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Re: End of the line getting closer ....
Author: WURR
Date: 05-31-2010 - 13:03
>First, the mill that was auctioned the other day hadn't operated (produced freight) for several years. So the auction did not bode the end of the line. Nobody had expected it to reopen anytime soon.
So what industry or combination of businesses still exist or are being seriously proposed for the Wallowa Valley that would create sufficient carloads to justify rail service now or in the next few years? To the best of my knowledge – none. The timely arrival of revenue from the storage cars is the only thing that financially saved WURR – for now. Scrapping the mill removed any possibility it might reopen.
>Board members have told me all along that the primary reason the two counties purchased the line was to maintain the infrastructure for future use, either freight, passenger or both. This means that at worst the railroad would mothball its fleet, not tear up the rails. Some local folks would like to turn it into a walking trail and one guy envisions a new pony express venture (remember, it's horse and cattle country). But none of these ideas has caught fire with the board or a majority of the populace.
Agreed, but you can’t simply decide to “mothball” a railroad and have all expenses cease. WURR needs STB approval to suspend their common carrier obligations, allowing them to close the track (this is different from abandonment and does not let them remove the main track). The majority of deterioration of a light traffic line is due to weather. Even if closed, ties and bridges continue to rot, rocks and trees still fall, culverts still plug, logs still jam against trestles, etc. – not spending the money to keep access open, doing regular inspections and doing minor repairs could result in major damage from weather, vandalism or encroachment. To keep up with tie replacements, even figuring one will last 50 years, would require replacing at least 3,000 ties per year on 63 miles. Not to mention that rail equipment sitting will deteriorate over time, requiring either regular maintenance or rehabilitation to return it to service. And there is a continuing liability issue for WURA, and insurance is not cheap. How much was spent to reopen the line and catch up on track repairs the first time? A future customer would insist on WURR to have the capability of handling the newer, heavier cars; these would be 29% heavier than most of the cars previously shipped requiring the track to be upgraded.
>The board is trying to keep the excursion trains running--it reduced the schedule, eliminating lightly patronized dates, to come closer to breaking even.
The expectation is that the excursion trains will “come closer to breaking even” this year – after seven or eight years of operation? WURA has subsidized the railroad for both freight and passenger in the name of retaining jobs and economic development primarily by using grants for normal repairs and to cover operating losses. Even though WURRR is owned by Wallowa and Union counties, it is a separate entity not financially supported by either county. Is there any real expectation that without any freight customers left and an excursion operation that historically has lost money, WURR should receive priority for any new grants? If the excursion train was a private business, it would either have failed by now or made somebody one heck of a tax writeoff.
>As the stored centerbeams continue to dwindle, the board will be studying its options. Its UP contract doesn't expire until 2012, so the least payments will keep rolling in unless UP gives six months' notice to cancel and remove all the cars--there still are 859 in storage between the towns of Joseph and Wallowa.
If the demand remains down for lumber, and if UP leaves the storage cars at Wallowa, then WURR will be able to pay off the substantial balance of its outstanding loan from Oregon Economic Development used to purchase the line. But – if UP gives 6 months notice too soon due to an increased demand or a cheaper storage solution – that leaves WURR with no income and a demand for payment by OED. At that point, the only option left would be to sell assets. Most of the rail equipment is well used and doesn’t have much value, leaving the track for scrap and underlying land. If you recall, there were discussions to sell part of the underlying land to another state agency that would use it for recreational access (and create an additional liability for any rail operation). State budget cuts killed that idea for now.
>One alternative in the original business plan was to acquire the Idaho Northern between Elgin and La Grande, which does produce freight revenue as it interchanges with UP at La Grande. That also would raise the possibility of a passenger schedule connecting with the Empire Builder if Amtrak revives it and if it stops in La Grande (admittedly, two big ifs).
As pointed out in other replies, the INP only leases the UP between Elgin and LaGrande, and there would be little chance or demand of operating passenger service to connect with a reinstated Pioneer. At this point, I think it is important to define “passenger service”. In my opinion, there is a possible demand for “recreational” passenger service between Elgin and Wallowa that might be operated at a profit. The chance that any train could be offered for passenger “transportation” is absolutely unrealistic. The trip between Elgin/LaGrande and Enterprise/Joseph is too long and too slow – even with extensive track improvements. If future energy prices forced us all to become primarily reliant on public transportation, busses would be the realistic option considering investment, travel time and cost for this corridor.
If WURA was to purchase the INP between LaGrande and Elgin, it would also mean that WURA would have additional debt to service – and it is only a lease. WURR would receive a division of revenue from UP instead of having to collect its own tariff, and some equipment and personnel could be shared assets – both advantages. A potential pitfall would be the expectation that a presumably profitable 20 mile line would support another 63 miles of line with minimal traffic, assuming the excursion operations broke even; and this is exactly why INP abandoned it in the first place). The other question is whether WURR would operate the combined railroad itself, or contract it out? A contractor would trigger property taxes (additional expense) and would expect a steady profit, potentially leaving little for subsidizing those parts not profitable or generating revenue. This assumes that traffic levels wouldn’t fall further due to additional closures or reductions in traffic.
The current “rule of thumb” for investors is that a shortline needs to generate 100 revenue carloads per mile each year, though there are many successful shortlines that do very well on much less. For WURR, that means they would need to generate 6,300 loads per year to keep the whole line open, 4,000 if you just consider Elgin to Wallowa. Even reducing it to 25 cars per mile per year, WURR needed 1,000+ carloads per year. I’m not sure they ever came close to that figure, my guess being the average before the mill quit shipping was more like 600 cars annually (or only 15% of the suggested figure for 40 miles.)
>Also, I'm interested in knowing how WURR knows the RDCs are for sale--the board has not taken any action along those lines so far as I know, and without the RDCs the trains would be very short since they have been serving as cars, not motive power.
Does anyone really expect that any board, public or private, or public official, publically discusses or announces every offer made, option considered, or manager’s action? Outside the big railroads, the rail industry is a small world, and you hear things. There is/was interest in buying the RDC’s, but at the time WURR could not sell them due to grant restrictions. WURR still has their original three passenger cars and the supporting baggage/power car. Of the three RDC’s, only two are full passenger cars, the third having a large galley, baggage space and a few seats. Typically, each passenger car is a few over 60 seats each. If WURR ran all seven cars, they would have 300+ seats, rarely needed when most trains only averaged 100 at best. The train for most of 2006 was one engine, the power car plus two passenger cars. I think last year’s common consist was two engines (one on each end operated pull-pull so the crews did not have to move the engine to the other end), two standard passenger cars and the power car, and the RDC with the big galley at the caterer’s insistence – despite a minimum increase in ridership. Because RDC’s are self-propelled, they are considered locomotives, even if pulled like a standard passenger car. All locomotives and RDC’s require regular inspections and maintenance – at a far higher cost than a passenger car. So, many of last year’s trains ran three “locomotives” for a capacity of about 150 passengers per trip, compared to one locomotive a few years before.
If you recall, earlier this year WURA publically stated that their cost to operate the fishing train was around $4,000 per day. This cost did not include catering, advertising or ticketing expenses. Assuming the Eagle Cap and fishing train expenses are similar, and WURA continues to pay 15% for ticketing services, and at least $5,000 for advertising this season (maybe more was already spent) – the cost per train will be over $6,000 per day. The current Eagle Cap schedule shows only 12 trains this season. Assuming the common ticket price of $65 for a senior, each train needs to average at least 92 passengers to “break even”. Using a three car train of the power car and two standard passenger cars gives them 120+ seats. A 92 passenger average on 12 trains is an annual passenger count of only 1,104 passengers. Even adding another car and increasing the average to 150 per train only results in 1,800 passengers, which strangely might be less than their historic annual average. There are very few tourist operations that survive on 12 trains or just a couple thousand passengers per year, or losing money for 7+ years. It isn’t the operating costs that are the majority expense for a tourist operation; it’s the overhead of insurance, maintenance, inspections and track that cost – before you even add advertising, ticketing or any catering.
All the regular excursion trains this year appear to have raised prices with lunch is no longer included – a wise move in this economy? A senior couple will spend $130 on tickets, and need to buy lunch on-board or wait until the train returns at 1:30p. For a family of four, the cost would be $220 before lunch – the expense and 3-1/2 hour trip excludes most families. Continuing the operations of the excursion train based on its historical record is hard to justify. When revenue ends from storage cars, and if substantial freight does not unexpectedly appear, does the excursion train become responsible for all overhead, inspection and repair expenses currently shared with freight/storage operations? Substantially reducing the number of trains compared to previous years, just to trying to “break even”, is not a good indication.
This is just my opinion based on rail industry experience. There are plenty of others with rail experience on this board that might have another opinion. The Wallowa Union RR is not dead yet, but without a doubt it is dying despite best intentions and efforts. Railroading at any level is far more expensive than the average person realizes.
So what industry or combination of businesses still exist or are being seriously proposed for the Wallowa Valley that would create sufficient carloads to justify rail service now or in the next few years? To the best of my knowledge – none. The timely arrival of revenue from the storage cars is the only thing that financially saved WURR – for now. Scrapping the mill removed any possibility it might reopen.
>Board members have told me all along that the primary reason the two counties purchased the line was to maintain the infrastructure for future use, either freight, passenger or both. This means that at worst the railroad would mothball its fleet, not tear up the rails. Some local folks would like to turn it into a walking trail and one guy envisions a new pony express venture (remember, it's horse and cattle country). But none of these ideas has caught fire with the board or a majority of the populace.
Agreed, but you can’t simply decide to “mothball” a railroad and have all expenses cease. WURR needs STB approval to suspend their common carrier obligations, allowing them to close the track (this is different from abandonment and does not let them remove the main track). The majority of deterioration of a light traffic line is due to weather. Even if closed, ties and bridges continue to rot, rocks and trees still fall, culverts still plug, logs still jam against trestles, etc. – not spending the money to keep access open, doing regular inspections and doing minor repairs could result in major damage from weather, vandalism or encroachment. To keep up with tie replacements, even figuring one will last 50 years, would require replacing at least 3,000 ties per year on 63 miles. Not to mention that rail equipment sitting will deteriorate over time, requiring either regular maintenance or rehabilitation to return it to service. And there is a continuing liability issue for WURA, and insurance is not cheap. How much was spent to reopen the line and catch up on track repairs the first time? A future customer would insist on WURR to have the capability of handling the newer, heavier cars; these would be 29% heavier than most of the cars previously shipped requiring the track to be upgraded.
>The board is trying to keep the excursion trains running--it reduced the schedule, eliminating lightly patronized dates, to come closer to breaking even.
The expectation is that the excursion trains will “come closer to breaking even” this year – after seven or eight years of operation? WURA has subsidized the railroad for both freight and passenger in the name of retaining jobs and economic development primarily by using grants for normal repairs and to cover operating losses. Even though WURRR is owned by Wallowa and Union counties, it is a separate entity not financially supported by either county. Is there any real expectation that without any freight customers left and an excursion operation that historically has lost money, WURR should receive priority for any new grants? If the excursion train was a private business, it would either have failed by now or made somebody one heck of a tax writeoff.
>As the stored centerbeams continue to dwindle, the board will be studying its options. Its UP contract doesn't expire until 2012, so the least payments will keep rolling in unless UP gives six months' notice to cancel and remove all the cars--there still are 859 in storage between the towns of Joseph and Wallowa.
If the demand remains down for lumber, and if UP leaves the storage cars at Wallowa, then WURR will be able to pay off the substantial balance of its outstanding loan from Oregon Economic Development used to purchase the line. But – if UP gives 6 months notice too soon due to an increased demand or a cheaper storage solution – that leaves WURR with no income and a demand for payment by OED. At that point, the only option left would be to sell assets. Most of the rail equipment is well used and doesn’t have much value, leaving the track for scrap and underlying land. If you recall, there were discussions to sell part of the underlying land to another state agency that would use it for recreational access (and create an additional liability for any rail operation). State budget cuts killed that idea for now.
>One alternative in the original business plan was to acquire the Idaho Northern between Elgin and La Grande, which does produce freight revenue as it interchanges with UP at La Grande. That also would raise the possibility of a passenger schedule connecting with the Empire Builder if Amtrak revives it and if it stops in La Grande (admittedly, two big ifs).
As pointed out in other replies, the INP only leases the UP between Elgin and LaGrande, and there would be little chance or demand of operating passenger service to connect with a reinstated Pioneer. At this point, I think it is important to define “passenger service”. In my opinion, there is a possible demand for “recreational” passenger service between Elgin and Wallowa that might be operated at a profit. The chance that any train could be offered for passenger “transportation” is absolutely unrealistic. The trip between Elgin/LaGrande and Enterprise/Joseph is too long and too slow – even with extensive track improvements. If future energy prices forced us all to become primarily reliant on public transportation, busses would be the realistic option considering investment, travel time and cost for this corridor.
If WURA was to purchase the INP between LaGrande and Elgin, it would also mean that WURA would have additional debt to service – and it is only a lease. WURR would receive a division of revenue from UP instead of having to collect its own tariff, and some equipment and personnel could be shared assets – both advantages. A potential pitfall would be the expectation that a presumably profitable 20 mile line would support another 63 miles of line with minimal traffic, assuming the excursion operations broke even; and this is exactly why INP abandoned it in the first place). The other question is whether WURR would operate the combined railroad itself, or contract it out? A contractor would trigger property taxes (additional expense) and would expect a steady profit, potentially leaving little for subsidizing those parts not profitable or generating revenue. This assumes that traffic levels wouldn’t fall further due to additional closures or reductions in traffic.
The current “rule of thumb” for investors is that a shortline needs to generate 100 revenue carloads per mile each year, though there are many successful shortlines that do very well on much less. For WURR, that means they would need to generate 6,300 loads per year to keep the whole line open, 4,000 if you just consider Elgin to Wallowa. Even reducing it to 25 cars per mile per year, WURR needed 1,000+ carloads per year. I’m not sure they ever came close to that figure, my guess being the average before the mill quit shipping was more like 600 cars annually (or only 15% of the suggested figure for 40 miles.)
>Also, I'm interested in knowing how WURR knows the RDCs are for sale--the board has not taken any action along those lines so far as I know, and without the RDCs the trains would be very short since they have been serving as cars, not motive power.
Does anyone really expect that any board, public or private, or public official, publically discusses or announces every offer made, option considered, or manager’s action? Outside the big railroads, the rail industry is a small world, and you hear things. There is/was interest in buying the RDC’s, but at the time WURR could not sell them due to grant restrictions. WURR still has their original three passenger cars and the supporting baggage/power car. Of the three RDC’s, only two are full passenger cars, the third having a large galley, baggage space and a few seats. Typically, each passenger car is a few over 60 seats each. If WURR ran all seven cars, they would have 300+ seats, rarely needed when most trains only averaged 100 at best. The train for most of 2006 was one engine, the power car plus two passenger cars. I think last year’s common consist was two engines (one on each end operated pull-pull so the crews did not have to move the engine to the other end), two standard passenger cars and the power car, and the RDC with the big galley at the caterer’s insistence – despite a minimum increase in ridership. Because RDC’s are self-propelled, they are considered locomotives, even if pulled like a standard passenger car. All locomotives and RDC’s require regular inspections and maintenance – at a far higher cost than a passenger car. So, many of last year’s trains ran three “locomotives” for a capacity of about 150 passengers per trip, compared to one locomotive a few years before.
If you recall, earlier this year WURA publically stated that their cost to operate the fishing train was around $4,000 per day. This cost did not include catering, advertising or ticketing expenses. Assuming the Eagle Cap and fishing train expenses are similar, and WURA continues to pay 15% for ticketing services, and at least $5,000 for advertising this season (maybe more was already spent) – the cost per train will be over $6,000 per day. The current Eagle Cap schedule shows only 12 trains this season. Assuming the common ticket price of $65 for a senior, each train needs to average at least 92 passengers to “break even”. Using a three car train of the power car and two standard passenger cars gives them 120+ seats. A 92 passenger average on 12 trains is an annual passenger count of only 1,104 passengers. Even adding another car and increasing the average to 150 per train only results in 1,800 passengers, which strangely might be less than their historic annual average. There are very few tourist operations that survive on 12 trains or just a couple thousand passengers per year, or losing money for 7+ years. It isn’t the operating costs that are the majority expense for a tourist operation; it’s the overhead of insurance, maintenance, inspections and track that cost – before you even add advertising, ticketing or any catering.
All the regular excursion trains this year appear to have raised prices with lunch is no longer included – a wise move in this economy? A senior couple will spend $130 on tickets, and need to buy lunch on-board or wait until the train returns at 1:30p. For a family of four, the cost would be $220 before lunch – the expense and 3-1/2 hour trip excludes most families. Continuing the operations of the excursion train based on its historical record is hard to justify. When revenue ends from storage cars, and if substantial freight does not unexpectedly appear, does the excursion train become responsible for all overhead, inspection and repair expenses currently shared with freight/storage operations? Substantially reducing the number of trains compared to previous years, just to trying to “break even”, is not a good indication.
This is just my opinion based on rail industry experience. There are plenty of others with rail experience on this board that might have another opinion. The Wallowa Union RR is not dead yet, but without a doubt it is dying despite best intentions and efforts. Railroading at any level is far more expensive than the average person realizes.
