TED STRICKLAND GOVERNOR STATE OF OHIO

December 7, 2010

VIA HAND DELIVERY

Governor-Elect John Kasich 77 S. High Street, 19th Floor Columbus,OH 43215

and

340 E. Gay Street Columbus, OH 43215

Dear Governor-Elect Kasich,

I write in response to your recent request that my administration stop work on Ohio's plans to reestablish 3C&D passenger rail service.

As you know, Ohio successfully competed against many other states to win a highly competitive $400 million federal grant to establish 79 mile-per-hour passenger train service connecting Cleveland, Columbus, Dayton, Cincinnati, and communities in between.

Because I am concerned that your views on this project may be based on incomplete or inaccurate information, 1 wanted to take this opportunity to provide an explanation for why I believe the 3C&D project is so critical to Ohio's economic future. I invite you to consider this information, as well as other research-based information, so that you can make as informed a decision as possible about how to handle this project in a way that is best for Ohio. 1

While developing passenger rail service in Ohio is not a panacea, there are several important reasons why this project should move forward. First among those is that this investment wil1lead to the creation of thousands of Ohio jobs at a time when nothing is more important. In addition, this project would ensure Ohio does not become an island, isolated from the emerging Midwest high speed rail system. Ohio could finally have its own passenger rail network that connects to regional and national rail networks. And by giving more Ohioans an additional transportation choice, we would reduce highway congestion, improve freight transport, reduce air pollution, and lessen dependence on foreign oil.

I'd like to provide you with additional detail to support what I consider to be the three most significant and compelling reasons to develop passenger rail in Ohio. Developing passenger rail will lead to the creation of thousands of jobs for Ohioans, revitalize our cities, and help keep talented young people from leaving our state.

1 I've attached to this letter a document that briefly touches on some of the pervasive myths surrounding this issue, like the notion that the train would only operate al39 mph.

77 SOUTH HIGH STREET • 30TH FLOOR. COLUMBUS, OHI043215-6117 • 614.466.3555 • FAX: 614.466.9354

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December 7, 2010 Governor-Elect John Kasich

Ohio's Passenger Train Network Would Create More Than 16,000 Jobs

First and foremost, this project is about jobs for Ohioans. Establishing high speed passenger train service in the 3C&O corridor would lead to the creation of more than 16,000 permanent jobs. Other states, like New York and Illinois, hope to take Ohio's money to create jobs in their states. As U.S. Department of Transportation Secretary Ray LaHood has stated, that is exactly what will happen if Ohio rejects our $400 million award: the funds will be given to another state to create jobs there. The Obama Administration has made it abundantly clear that it is deeply committed to the enhancement and expansion of passenger rail in the United States, and that these funds will be used for that purpose and no other. The governorselect of California and New York have already asked for Ohio's funds. It is my hope that Ohio's leaders never voluntarily give Ohio jobs away under any circumstances.

The thousands of jobs at stake include both manufacturing jobs and new jobs that would be created in station cities as part of the $3 billion of development expected to occur around stations. This investment would strengthen Ohio's existing suppliers and manufacturers. Our state is already home to at least 225 businesses and 26,000 employees tied to the railroad industry. Companies like Columbus Steel Castings, Morrison Metalweld in Canfield, and Precision Gage and Tool near Dayton express confidence that the 3C&D project would boost their sales. These Ohio companies, and others like them, stand to benefit and grow from Ohio's active participation in the development and operation of a regional and national passenger train system.

Ohio also has the opportunity to attract new manufacturing business to our state. U.S. Rail Car is headquartered in Columbus and is considering building a manufacturing center in Ohio that would be the only U.S.-owned, domestic manufacturer of passenger train cars. If Ohio does not move forward with this project, U.S. Rail Car will not bring a new manufacturing center to Ohio.

Ohio's Passenger Rail System Will Help Revitalize Ohio Cities

Returning passenger rail to our downtowns is perhaps the most transfonnative action that Ohio's cities would experience in decades. Without strong cities, we cannot have strong suburbs. Revitalized urban cores will have a positive impact on the surrounding metropolitan areas-as Greater Ohio's Restoring Prosperity report points out, "the seven largest metropolitan areas in the state house 70 percent of the state population and produce 80 percent of the state GOP." Aside from manufacturing growth, the greatest potential for job creation exists in station cities like Cleveland, Columbus, Springfield, Riverside, Dayton, Sharonville, and Cincinnati, and future station sites in the Mansfield, Middletown, and Delaware areas. The increased commercial activity in each of these cities would result in new jobs both in the cities and surrounding communities.

These communities recognize the successful job creation and development that passenger train service has delivered in 14 other states, including:

• In Maine, the Northern New England Passenger Rail Authority estimates $7.2 billion in privatesector construction, 17,800 new jobs, and $76 million in annual tax revenues. Robert Martin, a real estate developer from New England wrote: "We found that the Amtrak Downeaster is a true economic engine on our steel interstate. After less than $100 million in public investment, we see over $7 billion in additional construction investments; 42,000 new housing units; almost 7 million square feet of commercial space and almost 18,000 new jobs. Magnify that by the impact on energy and the $2.4 billion per year of additional consumer purchasing power, and you have a huge shift in the economy of a state one-eighth the size of Ohio. If we can do this in our little state, think of what Ohio can do."

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December 7, 2010 Governor-Elect John Kasich

• In Charlotte, North Carolina, a startup passenger rail service generated $291 million in private development in less than 12 months.

• In Dallas, Texas, more than $4 billion worth of private and public projects - all built within a decade - are the direct result ofthe presence of a single rail station.

National business developers, such as Forest City Enterprises in Cleveland, recognize that passenger rail cities in Ohio stand to reap the same job creation rewards as cities in other states. There is tremendous opportunity for job creation around the initial eight station sites:

• The City of Cleveland's station would connect to the city's light rail system and would be incorporated into plans for the Medical Mart, Convention Center, casino, and East Bank Flats development in order to encourage more economic activity and job creation downtown.

• The City of Columbus station would support business in the Short North and Arena District and be adjacent to the Columbus Convention Center, with potential tie-in to light rail connecting to Port Columbus Airport and the suburbs/communities of northern Columbus.

• The City of Dayton estimates that private mixed-used downtown development within a 10 minute walk of its station at Sixth and Ludlow could range from $150 million to $250 million in rehabilitation and new construction over the next decade.

• The City of Riverside has estimated that the station across from the U.S. Air Force Museum would spark 1.2 million square-feet of new commercial space, generating $180 million of taxable property and $480 million of taxable income, as well as strengthening the Museum's bid to host one of the retiring space shuttles.

• The City of Springfield has already incorporated its planned station into exciting plans to revitalize its downtown and university district.

Ifwe turn away Ohio's $400 million award, Ohio loses not just those resources but all of these job creation opportunities-in Cleveland, Columbus, Springfield, Dayton, Riverside, Sharonville, and Cincinnati, as well as the Mansfield, Middletown, and Delaware areas. Instead, our $400 million will be put toward the creation of jobs in cities in other states.

Ohio~s Passenger Rail Network Will Help Ohio Attract and Retain Young Workers

Along with sending our jobs to another state, turning away Ohio's federal funding would send a negative message to Ohio's young people. Public surveys, such as that conducted by a nationally respected workforce retention firm for the Columbus Chamber of Commerce in April 2007, found that, in order to attract and retain young professionals, Ohio's cities need strong urban cores with accessible public transportation.

President E. Gordon Gee of The Ohio State University also recognized the link between college students and economic development when he wrote to the U.S. Department of Transportation that passenger rail in Ohio will provide a critical link to the emerging knowledge economy. With more than 220,000 college students within 10 miles of the proposed 3C&D station stops, a robust public transit infrastructure would

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December 7, 20 I 0 Governor-Elect John Kasich

complement efforts in recent years by our higher education and business sectors that allow Ohio to compete more effectively with other states to attract and retain young talent.

Greater transportation options will affect more than where a young person chooses to reside, it will also affect business decisions about where companies locate their operations. In its most recent report, Site Selection Magazine's annual in-depth survey of corporate real estate executives continues to rank transportation as one of the top three factors most important to making site location decisions.

Moving forward with this project will create thousands of jobs in this state, revitalize our cities, and attract and retain young talent. By moving forward with the studies that are underway, your administration will be provided with far better information with which to make future decisions, including improving the current plans. And, if this project does not advance beyond this phase under your administration, the information gathered during this study period will be available for future governors and General Assemblies.

Our nation and our state are slowly recovering from a dark economic chapter. Many Ohioans are still out of work - we badly need new jobs in Ohio and cannot afford to squander significant job creation opportunities. I urge you not to begin your administration by foregoing significant near- and long-term employment opportunities for struggling Ohioans.

Governor, State of Ohio

Enclosure

TED STRICKLAND GOVERNOR STATE OF OHIO

3C&D Quick Start Passenger Rail Service

Ohio fought hard against other states to win this $400 million award in order to create jobs and economic opportunity in our state. Because so much incomplete and inaccurate information has developed around this project, it's important to separate myths from facts:

Myth #1: The 3C&D Quick Start would be a 39 mile per hour train.

Fact: The 3C&D "Quick Start" would be a 79 mile per hour train. In fact, the train would run at 79 miles per hour for 70 percent of a trip from Cleveland to Cincinnati. This 79 mile per hour system would provide the foundation for a higher speed system, allowing speeds to be increased incrementally, over time, as has been done in other states. Top speeds will initially be limited to 79 miles per hour, but speeds could be increased to up to 90 miles per hour for much of the trip between Cleveland and Columbus based on Ohio's memorandum of understanding with CSX. Future speed increases would be negotiated with the freight railroads and would require additional infrastructure investments from future governors and General Assemblies, much like advancements to our highway system over the past several decades.

Myth #2: The need for the state to subsidize passenger rail operating costs makes the project unaffordable given Ohio's severe budget challenges.

Assuming the first full year of service would be 2013, the 3C&D passenger rail service could operate through at least 2017, and likely beyond, without a single dollar of state general revenue funds. Even if the annual subsidy of passenger rail is $17 million, a combination of annual federal (CMAQ) funds and other non-general revenue fund sources, such as advertising dollars, would adequately cover the subsidy costs through at least 2017. For context, Ohio receives, on average, $90 million in federal CMAQ funds each year.

Beyond 2017, those sources, combined with the annual state tax revenue generated by the development and operation of3C&D and corresponding jobs, will far exceed an annual operating subsidy that may be necessary to support service.

Similarly, because the current studies are fully paid for with federal resources, continuing the studies will have no impact on the next state budget or future general revenue funds.

77 SOUTH HIGH STREET· 30TH FLOOR 0 COLUMBUS, OHI043215-6117 • 614.466.3555 • FAX: 614.466.9354

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3C&D Quick Start Passenger Rail Service

Myth #3: Ohioans do not want to ride passenger trains.

Fact: Tens of thousands of Ohioans already ride passenger trains, and hundreds ofthousands more want to. Numbers from Amtrak show that nearly 147,000 passengers got on or off trains in Ohio over the past year, despite the late-night and early-morning long-distance schedules currently offered. That's an increase of 14 percent overall from the previous year and includes impressive single-city ridership increases of 21 percent in Toledo, 30 percent in Elyria, and 12 percent in Cleveland.

An estimated 478,000 Ohioans per year would ride trains in the 3C&D corridor, according to AEeOM, well-regarded transportation experts with more than 25 years of experience in providing passenger train ridership estimates. This independent ridership analysis is based on population, availability of competing transportation, alternative drive times, and fares. Based on this conservative estimate, Ohio's service in its first year of operation would have the tih highest ridership level in the nation. There is no doubt that the vast majority of Ohioans traveling between these cities will use our highway system, but this new option will be utilized by hundreds of thousands of Ohioans. Not only will passenger rail benefit those on the trains, it will benefit those who continue to drive by reducing traffic congestion both on the highways and in our downtowns.

Moreover, in making a decision on providing Ohioans with a passenger rail option, we must think to the future of highway expansion. Highways will always be vitally important to our state, but we cannot continue indefinitely to add lanes to our interstates and expand urban interchanges. If our shared goal is for Ohio to experience continued growth in the decades ahead, the future of commuter travel and freight transportation necessitate the development of more options now to lessen the impact on our highways.

Myth #4: Passenger rail service harms freight rail service.

Fact: Passenger rail service and freight rail service are compatible and coexist in many other states. Ohio has worked closely with Norfolk Southern, CSX, and Rail America to develop this project and has repeatedly pledged that the introduction of passenger train service will not harm freight service, but make it better. In fact, as much as half of the $400 million investment for the 3C&D service will go to track improvements and track additions on the freight railroad right-of-way and to safety improvements at roadway and railroad crossings. If Ohio manages capital improvements to freight tracks effectively, the railroads will benefit from the increased capacity and higher speeds that will result.

Myth #5: Rail is a partisan issue.

Fact: Just four years ago, the Republican-controlled Ohio Senate unanimously passed a resolution urging the federal government to fund the environmental and engineering studies necessary to build a high speed passenger rail network, including the 3C&D corridor. Governor Bob Taft first proposed the Ohio HUB, and commissioned ORDC to develop passenger rail plans for Ohio. The majority of Ohio's congressional delegation, Republicans and Democrats alike, have written letters of support for Ohio's passenger rail plans. There is broad consensus to proceed.