Aug. 30, 1985, The State Transportation Commission has approved a settlement in a long-standing dispute between the State of Michigan and the Michigan Interstate Railway Co.
The commission Wednesday approved an agreement settling contract disputes relative to 1977 agreement under which Michigan Interstate would operate the bankrupt Ann Arbor railroad system running from Toledo, Ohio, to Frankfort, Michigan, and a ferry service across Lake Michigan to Wisconsin,
The Michigan Interstate halted shipping service, except for the Ann Arbor - Toledo segment, in 1982 after a reduction in state subsides payments.
Key points of the settlement include;
1. The department will pay $4.75 million to Michigan Interstate
2. The department paid for $500,000 in track rehabilitation on the Ann Arbor - Toledo properties.
3. The department will pay for $1.25 million in track rehabilitation on its own rail properties between Durand and Ann Arbor.
Michigan Interstate will purchase the Ann Arbor - Toledo segment from the department for slightly less than $2 million, subject to the right of the transportation department to regain control if freight service stops.
Record-Eagle Sept. 10, 1985
Rail plan OK'd
Traverse City -- A proposed settlement between the state Transportation Department and Michigan Interstate Railway Company was accepted Friday by the Federal Bankruptcy Court.
Under terms of the settlement, the state will pay Michigan Interstate $4.75 million, of which $2.75 million will be set aside to pay any judgment the state might incur for labor protection benefits.
Former Michigan Interstate Railway workers, including about 120 who worked in Benzie County, have claimed the state owed them in excess of $80 million in back pay, severance pay, pensions and other benefits after cross-lake ferry operations were shut down in 1982 as a result of the state cutting its subsidy to the railroad.
Assistant state attorney general Patrick Isom said the settlement eliminates the availability of labor protection benefits to former employees beyond the $2.75 million.
However, the settlement does not affect a suit currently before the Michigan Court of Appeals in which the former employees have sued the Transportation Department. It has not yet been determined whether that suit would include labor protection benefits for former car ferry workers out of Frankfort and Elberta.
Michigan Interstate president Vincent Malanaphy called the settlement, "What you call being railroaded. A whole lot of people got screwed in the name of justice," he said.
"By this agreement, MI assumes all the labor protection liability. But I don't think the state can pass a liability to a bankrupt firm,' Malanaphy said.
Detroit Free Press Oct. 7, 1985
So the Bluewater chapter of the National Railway Historical Society's special passenger train excursion a weekend ago was a kind of sentimental journey. Ordinarily, the Tuscola & Saginaw Bay Railroad – which has been operating this state-owned trackage – has rolled quietly into town once or twice a week with a car of fish oil for the Pet Milk plant here. Otherwise, the rails have been silent and getting rustier as they await the wrecking crew.