Starting a Railroad, Phase 1

[Anonymous]

QUOTE: Originally posted by Junctionfan

Have you reached a preliminary calculation of costs of employees plus operating costs versus revenue?

No. WIthout traffic figures and a proposed tariff, it isn't possible.

LC

[Anonymous]

QUOTE: Originally posted by jruppert

I would suggest finding a small town with a lot of undeveloped land in a geographic location near a large city, but not too close, and close to a class 1 mainline. Then work with the local city council, and business organizations to put together a tax and capital plan that would be attractive to prospective companies to relocate to the area.

Identify available lands and with input from the city council, residents, local developers, develope a plan that can be presented to prospective companies. Such plans should take into account road access, sewer, water, nearby housing availability, phone and information service, as well as construction permitting and architectural theme. All of this has to be presented as a package, so a prospective company can see, number one, that everybody is on the same page, and that buying in will be a trouble free and positive experience.

What I am getting at is instead of trying to revive an old line, start from scratch, and develope an industrial short line serving a campus of businesses developed by yourself in conjunction with local interests and prospective companies. This will give you a maximum of traffic with a minimum of track and equipement, controlling your startup costs and having ready made costomers from day one.

I could be wrong, but is this what companies like RailAmerica does? Such a developement would be a win for the comunity, businesses, and the line serving them. Having a solid costomer base could then serve further developement in the future.

Nice suggestion. Problem is finding such a place and getting the financing to build. Frankly, if such a place exists no one has found it yet.

No, Rail America starts with old lines, the same as other short lines.

LC

[Anonymous]

QUOTE: Originally posted by Junctionfan

I have to ask, what kind of contract will our employees (I we are pretending the forum is members of the board and you (L.C) are the chairman)

What kind of benefits packages and health coverage are we going to give? What is our utility bills and our tax bills going to be like?

Do we have enough customers to make a profit and be able to offer our employees the basic wages to maintain an exceptable living?

1. No contract. Employees will be non-union and will be paid a fair annual salary.

2. Benefits. We expect to pay employee medical complete coverage. 0% employee contribution. We will also pay employer share of Railroad Retirement Benefits.

3. Utility and tax bills should be fairly small. I would expect utility bills would be limited to office electric, gas and water and grade crossing equipment. Tax bills in Mississippi are quite inexpensive. I would anticipate less than $75,000 annually in property tax (Ad Valorem) for the entire RR.

4. Yes, there should be adequate traffic to support a lean short line.

LC

[Junctionfan]

Have you reached a preliminary calculation of costs of employees plus operating costs versus revenue?

[Anonymous]

QUOTE: Originally posted by crazytechie

you mentioned drainage and bridge condition.
what other environmental liabilities do you face? are there solvent/fuel plumes in the ground under any engine facilities? How about tie treatment facilities?

Also to the point: how much goodwill is there toward the railroad in the local community? (per a thread elsewhere, are there noise/traffic delay complaints? what will it cost to mitigate those?)

I don't recall any mention of the labor situation of your railroad; JunctionFan made a case for Canada, but what is the REALITY of relations between current management and the gangs that make the wheels roll and the track stay put?
More to the point, what attitude do they have toward their jobs and the likelyhood of a new management team?

I'll try to answer these one at a time:

1. We don't generally conduct environmental due diligence unless indicated. If there are old engine service facilities on line that are not in use we wold exclude them from the deal. There are no tie treatment facilities on this line.

2. No cost. We will assume goodwill in the community is neutral as it usually is. Our high quality short line service should help us convert customers, but it won't happen overnight. Figure 3-5 years.

3. Nonunion labor.

LC

[Anonymous]

QUOTE: Originally posted by ericsp

What happened to this?

I haven't had time to do any more exploration on traffic levels or customers beyond the Port of Gulfport and DuPont. I know of at least one sizeable lumber mill and a plywood mill that are on line also. Only way to get the rest of the detail is to visit and I just haven't had time to take it to that level yet. Perhaps that will be phase 2.

LC

[ericsp]

What happened to this?

[Junctionfan]

Because a lot of city council folk are thick in the head (at least in St.Catharines). They don't know jack about pretty much anything and the people are too apothetic to vote in someone with the right vision in everything and not just one thing.

Our mayor and some of the councilors are as stupid as they get. One day I will try to get in and show my city that we can do better. (opps-premature campaigning; aren't I)

[Anonymous]

The main selling points of my idea that have to be stressed to a prospective company are:

Tax breaks by the local government - this is your biggest stick, use it well.

Low financing rates from local sources - this is a win for a prospective company, and it keeps money from leaving town, a big win for local bank(s), who can then turn around and finance developement.

Costomized infrastructure - We'll build it to your specs! This is a powerfull incentive when combined with the other two. Rather than trying to comply with complicated permitting regulations and costs associated with developed communities to make some preexisting plant comply with needs, a prospective company can get a brand new facility with exactly what they need.

Quality of life - this is just as important as any of the "serious" considerations above. What kind of house can I afford if I live here vs. somewhere else? What kind of schooling for my kids? What kind of activities? hunting? fishing? sports?

So, what kind of industry should be lobbied? Hmmm good question, maybe not so much an industry but type of companies, how about frozen food distributors, or building supply distributors, or light manufacturers, importers of machinery or machine tool, or manufacturing supplies. A selection of companies whose proximity are beneficial to each other. That's pretty general, but without answering many other questions it is the most I could say.

I don't see why many towns in Canada don't already fit this bill.

[Junctionfan]

I have to ask, what kind of contract will our employees (I we are pretending the forum is members of the board and you (L.C) are the chairman)

What kind of benefits packages and health coverage are we going to give? What is our utility bills and our tax bills going to be like?

Do we have enough customers to make a profit and be able to offer our employees the basic wages to maintain an exceptable living?

[Anonymous]

you mentioned drainage and bridge condition.
what other environmental liabilities do you face? are there solvent/fuel plumes in the ground under any engine facilities? How about tie treatment facilities?

Also to the point: how much goodwill is there toward the railroad in the local community? (per a thread elsewhere, are there noise/traffic delay complaints? what will it cost to mitigate those?)

I don't recall any mention of the labor situation of your railroad; JunctionFan made a case for Canada, but what is the REALITY of relations between current management and the gangs that make the wheels roll and the track stay put?
More to the point, what attitude do they have toward their jobs and the likelyhood of a new management team?

[Junctionfan]

I think that is a great idea. Know of any industries looking to expand?

[Anonymous]

I would suggest finding a small town with a lot of undeveloped land in a geographic location near a large city, but not too close, and close to a class 1 mainline. Then work with the local city council, and business organizations to put together a tax and capital plan that would be attractive to prospective companies to relocate to the area.

Identify available lands and with input from the city council, residents, local developers, develope a plan that can be presented to prospective companies. Such plans should take into account road access, sewer, water, nearby housing availability, phone and information service, as well as construction permitting and architectural theme. All of this has to be presented as a package, so a prospective company can see, number one, that everybody is on the same page, and that buying in will be a trouble free and positive experience.

What I am getting at is instead of trying to revive an old line, start from scratch, and develope an industrial short line serving a campus of businesses developed by yourself in conjunction with local interests and prospective companies. This will give you a maximum of traffic with a minimum of track and equipement, controlling your startup costs and having ready made costomers from day one.

I could be wrong, but is this what companies like RailAmerica does? Such a developement would be a win for the comunity, businesses, and the line serving them. Having a solid costomer base could then serve further developement in the future.

[Junctionfan]

How many industries do we serve? Is there any transloading opportunities? What kind of profits do we look to achieve in the fiscal year?

[Anonymous]

QUOTE: Originally posted by Junctionfan

I would recommend trying to get a loan or government grant and replace them especially if the area is prone to dry weather which could make the bridge fire hazard.

How long are thease bridges? It might be better in the long run particularly if the area is prone to flooding, to use concrete.

Andrew-

As you'll see I have provided for maintaining the bridges. Absent MAJOR government help, which is unlikely, the best we can expect is to maintain existing infrastructure. On a line of this length the cost of replacing the bridges with concrete is prohibitive. There simply isn't enough traffic to support a program like that which would certainly be in the $100Million+ range in costs.

LC

[Junctionfan]

I would recommend trying to get a loan or government grant and replace them especially if the area is prone to dry weather which could make the bridge fire hazard.

How long are thease bridges? It might be better in the long run particularly if the area is prone to flooding, to use concrete.

[Anonymous]

QUOTE: Originally posted by dehusman

A good question to ask yourself is why is the railroad selling the line? What expenses are they looking at that make it unattractive financially to retain the line?

What bridges are on the line and how much repair do they need?

What is the subgrade and drainage condition of the railroad?

Dave H.

Good points. The bridges along the line are largely of timber construction and are in fair condition. Some state funding may be available to assist in rehabilitation. Subgrade and drainage condition is generally good, although the line does cross some lowlands and flooding and washout risks are substantial.

LC

[Anonymous]

QUOTE: Originally posted by 88gta350

Do I get to be Chief of Police for this little railroad? As a campain pledge, I promise to allow railfans to photograph our great railroad without labeling them as terrorists!

If you need a resume, I have several years of experience defending nuclear power stations, with training in SWAT style tactics, sniper shooting, night vision devices, and a host of other little toys I probably shouldn't write about on the internet. I have a Bachelor of Science in Criminal Justice from Pennsylvania State University.

Sorry, don't need a police department. Just an expense. Can't afford it.

LC

[Junctionfan]

I have located some locomotives for sale.

Candic Route (Cedar Rapids and Iowa City): 5 GP9

H Bracer Equipment Sales and Service Inc.: 1GE 65 ton and 1 GE 50 ton

Turner Locomotive and Components: 3 SW1200s, 1 GP9, 5 GP40, 3 GP7, 1 GP20

Global Energy Equipment: 4 SW1500

Rail America: 15 GP7, 15 GP9, 6 GP10, 4 GP16, 3 GP18, 8 GP20, 3 GP30, 2 GP35
5 SD20, 2 Alco 412, 1 SW12

They don't have a price listed though.

[Anonymous]

QUOTE: Originally posted by bnsfkline

For Anther....L/C's RS18 needs to be sold (Or Given) to Jhhtrainsplanes, and you need to buy a couple GP38-2's

The RS18 is not currently for sale and GP38-2s are going for $200,000+, far too expensive for a simple short line operation. To make it in the short line business pennies count. We'll be looking for cheaper power.

LC

[Anonymous]

QUOTE: Originally posted by Junctionfan

What are the workers in the U.S payed compaired to in Canada keeping in mind that the U.S dollar is stronger than the Canadian? Even after the exchange rate, Canadian workers should be cheaper shouldn't they?

Andrew-

Please focus on this line. It is not in Canada. Even if Canadian labor rates can be less than U.S. labor rates due to the exchange rates there are other disadvantages. Also, remember that if a short line were acquired in Canada, there would be no exchange rate benefit in terms of cost as there would be no parent company in the U.S. to take advantage of the exchange rate...

LC

[Anonymous]

Due Diligence

Records concerning traffic over the line and revenues will be obtained from the KCS under confidentiality agreement for the preceding five (5) years. Revenue and traffic will be analyzed for the pro forma budget.

Records concerning the real property titles and related documents including grade crossing agreements, pipeline, wireline and other easements or profits (real estate term) will also be obtained from the KCS. Local real property taxes will be verified by county.

Records concerning track and bridge inspections, employees (numbers and types), communications facilities, equipment used (both on track and MOW), transportation service, customer service, car service, car repair and other records will also be obtained from the KCS.

One or more hirail trips will be arranged to inspect the physical plant in detail including all bridges, culverts, trestles, overpasses, underpasses, grade crossings, private crossings, track structure, and subgrade. Conditions will be compared with bridge and track inspection reports. There are no tunnels on the route.

Other documents and records will be requested based upon the results of the above.

LC

[88gta350]

Do I get to be Chief of Police for this little railroad? As a campain pledge, I promise to allow railfans to photograph our great railroad without labeling them as terrorists!

If you need a resume, I have several years of experience defending nuclear power stations, with training in SWAT style tactics, sniper shooting, night vision devices, and a host of other little toys I probably shouldn't write about on the internet. I have a Bachelor of Science in Criminal Justice from Pennsylvania State University.

[Junctionfan]

I picked Trillium personally because the rail is in fairly good conditions (also uses 136 pound rail), a large amount of customers, tremendous amount of oppurtunity, the workers aren't expensive but you can pretty much guarantee a good tradesman, you can get government subsidies especially now that Canada is gun-ho on the Kyoto Protocol, getting the wood for ties is cheap because it is close by (Northern Ontario) , there are several railroad construction and maintainance companies with in the region for contracting, you are close to Buffalo and so have access to both two countries and have access to 3 class 1 railroads currently. Infrastructure is well intact so no rebuilding is necessary. This is just a few great advantages.

The problems with Trillium is poor marketing strategy, too expensive, need better motive power and need vision and the leadership to go after opportunities. Minor problems includes yard compacity limits which can be solved by removing some of the switches at Eastchester Yard as well as some of the track which is not necessary and relocate at Feeder Yard (main yard). There is also some other areas of track not used but still in good condition just needs to be consolidated.

[bnsfkline]

For Anther....L/C's RS18 needs to be sold (Or Given) to Jhhtrainsplanes, and you need to buy a couple GP38-2's

[Anonymous]

QUOTE: Originally posted by oltmannd

Anybody interested in owning/investing in shortlines should check this out:

http://www.rblanchard.com/

Lots of good stuff there.

Also, a shortline needs someone familiar with the commercial side of the business as well as someone familiar with IT requirements for shortlines. It is nearly a requirement to be able to send and receive trip plans/ETI/ETA messages these days.

IT issues are easily handled through Railinc and a couple of other vendors who provide the software necessary and all the support you could want on a per carload basis. It will be a line item in the pro forma budget.

LC

[oltmannd]

Anybody interested in owning/investing in shortlines should check this out:

http://www.rblanchard.com/

Lots of good stuff there.

Also, a shortline needs someone familiar with the commercial side of the business as well as someone familiar with IT requirements for shortlines. It is nearly a requirement to be able to send and receive trip plans/ETI/ETA messages these days.

[Anonymous]

QUOTE: Originally posted by Junctionfan

What are the workers in the U.S payed compaired to in Canada keeping in mind that the U.S dollar is stronger than the Canadian? Even after the exchange rate, Canadian workers should be cheaper shouldn't they?

Thats What I calculate-

[dehusman]

A good question to ask yourself is why is the railroad selling the line? What expenses are they looking at that make it unattractive financially to retain the line?

What bridges are on the line and how much repair do they need?

What is the subgrade and drainage condition of the railroad?

Dave H.