Western Railroad Discussion > A new financial revival for Port of Coos Bay RR

Feb. 6 news blurb from RAILWAY TRACK & STRUCTURES Magazine:
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State loans revive rail acquisition for Port of Coos Bay

The state’s economic development arm came to the rescue of the Oregon International Port of Coos Bay, approving $12.6 million in loans that will allow the port to buy most of the 120-mile rail line between Coquille and Eugene, according to local newspapers.

The port was running out of time to come up with the cash, with less than two weeks before the federal Surface Transportation Board’s deadline to buy the line from its current owner, the Central Oregon and Pacific Railroad. If it had missed the Feb. 18 deadline, CORP would have been permitted by the government to abandon the line and sell its parts for scrap, a troubling outcome for the half-dozen companies who have been transporting their products by truck since the railroad shut the line down in September 2007.

Last summer the port secured a $12.5-million line of credit from Umpqua Bank, but that expired in November. And U.S. Rep. Peter DeFazio’s attempts to redirect $8 million in federal grant money that Congress had already allocated to fix a bridge across the bay haven’t come through yet. With the nationwide credit crunch, the port was running low on options for short-term financing.

The state’s Economic and Community Development Commission approved two loans to the port, with money from its special public works fund. One is a short term-loan of $7.2 million, to be repaid within 24 months if and when the federal money comes in. State transportation officials already have $5.7 million of that money, although it still has to be reallocated from the bridge project. Another $1.5-million installment is expected from federal transportation officials by April.

The second loan is for 25 years and $5.4 million. The state agreed to a four-year period of deferred principal and interest payments, during which the interest rate will be one percent annually. After that, port officials can request a four-year extension of the deferred payments. If they don’t, the rate then climbs to five percent.

Board members grilled the port’s executive director before approving the loans, wary of getting stuck with the tab if the agency can’t make the payments or come up with the money necessary to reopen the line.

Part of the reason port officials argued they should be able to buy the line for a lower price is that its owners argued it was unprofitable, operating at an average annual loss of $1.5 million. Now, port officials say, they have an agreement “in principle” from shippers to pay surcharges that would make up that deficit.

“Agreeing ‘in principle,’ what does that mean?” asked commission member Tony Hyde.

Bishop answered that the shippers have put forth a proposal, the details of which he said he wouldn’t reveal because of non-disclosure agreements.

Hyde also wanted to know who was going to pay for the necessary repairs to the line, which Bishop estimated at between $8 and $10 million for the minimum amount of work to get it up and running. And Hyde asked how the port planned to pay back the loan, especially if it continues to be a struggle to make the venture break even.

Given the crunch involved in meeting the government’s deadlines, Bishop said, there hasn’t been enough time to flesh out all the options for repair work, which he hopes to pay for with grant money or other low-interest loans. As for the long-term loan, Bishop said, the port has enough money in its operating budget to cover the debt service, and could probably even make payments on the bigger, short-term loan if the DeFazio funding doesn’t happen.

Commission chairman Wally Van Valkenburg wondered how quickly the port could get the line reopened.

“You’re buying this for $16.6 million and you’re not sure how long it’s going to take before it can actually be used again,” Van Valkenburg said. “How long are these companies going to wait before the line can be usable?”

Bishop replied that CORP has been reluctant to let port officials inspect the line, so it’s hard to know what it will take to get it repaired. It may be as little as nine months to do the minimum amount of work, he said. But there’s a “debate” among engineers about whether to wait to reopen the line until more of the repairs are completed, given that it’d be cheaper to get the job done when there aren’t trains running along the tracks. The port has three years to finish the repairs, according to the Surface Transportation Board.

Sounds more like going in the hole for $25 million than financial revival.

The profit from scrapping the Coos Bay Line would not have yielded anywhere near $16 million dollars, had the expense of bridge and other structure removal been figured in. Don't get your hopes up that Fortune Investments will be putting any of this windfall to work for the CORP either. Like most leeches, after they have thoroughly gorged themselves, they will detach and leave the victim to recover on its own.

Fred Harrison
Central Point, OR
CORPpower/JSS/EORS

fredkharrison Wrote:
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> The profit from scrapping the Coos Bay Line would
> not have yielded anywhere near $16 million
> dollars, had the expense of bridge and other
> structure removal been figured in. Don't get your
> hopes up that Fortune Investments will be putting
> any of this windfall to work for the CORP either.
> Like most leeches, after they have thoroughly
> gorged themselves, they will detach and leave the
> victim to recover on its own.

I'm confused. If scrap vaule of the Coos Bay Line ain't worth $16 million pizzozzas, then what would anyne want to plunk down $25 million more pizzozzas to keep the pig open?

billio Wrote: I'm confused. If scrap vaule of the Coos Bay Line ain't worth $16 million pizzozzas, then what would anyne want to plunk down $25 million more pizzozzas to keep the pig open?

Reply: The economic future of Coos County and the Port of Coos Bay depends on a rail connection.

Fred Harrison
Central Point, OR
CORPpower/JSS/EORS

Sad to see how people will buy up a railroad to operate it and then just run it into the ground and walk away from it. They just reap the profits with no money put into maintaining the plant. Glad to see the Port trying to keep it alive,,,

Amtkrd4man Wrote:
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> Sad to see how people will buy up a railroad to
> operate it and then just run it into the ground
> and walk away from it. They just reap the profits
> with no money put into maintaining the plant. Glad
> to see the Port trying to keep it alive,,,

I seem to recall the line to Coos Bay was always on the brink even during the SP era. SP didn't invest much toward the end and opted to sell or lease less profitable lines (e.g., Coos Bay, POTB, and the Westside and even lines on the Eastside).

SD9E Wrote:
-------------------------------------------------------
> Amtkrd4man Wrote:
> --------------------------------------------------
> -----
> > Sad to see how people will buy up a railroad to
> > operate it and then just run it into the ground
> > and walk away from it. They just reap the
> profits
> > with no money put into maintaining the plant.
> Glad
> > to see the Port trying to keep it alive,,,
>
> I seem to recall the line to Coos Bay was always
> on the brink even during the SP era. SP didn't
> invest much toward the end and opted to sell or
> lease less profitable lines (e.g., Coos Bay, POTB,
> and the Westside and even lines on the Eastside).

Maybe we should blame the SP for failing to invest in the infrustructure from the very beginning. Lines like this did have some profit potential, but there was a certain opportunity cost SP would have had to make to make it profitable.

Amtkrd4man got it right smack dab on the nose! I've opened a few knuckles in my day, but nothing to compare to the knuckles in the heads of some of our railroad executives. Their knuckles have never been open to growth, especially on subsidiaries or lines with dwindling traffic. It's much easier to shut down an unprofitable line, than to put money into overcoming obstacles like lack of maintenance costs, and facility control, or acquiring new traffic or business. It is a sign of the times. Maybe some of these real bright people should pull some of the feathers out of their nests, and do something intelligent for once. Pull the plugs out of their arsses.