Thursday, November 15, 2007
Serving the South Coast of Oregon



CORP calls for rail partnership

By Elise Hamner, City Editor

EUGENE — Some people on the South Coast are hoping for some kind of miracle to bring the Coos Bay rail line back into operation.

The Central Oregon & Pacific Railroad is hoping for money — more than $23 million.

On Wednesday afternoon, CORP officials and managers from the railroad’s parent company, RailAmerica, unveiled their proposal to re-open the line. They called for a public-private partnership. Fewer than 20 people came to hear it, including shippers, some public officials and fellow railroad execs.

Partners would share in the costs to repair deteriorating tunnels. They would pay to replace 88 miles of ties and to fix bridge defects, according to CORP’s presentation to the group of proposed partners invited to Eugene’s Valley River Inn.

The partners

CORP proposed to divide the costs at $4.66 million for each partner its managers selected. Those asked to come up with money include CORP, the Union Pacific railroad, the Oregon Department of Transportation, the Oregon International Port of Coos Bay and the shippers. Companies such as Southport Forest Products, American Bridge, Georgia-Pacific and Roseburg Forest Products would pay $204 more per carload with a guarantee they would send out at least 5,700 carloads annually.

The reality is the line loses money, said RailAmerica’s Bob Jones, the vice president of the company’s western region.

“Unfortunately, it makes it tough to invest a large amount of money when we’re losing approximately $1.5 million a year on the line,” he said.

Even so, railroad officials aren’t ready to give up the line.

Railroad executives said they’ve spent $4.3 million over the past six years on the line, but they didn’t give out any revenue information.

And to keep it operating, railroad executives want ODOT to sign a five-year deal to pay up to $2 million annually for operating costs and $2 million over each of three years for maintenance.

The timeline

Executives said they would like to have commitment from partners within a month. In a best-case scenario, bids could go out March 1. The all-important tunnel upgrades could start June 1 and be completed by summer’s end, allowing the railroad to re-open come September 2008.

But the work can’t stop with tunnels, CORP officials said.

“We can go in there and fix the tunnels, but in a year we would be in the same situation,” said Marc Bader, RailAmerica’s chief engineer.

And more, Bader said, now is the most efficient time to do the repairs — while the rail line is down.

“So, I’m sure you have questions. We’re ready,” Jones said when his presentation was done.

Questions

The room was silent for a time before a Union Pacific official asked whether the tunnels would be able to accommodate double-stacked container trains. He was referring to talk that APM Terminals of North America is considering the feasibility of building a container import terminal at Coos Bay.

“No,” Bader told him.

Two representatives from Reedsport’s American Bridge asked what will happen if the proposed partners say no.

“There are other options. We’ll just have to see what gets us there,” Jones responded.

State Rep. Terry Beyer, D-Springfield, who chairs the interim committee on transportation, asked why the railroad didn’t work with any proposed partners in coming up with a plan.

This was that opportunity, Jones said.

That didn’t sit well with Douglas Timber Operators’ Executive Director Bob Ragon. He demanded to know why CORP felt it was more economical for other entities to borrow money for rail repairs.

“We’re not in this alone,” Jones told him. “Number one, who do you represent?”

“The timber industry,” Ragon responded “The shippers. Lots of them.”

“I will ask you this question,” Jones said. “What do you do with your businesses when they fail?”

John Johnson, with Oregon Rail Division, asked why the company recently turned down a $40 million low-interest loan to make repairs on the company’s Coos Bay and Siskiyou lines. Jones responded that at the time, managers thought there was money available from other in-company sources.

“They decided it wasn’t the most economical way to make those repairs,” he said.

Jones blamed the deterioration of the line on the railroad’s former owner, Southern Pacific, which was bought out by Union Pacific. When lumber mills shut down in the 1980s, the railroad stopped investing. And more, federal officials don’t oversee tunnels and bridges, Jones said. It’s been up to the railroad companies to police themselves. The industry has found over the years that hasn’t been the best situation, he said.

Rep. Beyer told CORP and RailAmerica that state money isn’t likely to materialize anytime soon. The Legislature won’t be allocating new spending until 2009.

“I can tell you that is pretty much an impossible timeline for a request,” she said.

Throughout the presentation, however, railroad officials were adamant about the partnership.

“Somehow somebody’s got to make a deal with us. We own the line,” Jones said.

Lawmakers respond

After the meeting, Sen. Joanne Verger, D-Coos Bay, talked less about money and more about what she perceives as a lack of trust in CORP.

“This process has left a number of legislators and people in the public with a lot of anxiety,” she said.

She added that the state is committed to economic development but it will consider other options.

“I think if you want somebody to bail you out, you create a crisis,” she said. “We have a crisis.”

Congressman Peter DeFazio, D-Ore., who sent a staffer to Wednesday’s meeting, said this morning that the company is buying time should AP Moeller Maersk, APM’s parent company, choose to locate in Coos Bay.

“To subsidize their ongoing operations so they can wait for a tremendous windfall is not in the public interest,” he said.

He in no way supports subsidizing the private railroad with taxpayers’ money.

“This is a fabulously wealthy company. Five principals took about $500 million each out of the hedge fund before they went public last year,” he said of Fortress Investments LLC, which bought RailAmerica earlier this year.

DeFazio said he sees two options: the port pursuing ownership through federal channels or the state of Oregon taking the rail line through eminent domain.

“I’m recommending that we use any and every legal tool at our disposal to relieve them of their burden,” DeFazio said.