Corporate News
       Saginaw Bay Southern Railway has instituted a surcharge of $20 per car to cover a portion of the expense incurred in keeping railroad/highway crossings maintained to MDOT (Michigan Department of Transportation) standards.
This action became necessary when the State of Michigan announced it would no longer pay for the cost of repairs to grade crossings on state highways.  The elimination of funding for crossing repairs on state and federal highways has dramatically increased the cost of doing business in Michigan for SBS.&nbs
       SBS and LSRC have budgeted over $500,000 for crossing work during 2008.  This amount of money invested in the railroad would allow us to replace 17,000 ties, enough to rehabilitate 17 miles of rail.  We are faced with the need to raise funds for crossing work previously financed by the State via this new surcharge.  We are unwilling to compromise the safety of our railroad due to the inability of the State of Michigan to fund crossing repairs which were previously state funded.
       It is an unfortunate fact that the primary cause of damage to our crossings is truck traffic.  Michigan’s high truck weight limits increase the amount of damage our crossings sustain, and increase our expense to keep these crossings repaired.  The failure of the state to fund crossing repairs as they have done in the past means that the railroads are in the position of supporting our truck competitors by repairing damage that the trucks have caused.
       This direct subsidy to truckers places an unfair burden on SBS and our customers.  All money collected via the surcharge will be spent on crossing repair.  If the State of Michigan removes this unfair “tax” on the railroad, the surcharge will be eliminated. 
       We want our customers to understand the background that made this surcharge necessary. Every dollar spent on highway infrastructure is a dollar that is not available to spend on keeping our railroad infrastructure as safe as we can possibly make it.

Locomotive Purchase
       In 2007 LSRC/SBS purchased 9 GP-40-3 locomotives.  The GP-40-3 is a 3000 horsepower, turbo charged, four axle locomotive.
       This acquisition is part of a locomotive fleet upgrade.  We will be selling our remaining Alco locomotives and our railroad fleet will consists solely of EMD power.  We get greater horsepower and greater tractive effort from a smaller number of locomotives.  In addition it will be easier to obtain parts for a more modern fleet.
       The new units were purchased from First Union.  We plan to paint four locomotives per year until all locomotives have the SBS/LSRC paint and LSRC markings.  All painting will be done in-house in our recently relocated and modernized locomotive shop in Saginaw.

Track Rehabilation
       In its second year of operation, SBS rehabilitated the line from Saginaw to Essexville.  Over 13,000 ties were replaced in 10 miles of railroad.  In addition, rail was replaced in all curves.  SBS plans to continue to invest aggressively as we have done since our inception.  We believe there is significant growth potential in our service area, and we are poised to participate in increased rail traffic.

LSRC News
       2007 marked the 15th anniversary of the creation of the LSRC.  It also marked our 15th consecutive year of providing profit sharing via our employee’s 401-k plan.  The LSRC was formed from the underperforming assets of a previous railroad.  Our employees deserve great credit for making a success of a rail property that many thought had seen its best days.  LSRC has met its targets in a difficult economic environment, and has been very successful.  Thanks to all of those who have played a role in the LSRC resurgence!