If you've always wanted to start a shortline.....

[tormadel]

But you didn't know what it takes. What would you do?

Reading alot of trade magazines and books can teach you alot. Especially about history how's and whys. But it doesn't teach you how in modern times the peices fall into place.

So what I'm looking for I guess is advice from people wiser then I in the "Trains" community.

[kenneo]

It takes someone who has administrative experience at (at least) the Division level. Having been in on the formation of one of these businesses, I can tell you that 60% of your time and energies (not to mention money) will be spent on FRA matters, then there is the STB (not in the picture when I did this), insurance (you will need to have to have at least 100% of the purchase price and any upgrade costs(for the banks well being) and then at least 10 millions of deep pockets liability, plus wreck and washout protection. And this is only where it starts.

It's a business like no other. It is transportation, it is warehousing, it is logistics, you get to carry your costomers transportations for at least 60 days so you need to also be a "bank".

I have a set of books that detail just how to do this. It is about 10,000 pages long, in 13 volumes plus 2 volumes for the index.

If you are starting from square zero, believe me, you don't want to do this unless you can hire it done for you. You say you just won the 300 million dollar (after taxes) Power Ball???

[tormadel]

Hehe, thank you Eric. But just because you're dream is hard doesn't mean you don't try. I have started to read the STB's informational "So you want to start a shortline". Now, informational as it is, it's not the start of the learning that I'm looking for. I've gotten some correspondence on course's to learn to be an engineer, coductor, trainmaster etc. And while I'd like to learn these things, I don't see them as the end of the line for me either. Now (and I'm not meaning to be insulting) from some of the testimonials that have been in Trains, I'm personally thinking that working for a class 1 sounds like a nice slice of hell. (Silly me I like to sleep for 8hrs in a stretch). But reading about other operations like "Northern Plains RR" sounds much more like the life I've envisioned. If it's possible could you PM me a message about that bookset you refer to? If I can find the fortitude within myself to read that hefty chunk of reading and ingest it I will have passed my first personal hurdel as to weather or not I have the fortitude for what I want. (Ok thanks, sermon over now <grin>)

[tormadel]

If you are starting from square zero, believe me, you don't want to do this unless you can hire it done for you. You say you just won the 300 million dollar (after taxes) Power Ball???

[kenneo]

I'm not trying to discourage you. But if you think that working for a Class 1 is hell (and it is - I used to for 28 years), working for a Class 1 is a picnic compared to starting up a railroad of any size - or even managing a Class 1.

Call me silly if you wish, but 80 hours a week on the job and on call the balance is just not my choice.

And about that book set I have. It is out of print and has been for many years. If you can find a set, it will cost you thousands. And I doubt that you can find it in any library, but now having said that, some library will certainly have one.

And, no, you can't have mine.

[Joby]

Anyway, I've always thought that it's probably be wise to go in with a "partner-corporation", ie a logging mill, coal mine, copper mine, etc. While you'd probably be dependent on one customer, it'd be a lot easier than trying to get existing traffic from the trucks.
Look at the Copper Basin in Arizona. It hauls ore from a mine to the smelter, and sulfuric acid from UP to the smelter. It seems (to the uneducated) to be a lot more strait forwars that other short lines.
Also, I hear a law degree would be great. Fred w frailey went into this in his book ROLLING THUNDER when he talked about the Susqhehana(u kno what i mean) coming up from nothing to having a strong bussiness.

[tormadel]

QUOTE: Originally posted by kenneo

And about that book set I have. It is out of print and has been for many years. If you can find a set, it will cost you thousands. And I doubt that you can find it in any library, but now having said that, some library will certainly have one.

Ah, well I still don't know what it's called <smile>. But yeah, anything would help as I've seen naught about it. But being long out of print could also be very out of date too....

And starting any business is a huge investment of yourself. Time, money and Soul I would have to say.
But like I said, I would at least like the chance to learn.

And yes Joby you are correct, life would be easier if you had a corperate sponser (for lack of a better way to put it). And I'm not ruleing that (or anything else) out at this point. I'm in touch with the fact that it will probably take me years of learning so I have to think long term anyway. I've dreamed and planed things like regionals since I was a teanager, and the plans changed a million times and will continue to do so I'm sure as the world evolves around me. =) But I feel much better at least having a place to talk about it now, ain't the internet a wonderful thing?

[tree68]

Just like any start-up, first thing to do is put together a business plan. What's the income, and what's the outgo? While you can't ignore all the regulatory stuff, you also can't start up a business like a railroad with an insufficient customer base.

Also, unlike a business that can rent facilities that suit its needs, you start out with X miles of real estate, unless someone else (say a city) owns it and you are simply operating it.

[Anonymous]

I'm glad someone else asked the question because I have been toying with the same idea- and no, I didn't win the powerball either.

How likely are railroads (the Norfolk Southern, in my case) to turn over property and facilities they want to abandon? Here in Georgia it looks like some of the rail lines have been taken over by the state.

I too would like to know the name of the volumes of books you have out there, because reading up on a subject is best for me.

Erik

[pmsteamman]

Dont forget the track. Most shortlines were started from class 1s that did little or no maintence. The trains will make money as long as they stay on the track, one hazmat derailment can put a railroad under for good.

[CSSHEGEWISCH]

If you plan on going into business for yourself, be it a shortline railroad, video rental store, hobby shop or anything else, expect to kiss your free time goodbye for the foreseeable future and a while after that. The railroad will own you, not the other way around.
Also, some of the Class 1's, especially NS, are getting very particular about to whom they sell their branches. Experience in railroad operations is expected.

[CMSTPP]

I have always wanted to start a passenger line that ran between Butte and Harlowton Montana. This where the milwaukee road ran and I have always thought of going out there and starting up that passenger line.

The first thing I would do is win the lottery.[(-D] What a laugh.
After that I would go to the CP ( CP owning the name of the milwaukee road and the land) and ask them if I could build.
Then I would go and purchase the locomotives and the passenger cars and start building the line back up.
After thats all done have the stations built and then the fun begins.

James

[tormadel]

Very true. There are many things to consider, but I don't know them all which is my problem.
Also true I would intend to acquire my track from a Class 1. Building entirely new raillines in this day and age would require divine intervention as I see it. It's costing BNSF and UP billions just to double track and add sidings new CTC etc. This gives me the feeling that going to Mars may be cheaper then trying to build say the "Great Northern" for sake of example in todays world.
But also to form a business plan I need to know where to get information, and I don't know where to get it. How much do locomotives cost? Which ones are the best bang for the dollar? Buy or lease the locomotives?(it seems the wiser choice is to lease the motivepower for financial reasons) How much does it cost to maintain them? Who will maintain them? What kinds of insurance will I need? How much will that cost?
How do you figure the value of the railline? Buy or lease?(I have seen several mentions in recent years of new railways leasing they're right of way rather then out right buying it) To hire my own maintence people (perhaps the very ones that used to work it for the Class 1) or contract maintence? Buy our own fright cars or wait and see on demand for that. Will I need online car repair? (A rip track maybe) <Here's a big one> Will I have to accept expensive unionized labor I inherit from the class 1? Or will i be able to be more competitive with non-union labor hence lower overhead and better shipping rates.

And worst of all I don't want to make a pain in the butt of myself and start Harrassing BNSF or NS for detials about parts of they're property I may be interested in without haveing some credability to back me up first. I'm sure they all have the crazy guy who calls saying there's a devil in that crossing gate downtown. <smile>

[tormadel]

Never stop dreaming CMSTPP. Alot of railroads (and other things) were built on dreams. That and I also have had some thoughts about fallen flags like that. I have thought it would be neat to pay homage to fallen flags buy operating some locomotives in they're colors. I know there would be legalities involved. And perhaps go the route of buying some units that used to belong to said road and "historically" restore them to origional paint. There are still some Ex Rock Island and Ex Erie Lackawanna locomotives floating around for example.

[mudchicken]

(1) Talk to Limited Clear
(2) If you want to fail like so many do, go in there thinking about just running trains and ignore the track structure[}:)]

(3) look for income outside of train operation's carload billing[}:)][}:)] and find people that know how to work/ take pride in what they do. (work for the Company with a capital "C"!)

[canazar]

Being one that has started and been running my own business from the ground up, I would fibbin through my teeth if I said I have never dreamed about it. Hell of a dream. I wont get past my own railroad in the garage.. So, I live with that.


A couple of things though to think about as I have thought of....

I am not sure what kind of money backing you have or resoucres, but one option is to buy out right, or buy into a exsting short line. There are 100's of them all across the US. Might be eaiser way in.

I would lease up front and out right. Several reasons... Much cheaper in startup. Easeir to come up with 10,000 then 100,000. Also, chances are if you lease, they will only be too happy to provide personal for service. (they get to keep an eye or thier goods plus, get more cash from you)
It could also make it easier to get money from a bank or investors. Canceling a service in one thing, getting stuck with a yard with half-a-dozen 30 year old engines does not go over well with the bank or investors. If it cant float, make drinks, or go on a golf course, they wont want it.

And the last big thing, lets say you find a route, or an aera, (prefferably that used to have rail service. I think of a good place out in Casa Grande, AZ UP yanked up local service) so some of the infastructure is all ready there. If rail service has been gone for awhile, then so has the business.

I would take a guess at 2 to 5 years before you could reseaonably expect to get business to come back. Would have wait for them to return, plus you would have to prove to them you are going to be around for awhile. Again leasing could be a good thing, definatly if there is a healthy prectange of seasonal traffic. (Buidling materails, farming, produce)

Then there is still that little pesky issue of getting a Class 1 to accept your traffic.[V]

[tormadel]

First of all Mud, I would have prefered to send you a private message rather then make another post, but it doesn't seem like Trains forum allows that . So I'm sorry all that my questions I have for 1 person I have to put in public (some may think that unseamly)

QUOTE: Originally posted by mudchicken

(1) Talk to Limited Clear
(2) If you want to fail like so many do, go in there thinking about just running trains and ignore the track structure[}:)]

(3) look for income outside of train operation's carload billing[}:)][}:)] and find people that know how to work/ take pride in what they do. (work for the Company with a capital "C"!)

1. (what is Limited Clear? A company?)
2. That's why I'm trying to study up and ask people, such as yourself, the questions about what I'm missing. Talk to me all day about the infrastructure and the details =). I would love to hear it.
3. You have hit the nail on the head here Mud. It is wise to think of other ways the company can keep itself in the black. Opening a Chain of blockbusters doesn't seem like a proper way to go about supporting ourselves. But I would like to consider things that relate to the business. The transloading facilities perhaps? What other things relate or work with the railroad operation that are not nessarily part of car load income?

I'm telling you people, in me you have found a sponge that will greedily soak up all the knowledge and wisdom you have to offer [8D].

And you're second point I agree with also Mud. I want people who love what they do. Quote "People with railroad in they're blood". I want my company to be a place people want to work. To make things (the railway) flow they way it should. To have people think, alright I'm off to another day at work and it's going to be a good time. Not, <ring> aww*** it's the crew caller again.

[tormadel]

I agree Canzar, there would be many advantages to leaseing. Just have to be carefull. You don't want to get a 5 year lease and then have the class 1 decide they aren't going to renew it and they're going to take back over the business you built. And who cares for the leased line? you or the class 1? I would think you would but I read that CP does the maintence on Northern Plains and they lease the lines.

And I think part of the solution of getting someone to accept my traffic is to connect to a couple of the roads, you have more leverage if you're customers have options.

[chad thomas]

In most cases the class one that leases out a line will make sure there is a clause prohibiting the leasee from interchanging with any other railroad. Like the leasor will retain the last mile or so of track and give the leasee track rights over that mile to interchange with the leasor only.

[oltmannd]

I would get in touch with Roy Blanchard and subscribe to his newsletter.

http://www.rblanchard.com/index.html

[mackb4]

The NS has had two offers to by the old "P-vine" route from Portsmoth to Cinncinatti Ohio and refused.One was a local Portsmouth trucking outfit (I talked to his negotiator).The other the I&O R.R.There has been several business' who have asked for new service and refused.Also the local Scioto county goverment agencies have tried to get the service restored to no avail.Shortlines are good in a sense that if it helps the local economy and the major railroad that once owned them absolutely refuses to run the route.But on the bad side most shortlines spur up from the loss of good union paying jobs.But to start one requires alot of money.I was told that a $5 million dollar offer was refused for the 100 miles of track mentioned.That was all,no engines,freight cars or anything.So imagine the price when you add all that plus your charter fees and taxes on all that property.Because if you use a piece of track one time in a year.You pay the whole years taxes on that property.

[jeaton]

$5 million??? I can hear the NS guy laughing all the way from Norfolk.

[kenneo]

QUOTE: Originally posted by jeaton

$5 million??? I can hear the NS guy laughing all the way from Norfolk.

Even all of the way back to Norfolk and still laughing! Maybe that was a per mile price, but with the price of scrap being what it is, the NSV would certainly exceed 5 millions be a large amount.

[tormadel]

QUOTE: Originally posted by mackb4

The NS has had two offers to by the old "P-vine" route from Portsmoth to Cinncinatti Ohio and refused.One was a local Portsmouth trucking outfit (I talked to his negotiator).The other the I&O R.R.There has been several business' who have asked for new service and refused.Also the local Scioto county goverment agencies have tried to get the service restored to no avail.Shortlines are good in a sense that if it helps the local economy and the major railroad that once owned them absolutely refuses to run the route.But on the bad side most shortlines spur up from the loss of good union paying jobs.But to start one requires alot of money.I was told that a $5 million dollar offer was refused for the 100 miles of track mentioned.That was all,no engines,freight cars or anything.So imagine the price when you add all that plus your charter fees and taxes on all that property.Because if you use a piece of track one time in a year.You pay the whole years taxes on that property.

If you start up with only $10million in initial outly you have gotten off cheap. Also, I don't know Ohio law, but here in Wisconsin if the Class 1 keeps refusing to sell and refusing to offer service, the state will take it away from them. The railroad will get paid what the state deems fair market value, but generally the politicians will not let service continue to lapse. Most of what the Wisconsin & Southern runs on is state owned rail.

[tormadel]

QUOTE: Originally posted by kenneo

QUOTE: Originally posted by jeaton

$5 million??? I can hear the NS guy laughing all the way from Norfolk.

Even all of the way back to Norfolk and still laughing! Maybe that was a per mile price, but with the price of scrap being what it is, the NSV would certainly exceed 5 millions be a large amount.

I agree that is low, but stranger things have happened. Tillamook got they're railway from SP for $2.8 mill including 3 SD9's.

[Anonymous]

I have watched the ATRR start up the CSX sub Gadsden,AL to Birmingham, Al and Gad to Guntersville, AL . Omnitrax won the bid to operate this branch and called it Alabama and Tennessee River Railroad (ATRR). Seeing what it takes to start up in experienced men and equipment and the pressure on all involved, I can't imagine any entity except those already established with short line operational experience being able to take on a new venture, and even then the success (bottom line) is not for sure.

wboatner

[tormadel]

QUOTE: Originally posted by wboatner

I have watched the ATRR start up the CSX sub Gadsden,AL to Birmingham, Al and Gad to Guntersville, AL . Omnitrax won the bid to operate this branch and called it Alabama and Tennessee River Railroad (ATRR). Seeing what it takes to start up in experienced men and equipment and the pressure on all involved, I can't imagine any entity except those already established with short line operational experience being able to take on a new venture, and even then the success (bottom line) is not for sure.

wboatner

These companies haven't even been in existance as long as I've been alive, everyone starts somewhere. So seems reasonable that it could still be done. Alot of the people that did it in the past have sold out to the larger shortline conglomerates <for lack of a better term.>

[Anonymous]

QUOTE: Originally posted by mudchicken

(1) Talk to Limited Clear
(2) If you want to fail like so many do, go in there thinking about just running trains and ignore the track structure[}:)]

(3) look for income outside of train operation's carload billing[}:)][}:)] and find people that know how to work/ take pride in what they do. (work for the Company with a capital "C"!)

Thanks for the plug MC.

BTW, for those who don't know, I am Limited Clear, for all that is worth.

I have been around for the start of quite a few short lines, I've even sat in a senior and not so senior management chair. As has been said above, it is not a pursuit for the faint of heart nor is it one for those who don't expect to bring ca***o the table. In my own humble experience it will literally take years for someone coming from the outside to penetrate the industry to the point where a Class 1 will seriously consider leasing or worse selling a line to an unknown. Anything they do offer, LOOK OUT, it is probably something all the "real" players have turned down.

As to cash, you'll need a minimum of $100,000 in just working capital to start with, and that's assuming you can lease your property from someone and lease or contract out pretty much everything else. If you are buying a line, you'll probably have to bid against others and the Net Liquidation value (NLV) is a place to start. That is usually well into the millions these days. But, if you want to get in, you have to buy a ticket and there are people willing to invest in a good deal with the right management team. It does take more than just managers and a business plan. You'll need industry credibility as I mentioned above.

Before you decide to go this route I'd recommend you attend one of the ASLRRA's annual meetings which has all sorts of short line folks and Class 1 people (usually those dealing directly with the SLs there and a trade show with all sorts of vendors, so you can figure out how to price all your equipment and contractors or at least get a feel for it. Go to www.aslrra.org and look under meetings. I think this year it'll be in Orlando in April, but look for yourself. It isn't cheap, but it is a great place to start, if you are really serious.

Oh, and a word about the STB book. It is out of date as is the set Eric is referring to. Most of the rules have changed since the ICCTA of 1997. Before you run out and start looking, you need to learn the business. Remember, even those of us who've gone this route don't always stick with it. Some of us have other jobs to pay the rent too...

LC

[tormadel]

Thanks LC, it's great to hear from you (since I didn't know if you were a person or a webpage <smile>). Good words of wisdom.

[mackb4]

Wonder how long it took the I&O to buy the Cinn. to Columbus route off the CSX ? And for a mere $8.5 million .That seems like a bargin.