B.C.D. 02-69 OCT 1 8 2002

Employer Status Determination - Reconsideration

Riverport Railroad, L.L.C.

This is the determination of the Railroad Retirement Board on

reconsideration of its decision dated June 1,2001 (B.C.D. No. 01-44)

holding Riverport Railroad, L.L.C. (B.A. No. 4650), to be an employer

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

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

effective March 1, 1999. Mr. John D. Heffner, counsel for Riverport,

has requested reconsideration of the Board’s decision.

As stated in the Board’s decision, Riverport operates as a switching

railroad and connects with the Burlington Northern and Santa Fe

Railway. Riverport stores out of service railcars for car owners. When

the cars are recalled, Riverport delivers the cars to the interchange

with the Burlington Northern and Santa Fe. Riverport also leases

warehouses on the former army base to subtenants. The Board

found that Riverport is a carrier operating in interstate commerce

and held that it became an employer under the Acts effective

March 1, 1999, the date as of which it first hired employees. This date

was provided to the Board by Riverport's General Counsel in a letter

dated February 14, 2001.

Mr. Heffner contends that the effective date for coverage of

Riverport under the Acts should be some later date. He proposes

May 1,2000, when the freight tariff became effective or October 10,

2000, when Riverport moved its first carload of “revenue freight."

Mr. Heffner also points out that Riverport first took possession of

leased property March 30, 1999, and states that “It was not until

September 10, 1999, that Riverport became a railroad common

carrier subject to the federal Surface Transportation Board's (STB)

jurisdiction when a notice of exemption for operating authority filed

with that agency on September 3, 1999, took effect.” (Finance

Docket No. 33799.)

BA# 4650
Mr. Heffner encloses a sfafement dated April 8, 2002 by Thomas

Kamper, General Manager of Riverport, to the effect that the date

employees were first hired by Riverport was June 1, 1999, and that

the statement by Philip A. Jackman, General Counsel of Riverport,

relied on by the Board, that employees were hired on March 1, 1999,

was in error. Mr. Heffner submitted payroll records in support of this

contention. Although, according to Mr. Kamper, operations began

May 1, 19991, those operations "were limited to the solicitation of

freight car storage business by then unsalaried management

personnel compensated on a commission basis. As of June 1,

‘operations' expanded to include the repair and rehabilitation of out

of service railroad track and equipment." It is apparent that the

repair and rehabilitation of rail track and equipment are required for

the operation of freight transportation.

In a submission dated June 12, 2002, Mr. Heffner examines the

background of Riverport. He states that the railroad terminal 

facilities that Riverport took over were originally owned and

operated by the United States Army, and were leased by the Army

to the Jo-Davies/Carroll County Local Redevelopment Authority

(LRA); that when the LRA leased these facilities from the Army in

December 1998 and entered into an operating sublease with

Riverport in March 1999, Riverport was required as a condition of the

lease transaction to create jobs and therefore hire some employees

who had previously worked for the Army. Mr. Heffner points out that

these employees had not been covered under railroad retirement

1 This date is also referred to in the letter of February 14, 2001, from Mr. Jackman,

wherein Mr. Jackman specifies March 1, 1999, as the date on which employees

were first hired. However, a letter of March 13, 2000, from Mr. Jackman states

that employees were first hired and compensated and operations began

June 1, 1999.
when they worked for the Army and the LRA itself had never sought

Surface Transportation Board (STB) authority to acquire the rail

facilities. When Riverport took possession of the railroad it did not

have any customers, and there was considerable deferred

maintenance. Riverport then entered into car storage contracts

and solicited tenants looking for warehouse property.

Mr. Heffner states that the initial duties of Riverport's original

employees consisted of putting the railroad trackage in a condition

suitable for the inbound and outbound movement of rail cars to be

stored on its property as well as cleaning up the property. The

original employees moonlighted for Riverport while working full time 

for the Army.

Riverport sought STB authority in September 1999 in order to attract

"distribution customers to its warehouse facilities." However, 

Riverport was not ready to hold itself out as a common carrier until it

could attract loaded rail car switching business and stated in its STB

notice of exemption that it would commence operations “no sooner

than September 10, 1999." Mr. Heffner concludes that Riverport's

operations did not evolve from those of a warehouse operator and

rail car storage facility to a common carrier short line railroad until

2000. It began soliciting potential shippers to locate on its tracks and

began discussing marketing, pricing, and operating arrangements

with the Burlington Northern Santa Fe Railway, at which time it

published a tariff and in August 2000 signed its first lease with a

warehouse customer with the potential to be a rail customer.

Riverport has two customers which use its facilities to ship or receive

freight in interstate commerce. Riverport handled its first loaded

carload of revenue traffic October 10, 2000.
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In his submission dated April 8, 2002, Mr. Heffner concedes that

Riverport became subject to the jurisdiction of the STB September 10,

1999, and states that, “prior to October 10, 2000, Riverport's activities

were limited to rehabilitating and preparing the leased facilities for

future railroad service and storing freight cars for railroad leasing

companies."

Internal Revenue Service Revenue Ruling 82-100, 1982-1 C.B. 155,

concerns a case which is legally indistinguishable. That ruling

concerned a company which hired employees on February 1, 1981,

to perform functions directly related to its commencement of

railroad carrier operations. The Interstate Commerce Commission

approved the operation of the railroad effective March 1, 1981. The

Ruling held that the company became an employer subject to taxes 

under the Railroad Retirement Tax Act on February 1, 1981, the date

it hired employees to perform functions directly related to its carrier

operations. This ruling is consistent with the long-term past practice

of the Board.

The previous Board decisions cited by Mr. Heffner do not appear

relevant to this case. The decision regarding GWI Switching Services,

L.P. (B.C.D. No. 94-113) held that company not to be covered under

the Acts because it was a private carrier that did not hold itself out

to provide services to the public2. The work engaged in by Riverport

prior to its beginning carrier operations was not that of a private

carrier; that work was preparatory to its beginning carrier operations.

The Board's decision referred to by Mr. Heffner concerning Santa

Cruz, Big Trees & Pacific Railway Company (B.C.D. No. 94-9)

concerns a company which had previously been held to be a

covered employer. On reconsideration, the Board held that the

2 This decision was reversed on reconsideration when the company substantiated that it

did hold itself out to the public and therefore was not a private carrier (B.C.D. No. 96­

19).
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company's tourist railroad operations should not be covered under

the Acts, and that only the company's much smaller freight

operations should be covered. Again, that decision appears to

have no bearing on the instant case.

On reconsideration, the Board’s decision dated June 1,2001, 

holding Riverport to be an employer under the Railroad Retirement

Act and the Railroad Unemployment Insurance Act as of March 1,

1999, is amended to hold that Riverport became an employer June

1, 1999, the date as of which it first hired employees.

V. M. Speakman, Jr.

erome F. Kever (Dissenting in part)

£-4site^
MANAGEMENT MEMBER KEVER’S DISSENT

RIVERPORT RAILROAD, L.L.C.

I disagree with the majority’s determination of June 1, 1999 as the effective

date of coverage. The effective date of coverage should be September 10,

1999; the date Riverport’s STB exemption for operating authority took

effect. Prior to that date, Riverport’s employees were performing noncommon carrier functions.

Jerome F Kever, Management Member