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

[tormadel]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by tormadel

Indeed I have read it. I was just saying it was abit of a bore. My little family here has a savings of about $700 so I would say my dream is in the infant stage where it hasn't even learned to crawl yet. I'll keep working hard and crawling up the ladder. I will get there someday.

Well, since cash is an issue I'd suggest a job with a railroad where you can learn while you earn as I mentioned above. I'd look at T&E service as you can make pretty good money there and hopefully put some away. It will be difficult on the family but if you establish a seniority date early and get your RTC and Engineer training done ASAP you'll have decent seniority and should be able to hold a decent job. In your area I'd check with the Wisconsin Southern and perhaps the UP and\or CN if they have terminals close by. At least that way you will get hired out and get your training paid for by the RR. I have no idea what you make at Dominos but I am certain the RR is better.

LC

Oh for sure. I've been trying to keep tabs on W&S and CN they are the most local, UP or CP would be quite a decent move from here thou. Is T&E track and equipment service?

[Anonymous]

QUOTE: Originally posted by futuremodal

Interesting thread. Some comments...

1. Why a shortline? Shortlines are usually contractually mandated to get all their traffic and have their share of the revenue dictated by the former Class I owner, e.g. you are captive. Which would be fine, except now you start to realize why the Class I gave up on the line in the first place - low traffic levels, terminal consolidation, etc. Why do you think the former owner will effectively want to reverse course and refocus on that traffic?

2. But if you are committed to such a dream, try to find a shortline that has access to quasi-unit train potential, e.g. a coal mine, a large wheat growing area, etc., or that has access to a transload alternative to interchange with a Class I, e.g. a barge port, or best yet both. If you can originate and terminate a good portion of your traffic base potential in the form of multiple car lots at a time, you will have as good a shot as any for success because then you can control part of your own business destiny, not the Class I connection.

3. Also, look for lines that have the potenial to become at least a secondary mainline in the future, and not just a dead end line. You remember the Washington Central? They bought the ex-NP Cascade line through the Yakima Valley to run as a shortline, then about 10 years later BN decided they might need that line again as a secondary main to the Stevens Pass and Columbia Gorge routes, and ended up paying WC a lot more to take it back than they sold it for in the first place. Needless to say, the WC owners ended up with quite a capital gain!

4. Take a page from the Watco Companies and try to pawn off as much of the infrastructural responsibility as possible onto the local and/or state governments (while retaining operating rights). The more you can absolve yourself of needless liability, the better off your chances of success.

5. For those still interested in all or parts of abandoned mainlines, take a good look at the ex-Milwaukee PCE. That grade is probably the best potential for rebuild in the nation, because it offers the easiest prospect of rebuilding a new east-west transcon with all that international trade potential. By all means, if you can get your hands on parts of that property go for it, even if you have no immediate plans to actually start up a shortline or regional. There is a growing national awareness for just how usefull it is to have new rail capacity available in the next few decades to capture both domestic and international trade growth, and there is no other ex-Class I gradient with as good a profile and geographic proximity to market optimization as the PCE.

6. Finally, if you want in of the ground floor of what it is like to be involved in a new rail project, start investing in the DM&E. That'll give you a first hand taste of all the particulars you would have to go through in starting up your own railroad.

I have to admit that, for once, I don't completely disagree with FM.

That said, I don't entirely agree with him either.

1. Why a short line?

It is the only place you can really have your own business in the railroad business that has any chance of longevity. You can run a real railroad. You can have a better life than is possible working for a Class 1. How many jobs on a Class 1 can be 9 to 5 or so monday thru friday, not many and by the time you can hold them you probably have more than 25 on the job. Traffic can be grown with good marketing and good service.

2. Are you committed to the dream?

Well, you'd better be because when it gets bad there isn't the backup of the Class 1 to babysit for you. Locomotive break down? No power room to call for mechanical help. Maybe the mechanic can come help you, but you need to be capable of basic troubleshooting on your own. You'll need to be capable of pretty much all the basics. Having an engineer's license, a conductor's qualification, a track inspector's qualification and some basic mechanical knowledge is a good start. A little business savvy, some legal knowledge, knowledge of handling employees and some spare cash will help a lot. Maximum personal commitment is an absolute.

Would it be nice to have unit trains, sure, but such lines don't grow on trees and most have too much traffic to be spin off candidates unless there is something seriously wrong with them such as environmental issues or HUGE maintenance costs due to many bridges, tunnels, curves or other features that greatly increase the costs of operations and maintenance. It is always worth looking, because there is an occasional opportunity which has great potential. Of course, remember, there are many bigger and more experienced short line groups looking for lines too and a new player has little chance.

3. Look for a Secondary Main Line.

Not a bad idea, but the Class 1s are on to this one. Very few such sales have happened lately. Where they have the Class 1s have used paper barriers or lease agreements to restrict any flow of overhead traffic. Recently, most Class 1s have been leasing lines to short line operators under some pretty onerous terms so not only will there be no capital gains (the Class 1 gets to keep that along with title to the line) but the short line has to pay for not only maintenance but capital improvements to an agreed level. Take a look at the "Heads I win, Tails you lose" article in the December 2004 Transportation Newsletter at the following law firm site for an example:

http://www.wbsk.com/

4. Pawning off infrastructure on localities has the nasty side effect of giving those localities far too much control over the short line. Also, you don't lose much liability this way, most municipalities are very good at making the short line shoulder all the responsibility through agreements for indemnity and contribution. Besides, joint and several liability usually means that hoped for liability savings are illusory at best.

5. Buying an old mainline with no track on the extreme speculation that it will someday be relaid is crazy. Even if it does work, the new railroad would simply pay you fair market value based upon the condemnation of the property. Your appreciation factored over the time you wold need to hold the property would be extremely low even if a major RR took an interest in such an uncertain and risky project today. As an example look at the many years it has take the DM&E to even get to the verge of a much smaller project as guidance. You can do much better buying bonds and clipping the coupons to say nothing of the stock market or simple real estate investments.

6. I wasn't aware that the DM&E was offering shares to the public, certainly it isn't mentioned on their website.

LC

[Anonymous]

Interesting thread. Some comments...

1. Why a shortline? Shortlines are usually contractually mandated to get all their traffic and have their share of the revenue dictated by the former Class I owner, e.g. you are captive. Which would be fine, except now you start to realize why the Class I gave up on the line in the first place - low traffic levels, terminal consolidation, etc. Why do you think the former owner will effectively want to reverse course and refocus on that traffic?

2. But if you are committed to such a dream, try to find a shortline that has access to quasi-unit train potential, e.g. a coal mine, a large wheat growing area, etc., or that has access to a transload alternative to interchange with a Class I, e.g. a barge port, or best yet both. If you can originate and terminate a good portion of your traffic base potential in the form of multiple car lots at a time, you will have as good a shot as any for success because then you can control part of your own business destiny, not the Class I connection.

3. Also, look for lines that have the potenial to become at least a secondary mainline in the future, and not just a dead end line. You remember the Washington Central? They bought the ex-NP Cascade line through the Yakima Valley to run as a shortline, then about 10 years later BN decided they might need that line again as a secondary main to the Stevens Pass and Columbia Gorge routes, and ended up paying WC a lot more to take it back than they sold it for in the first place. Needless to say, the WC owners ended up with quite a capital gain!

4. Take a page from the Watco Companies and try to pawn off as much of the infrastructural responsibility as possible onto the local and/or state governments (while retaining operating rights). The more you can absolve yourself of needless liability, the better off your chances of success.

5. For those still interested in all or parts of abandoned mainlines, take a good look at the ex-Milwaukee PCE. That grade is probably the best potential for rebuild in the nation, because it offers the easiest prospect of rebuilding a new east-west transcon with all that international trade potential. By all means, if you can get your hands on parts of that property go for it, even if you have no immediate plans to actually start up a shortline or regional. There is a growing national awareness for just how usefull it is to have new rail capacity available in the next few decades to capture both domestic and international trade growth, and there is no other ex-Class I gradient with as good a profile and geographic proximity to market optimization as the PCE.

6. Finally, if you want in of the ground floor of what it is like to be involved in a new rail project, start investing in the DM&E. That'll give you a first hand taste of all the particulars you would have to go through in starting up your own railroad.

[Anonymous]

QUOTE: Originally posted by tormadel

Indeed I have read it. I was just saying it was abit of a bore. My little family here has a savings of about $700 so I would say my dream is in the infant stage where it hasn't even learned to crawl yet. I'll keep working hard and crawling up the ladder. I will get there someday.

Well, since cash is an issue I'd suggest a job with a railroad where you can learn while you earn as I mentioned above. I'd look at T&E service as you can make pretty good money there and hopefully put some away. It will be difficult on the family but if you establish a seniority date early and get your RTC and Engineer training done ASAP you'll have decent seniority and should be able to hold a decent job. In your area I'd check with the Wisconsin Southern and perhaps the UP and\or CN if they have terminals close by. At least that way you will get hired out and get your training paid for by the RR. I have no idea what you make at Dominos but I am certain the RR is better.

LC

[tormadel]

Indeed I have read it. I was just saying it was abit of a bore. My little family here has a savings of about $700 so I would say my dream is in the infant stage where it hasn't even learned to crawl yet. I'll keep working hard and crawling up the ladder. I will get there someday. But at least the baby is not in the womb anymore <smile>

[Anonymous]

QUOTE: Originally posted by tormadel

Yeah I have seen that. It is where I got the orgional "so you want to start a railroad" pamphlet I refered to. But, unfortuneatly its about as good as curling up in front of a fire with the detailed version of sterio instructions hehe. Technically valuable information it's not really relevent untill you are at that point where < We've organized the company, sold the stock, arranged financeing, picked out the line we want at started talks with the owner to acqure it> then you'd need that info heh.

That is partially true, but the booklet contains a lot of information about how short lines can be evaluated. Read the "The Railroad, What it is, What it Does" book and then read the STB pamphlet. I also recommend reading the STB Abandonment guide mentioned on the same page. There are a few worthwhile lines being abandoned now and knowing how to put in an Offer of Financial Assistance is valuable in getting such lines. There are plenty of consultants who will charge you for what I have told you in this thread already.

Besides, you need to start finding lines and learning how to evaluate them or get started applying for RR jobs. If you want to get on the RR you need to do so ASAP. The longer you wait the lower your seniority will be.

LC

[tormadel]

Yeah I have seen that. It is where I got the orgional "so you want to start a railroad" pamphlet I refered to. But, unfortuneatly its about as good as curling up in front of a fire with the detailed version of sterio instructions hehe. Technically valuable information it's not really relevent untill you are at that point where < We've organized the company, sold the stock, arranged financeing, picked out the line we want at started talks with the owner to acqure it> then you'd need that info heh.

[Anonymous]

Here's the link to the STB page on line sales you might also want to look at, if you haven't already. http://www.stb.dot.gov/stb/public/resources_railsales.html

LC

[Anonymous]

QUOTE: Originally posted by tormadel

On another note LC. Would you argue for leasing or purchasing you're locomotives? As I understand it there are tax and accounting reasons that make leasing desireable. Or does it depend alot on the terms of the lease?

This needs to be part of your overall business plan and will depend upon many factors including your opportunity, need for power based upon customers, rail line, and traffic levels and what structure best suits you and your investors. The tax aspect is really quite minimal as most leases must be capitalized these days rather than expensed so it really doesn't matter nearly as much.

LC

[tormadel]

On another note LC. Would you argue for leasing or purchasing you're locomotives? As I understand it there are tax and accounting reasons that make leasing desireable. Or does it depend alot on the terms of the lease?

[tormadel]

Yeah that sounds like mostly good reasoning. As I have said somewhere else if people don't like trains roaring through they're neighborhood they shouldn't have moved there. I've seen refrences as far back as early 1900's talking about elimination of grade crossings. So high speed answer is what France did where they raised the mainline and there are no grade crossings at all. Anyone care to guess what kind of crazy costs this would have? I seem to also recall reading something about the former Lackawanna in New Jersey having some elevated line (built up soil not like the L) and that it had a greatly increase cost of maintence for some reason inherent of the big hill it was running on. But wouldn't this mean that UP's cutoff accross Omaha would cost a fortune to maintain? It crosses through most of Omaha on some VERY large fills and bridges.

[canazar]

QUOTE: Originally posted by tormadel

Looking at some of these magazine's website have brought another question to my mind. Around 1900 NYC had trains blazing along at 100mph (not all of them granted but some) today <over 100 years of technology later> railroads seem excited to have mainlines running 50mph. This seems to me to be far below what they should expect. I'm sure the underlying reason is the money. How much it costs to keep things moving at that kind of speeds. Coupled with congestion problems of just keeping things moving. But part of my mind still is saying to me that part of the leverage railroads should have on trucking is the ability to move it faster then is allowed on highways. It's not practical anymoe to build railspurs to every supplier and destination. Trucks may be able to roll you're delivery right up to you're door, but the railroads should be at least able to deliver it to you're town faster.

I have often wondered that too, but I do think, those were the good old days. Out here (In Arizona) in the wide open desert, it is not uncommom for the trains to get up to 70-75. But just about anywhere else, you deal with ALOT of grade crossings that didnt used to be there. Heck, there are whole towns that didnt exsist 50 years ago. In the eastern US along with alot of the south and far west coast, its just too congested. Doing 80MPH behind a neighboorhood just doesnt fly.

Also, even though trains may be advanced, you cant argue with physics. The rails are the same, wheels are the same and today's trains just cant stop due to the weight. Modern trains are so much heavier then what they used to be, both in load and in car type.

Anways, my crack at the theroy[:)]

[tormadel]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by tormadel

Thank you LC. I think I have that one bookmarked but I will check. Couple of weeks ago I spent a few nights doing web searches (google and such) for "locomotive sale & locomotive lease" as I researched the value of locomotives. Found alot of websites for contact but veeeeeery little in the way of hard information. I'm reluctant to send direct inquireies to any of these companies as at this point I am merely education myself and I do not wi***o be a pest when I am not ready to talk contract at this time. I have more respect for business people then that (Lord I hate telemarketers, so mean to them).

Ok nope, upon review that is a new one to me. Thanks again :)

Prices on just about everything is sky high right now. I just got a note concerning a GP9 in running condition for $75K. A GP38 will run you over $250K and even GEs are going for unheard of numbers as demand for them in South America and Eastern Europe increases. Track equipment prices are also heading up in a BIG way as new projects such as the DM&E and others demand available equipment. It is a difficult time to start a short line from a capital investment standpoint. Of course there are plenty of leasing companies willing to take your $$.

LC

Yeah $75k for a GP9 is one of the few things I found out <can look up my notes if you want details :)> But as you say, economic conditions are like a rollercoaster, everything could change in the years before I am ready. I saw a press release that Iowa Interstate asked for a $9.something FFRA loan to buy the 22 GP39-2's they have been leaseing. I figured that to something close to $450k ea. For 25 year old (granted rebuilt) Geeps. That had my mind going ***, that's what they should have been worth brand new! Makes that functional RS11 for $35k I found sound like a deal heh.

I suppose it should be gospel that any small operation should always be on the lookout for a good deal from a reputable source.

[tormadel]

True Lee that's basically the advice I've been given and the approach I'm currently working toward.

But also some of those operations cut down on costs by the few employees they have doing more then one job. Including the owner(s) being part of the road crew. Also could depend how much you bite off. Differnce in magnitude of headache between starting the DM&E or the Omaha, Lincoln & Beatrice.

[Anonymous]

QUOTE: Originally posted by Lee Koch

While I myself have dreamed of starting my own railroad, and while I am convinced that the best railroad managers are also railfans, I fear that owning and running your own branchline RR would be as big a disappointment as a challenge. As many have remarked on this thread, when you start a business, you are married to it, putting in 80+ workhours a week. You never really get to ride the trains, and you may not be able to implement everything you feel to be desireable due to economic restraints.

I would think the best path would be to start working for one of the shortline holding companies, gathering experience and getting to know the terrain. That way you wouldn't be starting from scratch!

Lee -

Most of your sentiments are right on. It is a difficult balance and any railroad is a tough mistress. That said, at least running a short line you have some control of your own destiny. I'd like to get out and do it again. And yes everyday there are significant financial constraints.

I disagree with your assertion that the best way to get started is with a short line holding company. I'd either start with a short line directly or a Class 1. Most of the folks at the holding companies come from the Class 1s and having had both experiences the Class 1 is definitely more difficult but also more intensive training for any sort of railroading.

LC

[Anonymous]

QUOTE: Originally posted by tormadel

Thank you LC. I think I have that one bookmarked but I will check. Couple of weeks ago I spent a few nights doing web searches (google and such) for "locomotive sale & locomotive lease" as I researched the value of locomotives. Found alot of websites for contact but veeeeeery little in the way of hard information. I'm reluctant to send direct inquireies to any of these companies as at this point I am merely education myself and I do not wi***o be a pest when I am not ready to talk contract at this time. I have more respect for business people then that (Lord I hate telemarketers, so mean to them).

Ok nope, upon review that is a new one to me. Thanks again :)

Prices on just about everything are sky high right now. I just got a note concerning a GP9 in running condition for $75K. A GP38 will run you over $250K and even GEs are going for unheard of numbers as demand for them in South America and Eastern Europe increases. Track equipment prices are also heading up in a BIG way as new projects such as the DM&E and others demand available equipment. It is a difficult time to start a short line from a capital investment standpoint. Of course there are plenty of leasing companies willing to take your $$.

LC

[Flint Hills Tex]

While I myself have dreamed of starting my own railroad, and while I am convinced that the best railroad managers are also railfans, I fear that owning and running your own branchline RR would be as big a disappointment as a challenge. As many have remarked on this thread, when you start a business, you are married to it, putting in 80+ workhours a week. You never really get to ride the trains, and you may not be able to implement everything you feel to be desireable due to economic restraints.

I would think the best path would be to start working for one of the shortline holding companies, gathering experience and getting to know the terrain. That way you wouldn't be starting from scratch!

[tormadel]

Thank you LC. I think I have that one bookmarked but I will check. Couple of weeks ago I spent a few nights doing web searches (google and such) for "locomotive sale & locomotive lease" as I researched the value of locomotives. Found alot of websites for contact but veeeeeery little in the way of hard information. I'm reluctant to send direct inquireies to any of these companies as at this point I am merely education myself and I do not wi***o be a pest when I am not ready to talk contract at this time. I have more respect for business people then that (Lord I hate telemarketers, so mean to them).

Ok nope, upon review that is a new one to me. Thanks again :)

[Anonymous]

Useful info on locomotives and other equipment are on www.railswap.com

LC

[tormadel]

Hehe, I'll get right on that [:D]

Sorry I had a negative moment there, worked through it now. I'll take one day at a time, do what I can do and see what life and I can do together [8D]

[cpbloom]

When you do take over RailAmerica don't forget about your "friends"
at Trains.com when it comes time for free cab rides. [:p][:o)][:)][8D]

[tormadel]

Important heads up there. Sometimes I may get too many James Hill nothing to something dreams in my head, so it's important I get reminded of reality. Had the first fight with the wife tonight about how she already doesn't see me enough as I manage a Domino's pizza. So I guess she's alittle against the idea heh. In a way it almost seems easier to make a name for myself into money (weather it's a business my hearts into or not) and stage a hostile take over of Railamerica (for sake of example) then to go the way we've been talking about. But, we shall see.

[Anonymous]

QUOTE: Originally posted by tormadel

Ordered the book you suggested [:)] thanx again LC. May take me awhile to get my certifications while I manage my restaraunt and wife and child. But at least I'm doing something other then wallowing in a career that doesn't sit well with me.

Railroading is a job best earned and learned. Don't think that a peice of paper from a school will get you too far in this business. You will need some skills and I strongly recommend a four year degree if nothing else for credibility when you have to deal with banks, investors, etc. Railroaders won't judge you on your education as much as on your abilites. As far as certifications, the ones I believe in is your qualification as a Conductor, your promotion to Engineer (and 49 CFR 240 Certification that goes with it) and enough track work experience to qualify you as a track inspector (requires both hands on and supervisory experience). Other extras I find useful are my advanced degree and bar membership, but they are not required by any means. Remember, although the qualifications are nice, railroading is a team sport. Make sure you have good business/RR partners to fill out your weak spots. The three most important short line people are an operating guy, a track/bridge guy and a financial guy. Everybody markets/sells so a marketing person comes later....

LC

[tormadel]

Ordered the book you suggested [:)] thanx again LC. May take me awhile to get my certifications while I manage my restaraunt and wife and child. But at least I'm doing something other then wallowing in a career that doesn't sit well with me.

[tormadel]

Interesting points Jock. There will always be people like me trying to make things work "the old fashioned way".

[jockellis]

G'day, Y'all,
I'm not a railroad person, I only play one on a piece of plywood. But I have talked to the proper railroad folks on some things and my guess is that railroads, first and foremost, decide whether to sell based on some liability they might incur. Lawyers love to sue railroads and juries seem to love to award money to those who are injured, even by their own lack of attention. I know one shortline owner who quit hauling people on flatcars behind his SW-1 because a bunch of Boy Scouts acted badly. However, I called NS to see what was available for purchase and got the feeling that they would like to sell a lot of branches they still have. Maybe I'm wrong, though. But with the business model that the Transcon has given BNSF, I would imagine that all the Class 1s see that the high speed, long haul business is the most successful because it allows them to employ fewer people. Shortlines and regionals, as Trains pointed out several months ago, often have to go back to the basics on track maintenance because they cannot afford to buy the necessary equipment to do the services efficiently. But there are always people who want to be C.P. Huntingtons and Thomas Durants who will take over these tracks which are headaches to the Class 1s but the backbone of the railroad industry.
Jock Ellis
Cumming, GA US of A
Georgia Association of Railroad Passengers

[tormadel]

Looking at some of these magazine's website have brought another question to my mind. Around 1900 NYC had trains blazing along at 100mph (not all of them granted but some) today <over 100 years of technology later> railroads seem excited to have mainlines running 50mph. This seems to me to be far below what they should expect. I'm sure the underlying reason is the money. How much it costs to keep things moving at that kind of speeds. Coupled with congestion problems of just keeping things moving. But part of my mind still is saying to me that part of the leverage railroads should have on trucking is the ability to move it faster then is allowed on highways. It's not practical anymoe to build railspurs to every supplier and destination. Trucks may be able to roll you're delivery right up to you're door, but the railroads should be at least able to deliver it to you're town faster.

[tormadel]

Bah, I've seen to many bank teller windows, screwed up my guess :)

[Anonymous]

QUOTE: Originally posted by tormadel

QUOTE: Originally posted by 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.

I would say big reasons would be track condition and the likelyhood that CSX wanted to get rid of it. For some reason, not based on traffic density, NS does not appear willing to sell it's Portsmouth - Cincinatti line. Could be anything from strategic planning, to nostalgia or just plain stubborness heh. Give them time.


Thanx again Limited Clear(ance)

Actually, Limited Clear is a signal indication and not a reference to clearance which is generaly referred to as "Close Clearance" or CC.

LC

[tormadel]

QUOTE: Originally posted by 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.

I would say big reasons would be track condition and the likelyhood that CSX wanted to get rid of it. For some reason, not based on traffic density, NS does not appear willing to sell it's Portsmouth - Cincinatti line. Could be anything from strategic planning, to nostalgia or just plain stubborness heh. Give them time.


Thanx again Limited Clear(ance)