Internal memos reveal that the company responsible for delivering public transport in Northern Ireland was refusing at the time to hand over £10 million from its reserves to government and was linking its participation in a new railways task force with gaining commitments over funding for enhanced safety measures.
In March of 2000, Joan Smyth, then chair of the Northern Ireland Transport Holding Company, the commercial arm of public transport operator Translink, wrote directly to Northern Ireland Secretary Peter Mandelson.
She said she was taking the unusual step after her board received a detailed presentation on the findings of a strategic safety review from NI Railways.
Ms Smyth said: "Although the review acknowledges that NIR is currently operating the rail network to acceptable safety standards, it also highlights the need for very significant investment in the short to medium term if rail services are to continue to operate within acceptable tolerances of safety.
"The need for the essential expenditure, which relates mostly to upgrading of track infrastructure and renewal of our short-haul rolling stock, has arisen because of the under-investment over a prolonged period."
She asked for assurance that additional financial support would be made available to address shortfalls.
In his letter of response, Mr Mandelson said Minister for Regional Development Adam Ingram had decided to set up a "high level task force" to provide advice on options for the future of railways.
Following Ms Smyth's letter, an internal DRD memo said a safety review had identified a need for expenditure of about £183 million over 10 years in Northern Ireland's rail network, including £115 million in the first three years.
It stated: "DRD and DFP officials believe that the time has come for a fundamental look at the future of the railways in Northern Ireland which would have to include the politically charged option of closing or moth-balling parts of the existing network."
Ms Smyth and Mr Ingram met in April. In a letter following the meeting, Ms Smyth said she would find it difficult to secure the support of her board for participation in the task force without concerns over significant funding to meet safety concerns being addressed.
She said: "Board members have a legal responsibility as Directors to address this and failure to do so leaves them exposed to possible criminal liability in the event of an accident."
The task force held its first meeting on April 17 2000.
A subsequent memo on the meeting from DRD Permanent Secretary Ronnie Spence said it had been a "difficult" meeting.
He added: "Her (Ms Smyth) letter of 14 April to the minister links the board's participation in the task force to further substantial Government funding for essential safety work this year; and the letter reports the Board's unwillingness to hand over the £10m of their reserves due in 1999/2000. Mrs Smyth is currently overseas."
He added: "We are in an unsatisfactory position, where £10 million (which NITHC cannot spend) is being withheld from Government and where NITHC are trying to extract further commitments from Government before signing up to the task force.
"I have told Mrs Smyth that, in my opinion, her Board is getting into dangerous waters.
"To be fair, I do not doubt the sincerity of board members' concerns that they would be very exposed if a serious safety related incident happened."