The following history was told to me by one of the conductors, Mr. Charles High.
The M&H Railroad was chartered in 1888 by local businessmen who wanted to increase competition in rates for passengers and freight to come out of Middletown. Up until that point, the Middletown/Hummelstown/Harrisburg area’s transportation needs had been served by the Union Canal (commissioned in 1791 by William Penn in order to connect the Susquehanna River in Harrisburg to Philadelphia and completed in 1827) , the Pennsylvania Canal, the Pennsylvania Railroad and its predecessors. The Pennsylvania Railroad had a monopoly on freight at the time and there was little competition to drive the rates down.
In 1857, the Reading Railroad completed their line to Harrisburg and essentially put the Union Canal out of business. When the Union Canal was finally abandoned in 1884, Middletown realized that an alternate mode of transportation to transport freight to Philadelphia was needed; so, this group of local businessmen decided to build their own railroad to meet this need. The M&H railroad would be constructed along the path of the former Union Canal.
Construction on the railroad began in 1889 on the Middletown side and was completed as far north as Stoverdale by August 1889. In 1890, the bridge over the Swatara Creek was completed and the M&H line joined the Reading Railroad so that they could compete with the Pennsylvania Railroad together. The Reading Railroad purchased the line from the M&H directors and they served the line with passengers until 1939 and with freight until 1972.
1972 is an infamous year in Pennsylvania history due to a massive hurricane named Agnes – a storm which is still frequently mentioned by name today. The M&H was not untouched by Agnes: the storm severed the railroad line between Middletown and Hummelstown when the Swatara Creek flooded as a result of the heavy rains. The Reading Railroad made a deal with the Pennsylvania Railroad: the Pennsylvania would service Middletown and the Reading would service Lebanon. This temporarily solved the problem and allowed freight to continue to pass through Middletown.
In 1976, Mr. Wendell Dillinger bought the railroad from the bankrupt Reading Railroad. From 1976-1986 the line was used solely for freight. In 1986, he decided to start running passenger trains, and they have been running ever since. All of the passenger coaches were built in 1916-1920 and were used in New Jersey until 1984.