STAYING ON TRACK : Entrepreneurs with a passion for railroads have been breathing life back into hard-working short lines, thanks to deregulation.

Oh, the Iowa Traction line is not a mighty good road as railroads go.

It has only 12 miles of track, much of it warped and rickety and some unusable. The newest locomotive in the fleet was built in 1923. And slow? Barking dogs race the trains and win.

Yet a year ago, Dave Johnson put up his life savings to buy the failing line, saving from extinction the last commercial freight-hauling electric trolley railroad in the country.

Now, every day after finishing his regular job as an executive at a nearby computer firm, Johnson, 45, rushes to the railroad office to oversee a transportation empire that includes five engines, some leased box cars, two full-time workers and a pile of bills and headaches.

Johnson, a railroad telegrapher’s son, is happier than Casey Jones at full throttle. “He’s in his glory,” said Johnson’s wife, Kay. “. . . You’ve heard about the men and their toys. The price just gets bigger. He’s just gone from model railroads into the real thing.”

His line may be unique, but Johnson’s passion for the rails is not. Just as government deregulation spawned a revolution in the airline industry, it has also fostered a renaissance for short-line railroads.

Customized Service

A short line is something more than just a piece of property on a Monopoly board. Nearly 200 new railroads, ranging in length from one mile to several hundred, have emerged in the past decade. Unburdened by the costly work rules of unions and the restrictive bureaucracy of government, many small lines have been able to make a go of once lightly traveled, money-losing branch routes that were shed by long-haul carriers such as the Burlington Northern or the now-defunct Rock Island and Penn Central.

Many of the new lines do little more than feed freight into national trunk lines of the big systems, but the profit comes from streamlining operations and customizing service to fit the needs and schedules of shippers in a way the less-flexible major carriers never could.

Though there may be no budding J. P. Morgans or Jay Goulds in the lot, deregulation has fostered a new crop of railroad entrepreneurs, many in it for the thrill as much as the money. It has also preserved a low-cost and historically rich transportation service for many shippers, among them debt-ridden farmers in the Midwest who could ill-afford the higher prices they would have to pay to truck grain and other commodities to market.

So vital are the rails to the Farm Belt that many states in the region have established special programs to help investors take control of the rundown branch lines that major carriers are now rapidly lopping off of their systems in their rush to slim down and economize.

Returning to Its Roots

“The lifeline of the Iowa economy depends on an efficient, low-cost transportation system,” explained Les Holland, an Iowa transportation department official who heads the state’s rail preservation program.

In a sense, the rail industry is returning to its roots. A century ago, the countryside was honeycombed with the tracks of hundreds of local and regional carriers. Then ambitious industrialists such as Gould and Morgan snapped up and consolidated many of the lines. Short lines never faded from the picture, but their importance was overshadowed by the mighty rail giants that ferried the nation’s commerce and passenger traffic from coast to coast over thousands of miles of track.

But the air travel boom and the development of the interstate highway system chipped away at the dominance of the big rail carriers, sapping profits from many and forcing some into bankruptcies or mergers. Figures compiled by the Assn. of American Railroads, an industry trade group, show that in 1975 there were 73 railroads that fit the government definition of a Class 1, or big, system. Together, they owned more than 191,000 miles of track and employed nearly 488,000 people. By 1986, the number of Class 1 railroads had dwindled to 16, their total trackage was down to 140,000 miles and the number of workers on their pay rolls stood at about 276,000.

New short lines rushed in to pick up some of the slack. Over the last decade, according to industry figures, the roster of the nation’s small carriers doubled to about 400. A primary catalyst was the 1980 Staggers Act, which cut through a thicket of federal rules that had long impeded efforts of major carriers to slim down by spinning off or abandoning marginal properties outright.

As a result of the act, “It’s easier to get into business and there’s less regulatory red tape,” said Thomas C. Dorsey, vice president and general counsel of the American Short Line Railroad Assn.

Small operators can succeed where big ones failed because they have far greater flexibility on staffing and pay requirements, explained John Due, a University of Illinois economist who has monitored the changes. Not only must major carriers adhere to nationwide pay scales, Due said, but tough union contracts have created a plethora of specialized workers and overstaffed crews.

That is not the case with short lines, many of which are not unionized. “Short lines can operate more cheaply. . . . Employees are paid local wage scales,” Due said. “They operate typically with two men on a train rather than three or four. The engineer may do all the diesel maintenance himself.”

Fears Sparked Takeovers

The transformation of the industry has had as dramatic an impact on Iowa as it has had on any state. Once, more than 10,000 miles of working track crisscrossed the state. Today, only half that number is in service.

The fear of impending rail closings and bankruptcies a decade ago set off a “panic” among farmers, grain elevator operators, food processors and other key industries, Holland said. Some nervous shippers decided that, with the aid of the Staggers Act, the best way to insure service for themselves was to take over the railroad.

One such enterprise became the Iowa Interstate Railroad, carved from 373 miles of former Rock Island main line between Chicago and Omaha. Armed with a hefty state loan, a consortium of Iowa industries once served by the Rock Island bought the line for $31 million and installed a former Rock Island executive as president.

Another 141-mile chunk of Rock Island track, a low-density segment in the northeast portion of the state between Cedar Rapids and Manley, is now the Iowa Northern Railway. Despite the farm crisis that was then at its height, a group of grain elevator operators along the route bought the line for $5.4 million in 1984 to ensure its survival.

The group has sunk another $5.7 million into a rehabilitation program to replace rotten ties and repair uneven road beds. But Harold Stark, who doubles as chairman when he is not running the grain elevator at Packard, said it was worth it. Shipping grain to market by truck would add millions of dollars a year to the transportation costs of the 4,500 farmers now served through elevators on the Iowa Northern route, Stark said.

Last year, the Iowa Northern did about $4 million in business and just about broke even. But to C. J. Stoffer, its president, the business is as much an enterprise of love as of money.

He grew up in a railroad family. His father was a telegraph operator for the Rock Island and Stoffer became one, too, when he graduated from high school in 1957. Stoffer met his wife, Linda, down at the depot. Her grandfather was a railroad firefighter and her father and brother were both conductors.

Stoffer worked his way through the ranks to become a terminal agent and then a dispatcher, but he never imagined that one day he would be running his own line. “You always knew you could do it but you never thought you’d get the chance,” he said.

Women Run Two Lines

The new crop of railmen spawned by deregulation includes some railwomen as well. Two short lines, both in California, are run by women.

Carmen Chappell is president of the 12-mile-long Ventura County Railway in Oxnard. Like Stoffer, railroading is in her blood. Her father was a roadmaster for the Trona Railway in the Mojave Desert and she would follow him around as he checked the track for damages.

The family lived by the tracks near a water tank where the old steam engines would stop. She would lie awake at night listening for the train whistles and when she heard them she would run out to greet the engineers.

“They always had candy for me while they would be filling up,” she recalled. “They all looked for me, and if I wasn’t there then the next day they would call Mom on the company radio to find out if I was all right.”

When she grew up, the Trona hired her for a succession of front office jobs, and six years ago the owners of the Ventura hired her to head the operations of their freight line.

For Dave Johnson, the new owner of the Iowa Traction Line, railroading held a similar mystique. As a youngster, he used to tag along with his telegrapher dad and stare bug-eyed as the huge locomotives chugged through Clearlake Junction on the outskirts of Mason City, the same spot where the Iowa Terminal links up today with trains from the Chicago Northwestern and the Soo Line.

After earning a graduate degree in mechanical engineering, Johnson originally went to work for the Union Pacific. But he ran a computer, not a train.

Challenges for Owner

Last year, when the owner of the local railroad filed an application for federal permission to shut it down, Johnson took advantage of a Staggers Act clause that let him buy it at the scrap-sale price of $319,000.

What he purchased was a crumbling relic. Several electrified traction lines once ran through Iowa and other parts of the country but virtually all gave way to diesel power decades ago.

Iowa Traction lost money for 20 years before Johnson came along. He hopes to make money on the line soon but says that any profits will go to improve the operation.

When you say the word railroad, something like Iowa Traction is probably not what would come immediately to mind. The line has only three major customers, who leave orders for pickups and deliveries on a telephone answering machine. Some of the rail was laid in 1896 and the four- to five-car trains rarely break 5 m.p.h. During thunderstorms, the line shuts down, “just to be on the safe side,” Johnson said.

Almost every day is an adventure. A few weeks ago, a section of the 80-year-old overhead electrical wire wore out and snapped. On April 17, two rails broke. Soon after that, Vic Koenigsburg, the jack-of-all-trades switchman, lineman, repairman, what-have-you, came into the office clutching a half-inch thick strip of steel that had somehow sheered away from a piece of track.

Despite the aggravation, Johnson insists it is worth it. “To me it’s always been more than just a job where you collect your money and go home,” Johnson said of railroading. “I always wanted to be a locomotive engineer when I was a kid.”