B.C.D. 03-12 JAN 2 9 2003

EMPLOYER STATUS DETERMINATION

South Dakota Railroad Authority

This is the determination of the Railroad Retirement Board concerning

the status of South Dakota Railroad Authority as an employer under

the Railroad Retirement Act (45 U.S.C. § 231 et seep) and the Railroad 

Unemployment Insurance Act (45 U.S.C. § 351 et seq.).

The Authority is an agency of the State of South Dakota which is

authorized to acquire railroad facilities where the South Dakota 

legislature declares the acquisitions to be in the public interest. The

Authority is prohibited from owning rolling stock or locomotives, and

from conducting its own rail operations. Consequently, the State leases

the lines to local railroad authorities which lease them to various 

operators which provide rail service. In Surface Transportation Board 

Finance Docket No. 32901, the Authority filed a notice of exemption to

acquire approximately 22.4 miles of rail line formerly owned by Rutland 

Line, Inc., and the issue of the coverage of the Authority has arisen in 

connection with this acquisition, the purpose of which was to preserve 

rail service. The track will be leased to the Dakota, Missouri Valley and

Western Railroad, a covered employer under the Acts (B.A. No. 3663).

The Authority presently has over 700 miles of track which it leases out.

Section 1(a)(1) of the Railroad Retirement Act (45 U.S.C. § 231(a)(1)),

insofar as relevant here, defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction of

the Surface Transportation Board under Part A of subtitle

IV of title 49, United States Code;

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act (45

U.S.C. §§ 351(a) and (b)) contain substantially the same definition, as 

does section 3231 of the Railroad Retirement Tax Act (26 U.S.C. §

3231).

The Board notes that in its decision regarding Railroad Ventures, Inc.

(B.C.D. 00-47), the Board held that an entity that has STB authority to
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South Dakota Railroad Authority

operate a rail line, but leases or contracts with another to operate the

line in question, is covered under the Acts administered by the Board 

unless the Board determines that the entity is not a carrier. The Board

enunciated a three-part test in B.C.D. No. 00-47 to be applied in making

this determination. An entity that leases a line to another company or

contracts with another company to operate the line, is a carrier under

the Railroad Retirement Act unless the Board finds that all three of the

following factors exist: 1) the entity does not have as a primary business 

purpose to profit from railroad activities; 2) the entity does not operate

or retain the capacity to operate the rail line; and 3) the operator of the

rail line is already covered or would be found to be covered under the

Acts administered by the Board.

In the instant case, the Authority meets this test. It does not have as

primary purpose to profit from railroad activities (its operations are

intended to preserve rail service). The Authority by law does not 

operate or retain the capacity to operate the rail line. The operators of

the rail lines owned by the Authority are covered under the Acts: in

addition to the Dakota, Missouri Valley and Western Railroad, the

other operators of Authority rail lines are the Dakota Southern Railway

Company and D & I Railroad, both of which are covered employers

under the Acts (B.A. numbers 2631 and 3641, respectively).

Accordingly, the Board finds that the Authority is not a covered

employer under the Acts.

CTierryVn. Thomas

A

Jeromec F. Kever