R. 368). Stagecoach is a division of a public company based in Perth, Scotland, United Kingdom, which operates rail lines in the UK and motor coaches in North America. (R. 371-372). Stagecoach had no relation to any Herzog company beyond the co-interest in Transit America. Stagecoach transferred its 50 percent interest to Herzog Transit in 2004, and consequently Transit America became a wholly owned subsidiary of Herzog Transit. (TR. 144).
     
38. Herzog Contracting transferred to Transit America the title to a 2.6 mile line of rail east of St. Joseph in Buchanan County, Missouri, which previously operated as a private rail line serving only Herzog Contracting. (R 301-304). In October 2002 the STB granted Transit America an exemption to operate the Buchanan County line as a class III rail carrier. See: Transit America, LLC—Operation Exemption—Line in Buchanan County, MO, Finance Docket No. 34253, 67 Fed. Reg. 64192 (October 17, 2002) (R. 370). Transit America began operations December 9, 2002, with one employee. (R.368). Based on the foregoing, the Board determined Transit America to be a covered rail carrier employer under the Acts. B.C.D. 03-10 Transit America LLC. (R. 366-367).
     
39. Transit America unsuccessfully bid in 2004 to operate Metrolink commuter rail service under contract with the Southern California Regional Rail Authority (SCal Regional Rail). (R. 413). So Cal Regional Rail had initiated rail commuter operations in the Los Angeles-San Bernardino vicinity in 1994, using Amtrak as the contract operator. B.C.D. 94-116, Southern California Regional Rail Authority, (R. 414-416). The Board has determined that SCal Regional Rail is an employer only with respect to the dispatching of rail carrier service over its rail line by Amtrak, Union Pacific Railroad, and BNSF Railroad. B.C.D. 02-12 Southern California Regional Rail Authority, Dispatching Department. (R.417-419).
     
40. In 2005, Transit America formed a wholly owned subsidiary corporation, Transit America Services, Inc. (TA Services Inc.) (TR. 133). TA Services Inc. is headquartered in Oceanside, California. (TR. 173). On June 8, 2005, Transit America contracted with the new subsidiary corporation, TA Services Inc., to operate the Buchanan County rail line. The Board has determined that TA Services Inc. is a covered rail carrier employer under the Acts. B.C.D. 05-33, Transit America Services, Inc.
     
41. In December 2005, TA Services Inc. replaced Amtrak as contract operator of the rail commuter service (the “Coaster”) for North San Diego County Transit District (North County Transit). See: “NCTD to contract with new company”, North County Times, December 15, 2005, at nctimes.com. North County Transit itself, as a public authority which merely owned the line of track, was determined by the Board not to be a covered employer in B.C.D. 95-56, North San Diego County Transit Development Board. The North San Diego County decision noted that Coaster commuter rail service would be conducted on behalf of the North County Transit by Amtrak, an employer covered under the Acts. Under the December 2005 contract between North County Transit and TA Services Inc., the Coaster commuter rail service continues to be operated by an employer covered by the RRA and RUIA.

CONCLUSIONS OF LAW

Based on the statutes, cases and authorities discussed below, I make the following conclusions of law:

1. An operator of a local commuter passenger rail service is a rail carrier employer under section 1(a)(1)(i) of the Railroad Retirement Act and sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act if it performs transportation provided by a local governmental authority as defined by either paragraph (A) or paragraph (B) of section 10501(c)(3) of Title 49 of the United States Code.
    
2. To meet the definition provided by 49 U.S.C. § 10501(c)(3)(A) of local authority subject to the Railroad Retirement and Railroad Unemployment Insurance Acts, the commuter rail service conducted by the local authority must have been previously conducted by a rail carrier employer, then assumed by the local authority.
    
3. To meet the definition provided by 49 U.S.C. § 10501(c)(3)(B) of local authority subject to the Railroad Retirement and Railroad Unemployment Insurance Acts, the commuter rail service must meet the standards for jurisdiction by the Interstate Commerce Commission over passenger rail service as in effect prior to the January 1996 effective date of the ICC Termination Act of 1995.
    
4. Under the law as in effect prior to January 1996, the considerations for determining that a rail carrier was subject to the jurisdiction of the ICC when that carrier operated entirely within one state and transported passengers but not freight, included: a physical connection of the intra-state carrier track to the interstate rail network; a through-ticketing arrangement with an interstate passenger carrier; direct travel connections and related scheduling of the inter- and intra-state passenger operations to facilitate transfer of passengers between them; whether a significant number of passengers would come from the interstate passenger carrier; whether the intra-state carrier markets itself as more than a local passenger service; and whether passengers of the interstate rail carrier have alternate means to arrive and leave the interstate rail carrier station.
    
5. A non-carrier company under common control with a rail carrier employer must perform more than a minimal proportion of services in connection with railroad transportation to the affiliated rail carrier in order to be held a covered employer under section 1(a)(1)(ii) of the Railroad Retirement Act and section1(a) of the Railroad Unemployment Insurance Act.
    
6. An owner of a rail line which is operated in interstate commerce by another entity is a “lessor” rail carrier employer under the Railroad Retirement and Railroad Unemployment Insurance Acts unless three factors are present: the owner/lessor does not have as a primary purpose to profit from railroad activities; the owner/lessor does not operate or retain the capacity to operate the rail line; and the operator/lessee of the rail line is already a covered employer under the Acts.
    
7. An owner of a rail line which contracts with another to conduct train service, but which dispatches the order and sequence of trains traveling in interstate commerce over its rail line, operates its line as a rail carrier employer under section 1(a)(1)(i) of the Railroad Retirement Act and sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act. If the owner engages in other, non-carrier, business, the dispatching operation may be covered separately as a segregable unit pursuant to section 202.3 of the Board’s regulations.

1Prior to February 5, 1992, regulations of the Board provided that initial determinations of employer and employee status were made by the Deputy General Counsel, subject to final appeal to the three-member Railroad Retirement Board itself. 20 CFR 259.1 (1991). Where no administrative appeal was taken, the decision by the Deputy General Counsel became the final decision of the Board. 20 CFR 259.7(1991).

2References to page numbers in the Administrative Record are identified as “R”.

3Pages of the transcript of the May 16, 2006 hearing are identified by “TR”.