From the ashes
of the Rock
The time is the
late 1970s. The railroad industry in the U.S. is in turmoil.
Transportation needs are changing. The Interstate System of
cross-country highways has changed the dynamics of getting
freight from place to place. Rail lines no longer have enough
traffic or revenue to earn a profit. Yet, as a regulated
industry, it is very difficult for railroads to abandon
unprofitable lines or adjust rates for changing economic
conditions. The debts of railroads are spiraling higher. Track
and equipment maintenance is deferred or ignored. And, safety is
becoming a real concern. As debts mount, many railroads find
bankruptcy the only viable option, leaving customers with no
In light of the
mounting crisis that was already affecting many areas of the
nation, Congress passed the 1980 Staggers Act. It essentially
deregulated the railroad industry.
provided the railroads with more flexibility in responding to
economic conditions. For some railroad companies, deregulation
arrived too late to allow them to survive.
In Iowa, two of
five east-west Iowa rail routes – the Chicago, Milwaukee, St.
Paul and Pacific Railroad (commonly called the Milwaukee Road)
and the Chicago, Rock Island and Pacific Railroad (commonly
called the Rock Island) – declared bankruptcy and left hundreds
of rail customers with potentially no service.
It was out of
the ashes of the bankrupt Rock Island Railroad that Iowa
Interstate was born. While Chicago and Northwestern Railroad
provided interim service on some Rock Island lines, a coalition
of shippers went to work to save the route that was their
lifeline. The group formed Heartland Rail Corporation and were
intent on purchasing the Rock Island property.
profitability, many traditional sources of financing were not
available to railroads or potential buyers such as Heartland.
To preserve essential rail service in Iowa, the State of Iowa
stepped in. In 1981, the Iowa Legislature created the Iowa
Railway Finance Authority (IRFA), an independent board with
broad powers to acquire, preserve and upgrade rail lines in the
1984, IRFA awarded a $15 million dollar loan to Heartland Rail
Corporation to help acquire the Rock Island mainline in Iowa and
Illinois, at a total cost of $31 million. This was the
culmination of years of work to preserve this crucial rail line.
Heartland Rail Corporation, the Iowa Department of
Transportation, IRFA, legislative leaders in Iowa and Illinois,
the newly formed future operator (Iowa Interstate Railroad), as
well as others, worked diligently to make the purchase a
Iowa Interstate Railroad (IAIS) found itself the operator of
hundreds of miles of track that were in a sorry state of repair,
the victim of years of deferred maintenance. Frankly, there
were doubters that the line could become a viable entity, let
alone a profitable one. The early years were rough, but the
owners kept dual goals in mind--- increase business volume and
invest money into the track.
Over the years,
investors have come and gone, management has changed, and in
2004 Heartland (the owner of the property) and Iowa Interstate
(the operator) were wholly acquired by Railroad Development
Corporation. A company headed by Henry Posner III of Pittsburgh,
Interstate, headquartered in Cedar Rapids, Iowa, operates over
500 miles of track between Council Bluffs and Chicago, serving
the heart of Iowa through Davenport, Newton, Des Moines,
Atlantic, and Council Bluffs, as well as, a branch line from
Bureau to Peoria in Illinois. It connects to all major Class 1
carriers at various points on its line, allowing customers to
ship their goods to or from anywhere in North America.
This year marks
the end of one chapter of Iowa Interstate’s story. Proving the
doubters wrong, Iowa Interstate will repay in full the remaining
balance of the $15 million loan from the State of Iowa.
A new chapter
will begin for Iowa Interstate as a major track upgrade project
is planned. After a long and arduous application process, Iowa
Interstate was awarded a $32.7 million federal loan through the
Railroad Rehabilitation and Investment Financing (RRIF) program.
This low interest loan will enable the company to restructure
its financing, and more importantly, finance track upgrades
across the state to handle the heavier rail cars now becoming an
Interstate’s journey has been long, and taken the help and
cooperation of the state and many individuals and companies.
What some viewed as a bad investment at the time has proven
otherwise. The citizens of Iowa have been repaid in a number of
ways, including a fully repaid loan investment with interest,
preservation of a key rail line through the heart of Iowa and
serving many shippers, and ensuring there are opportunities for
future economic growth for rail dependent industries.
industries have located on IAIS in the past couple of years, and
we hope to attract many more in the coming years. The track
program will also increase the railroad speed, as well as
handling heavier cars,” said President and CEO Dennis Miller.