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Lansing — The state will halt lease payments for 23 idle passenger rail cars near Owosso at the end of this budget year but retain the option to use them in the future, a transportation department official said Monday.

Tim Hoeffner, director of the Michigan Department of Transportation’s rail office, said the state will have spent $11.4 million when controversial lease payments are suspended under a tentative deal with Great Lakes Central Railroad.

“This is a risk Great Lakes Central is taking,” Hoeffner said. During the company’s deal with the state, “they could gauge the risk and make a business decision,” he said.

The 2010 deal between the state and the rail car owners became a contentious issue for lawmakers several months ago as legislative leaders and Gov. Rick Snyder were campaigning for the failed May 5 ballot proposal to raise taxes and add $1.2 billion to the annual road repair budget.

A state audit questioned the arrangements under which the state spent $7.6 million to have the 1950s-era through 1970s-era commuter passenger cars refurbished, only to have them sit idle while it paid to lease them for four years.

The cars, retired from Chicago’s Metra system, are intended for a proposed new commuter rail service between Ann Arbor and Detroit and between Howell and Ann Arbor. The exploratory transit plan has run into complications that have delayed it until at least 2017.

State Transportation Director Kirk Steudle promised lawmakers he would meet a self-imposed end-of-May deadline for ending the rail car lease deal or finding a sublessee for the stainless steel-sheathed, double-deck cars.

Hoeffner said the state is finalizing details with Great Lakes Central so it won’t dump the lease deal. But under a modified agreement, the railroad will stop taking lease payments from the state Sept. 30 and assume all the risk for finding another transit service to lease the cars, he said.

The state will keep a five-year option to reclaim the cars for use on one or both proposed commuter lines as part of the pending new deal with Great Lakes Central, Hoeffner said. He said his department conservatively projects it may not happen until 2019.

The state and local leaders in the involved communities are proposing to set up a demonstration project to gauge passenger demand and qualify for federal funds.

gheinlein@detroitnews.com

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