Short Line Investment?

[Anonymous]

Oh, and also, please assume that the management team will contribute at least $500,000 reprersenting 50 shares and will retain operational control of the company.

LC

[Junctionfan]

For me it would depend on the expected revenues and what kind of customers they were targeting. For example, if a shortline was investing in an area with a high demand for rail in industrialized areas such as say Hamilton, Ontario; Brampton, Ontario or Sarnia, Ontario; that would be such a reason for an investment. If the area is a high revenue generator, than a decent ROI should be expected. Of course it also depend on the kind of competition too (CN and CP operate switching in some areas however places such as Hamilton, Ontario is primarily switched by Rail America).

Another reason would be if I was a farmer, agriculture investor or had some kind of white collar interest in a mine and I need to ship my goods form point A to B and a class 1 wasn't interested in doing it, than I would have no choice but to seek a shortline operator if I was still interested in going that route. It would depend on the tonnage of course and projected amount of cost saving versus any other mode of transportation. Most likely though, rail would be cheaper.

For a political reason, I would say investing in rail would keep the taxes under control hopefully as it would reduce the maintainance cost on roads from truck use. I would also reduce hopefully, gridlock areas prone to such heavy traffic from trucks. It would also give industrial opportunities for future economic development to an area. Large industries that deal with the shipment of large quantities of items in bulk usually prefer a rail option hense a rail operation in an area offers a possible job creation if other desirable requirements are met for the industry to locate to that area in the first place-rail is just an added assentive.

[tormadel]

Yes. When I was still a teenager I bought 200 shares of Pioneer RR stock. Just because I had the money and saw an advertisement for it in Train's magazine. 10yrs later I sold it for 4.5 times as much when my first child was born and needed the cash. But the 10 grand part would hold me back cause I don't have it hehe.

I guess the other cavat for me would be I would want to participate with it, not just own it.

[Anonymous]

yea i think i would lay out the $10k, but only if i had a personal interest in it. if it was to create some sort of a co-op(?) to haul my corn away and/or to haul fertilizer in cheaper or provide overall better service to my area then i'd have no problem.

but to throw 10 large out to B.F. oregon for a shortline to haul logs 3 miles, then no.

i hope that answers your question. if not then i don't know the legalese some of the fast talkers do to explain it in more detail.

[jeaton]

Assuming I was in an investing mode, sure. Maybe 1 to 5 shares if the prospectus indicated that profit was a goal and the business plan indicated that there was a reasonably good chance that the goal could be met.

On the other hand, I don't think I would part with 10k for a vanity investment.

[edblysard]

LC,
Need some clarity...
Is the GM, CEO and CFO, along with the Super, MOW and such all a one man band?
I have seen a few of these, and, in my opinion, one guy can’t be all things at once...so, if it isn’t a one man show, who is the hired talent?

If I could "hire" you, along with mudchicken, Jay and a couple of other with a proven track record, then sure, count me in...

On the other hand, if we are trying to do this on the cheap....

Ed

[Anonymous]

QUOTE: Originally posted by edblysard

LC,
Need some clarity...
Is the GM, CEO and CFO, along with the Super, MOW and such all a one man band?
I have seen a few of these, and, in my opinion, one guy can’t be all things at once...so, if it isn’t a one man show, who is the hired talent?

If I could "hire" you, along with mudchicken, Jay and a couple of other with a proven track record, then sure, count me in...

On the other hand, if we are trying to do this on the cheap....

Ed

Ed -

As I said, this is only a hypothetical question. I wasn't meaning to imply a one man band. Assuming I could get the kind of investment I proposed in the hypothetical I would be glad to participate. If we actually had investors sufficient to purchase all 1,000 we would have a fund of $10,000,000 ca***o buy and run a RR. That would be quite a nice little short line and that isn't even including any borrowing.

Typically, in my experience, a handful of people are involved in starting a new RR (legally known as the "Promoters"). Once they have a deal, they then seek to raise the investment necessary to consummate the purchase. Typically they would have a small cadre of qualified people to initiate the startup including hiring additional necessary personnel.

LC

[edblysard]

LC,

I understood this is a exercise in the hypothetical...

What I was looking for is the specifics of who is going to run the show in this experiment...
And I trying to point out that one man can not do it alone...you have to be able to find, recruit and motivate talent in key positions.

When my Dad retired from the Navy, he bought a wholesale hardware company.
One of his suppliers asked why he took as many fishing trips as he did,
because he would go off every couple of weeks for a weekend down at the coast, and the guy didnt understand how he could afford to do that.

My Dad's answer makes a lot of sense to me, and I have applied to every business I have been involved in...

"I can’t understand a business owner or manager who is proud of having to work through his vacation....if he is a good business manager, he has hired and trained his people to the point he can afford to take a few weeks off, and be assured the business is still running quite well in his absence.

"A lousy manager tries to cut it so thin he cant afford to take a few days off, much less a vacation...that’s the guy who isn’t managing his business, its the other way around, the business is managing him"...

So, if you could get the number of investors, at the share price you stated, who would you have in mind for the key positions?

You were searching for those interested, just to see how many.
Well, I would be one of them, but this is part of the reason as many "short lines" seem to fade away as any other....they don’t hire the talent to run the business, they let the business dictate who they can hire.

Leadership starts at the top, and filters down...so who would you list in the prospectus as the top guys?

Ed

[mudchicken]

LC - Ed and I are of the same line of thought here. Neither of us would invest in it sight unseen, we want to "kick the tires" and see who the players are. I'm not going to put all of my eggs in one shaky basket (1-2 shares, max) and I have seen shortlines with promise fail and others that appeared high risk succeed by pure dumb luck. Then again I've seen several fail due to myoptic operating management. (Not trying to revisit that disagreement again, honest!) I gotta know more about the variables and fixed assets before I would commit on what's stated here hypothetically...[D)][D)]

[Anonymous]

I'd certainly consider it depending on the circumstances and the revenue base and prospects of the particular line. However, as MC points out, I too would want to "kick the tires" before signing a check [:)].

[Anonymous]

OK. I understand the desire for additional due diligence. Remember that the example below would be one of several that would be possible if the full $10 Million could be raised.

I'll add a few more hypothetical facts. Some have been changed slightly to maintain confidentiality. Remember this is hypothetical only and no offer or other investment opportunity exists. This is merely for discussion purposes. The people described are real some details of their background have been slightly modified to protect their privacy.

Proposed Management Team:

1. President - Background -Locomotive Engineer/Conductor - Class 1, 6 years; Attorney 15 years (significant time spent representing several RRs in different deals and litigation); Past short line management experience 5 years, also experienced with deal structures and financing; DSLE. B.A. J.D. Total of 15 years RR experience.

2. Vice President - Operations/Engineering - Background- Former Chief Engineer - Class 1 RR, progressed thru engineering ranks on another Class 1. Also Locomotive Engineer/Conductor and FRA qual. track inspector. Has operated his own short lines in the past (3). Total of 28 years RR experience.

3. Board Member - Background - Managing Director - Major Investment Bank - B.S. MBA Some RR deal background.

4. Controller - 15 years experience in RR finance. Class 1 and Class 3 B.S./M.S. Accounting

5. Manager Mechanical - 5 years Class 2 Mechanical Dept., Lic. Servicing Engineer, certified carman, machinist. 2 years MOW Experience.

6. General Manager - To be determined upon acquisition.

Property: (First of several)

Location; Southeast U.S.

32 miles. 115# and 112# with some 100# in sidings. Jointed. 2 miles of 115# CWR.
timber ties. 6 bridges all steel. Ruling grade 0.7%. Max curvature 10 degrees. Runs along river. Interchange: NS and CSX. Paper barriers possible.

Traffic: 2,400 carloads coal; 1,000 carloads cardboard; 2,000 carloads wood chips. Total 5,400 current annual carloads.

Revenue projection: $1.42Million Year 1. By year 5 assuming 4,000 additional coal loads revenue grows to $2.62Million+

Cost projection: $1.24MIllion Year 1. By year 5 costs increase to $1.88Million.

EBITDA projection $180,000 year 1 growing to $740,000 or more by year 5.

Potential customers. Recently two mining companies have reopened local mines. Coal is being trucked to a power station 60 miles distant. Power station has rail access which is not currently used. Coal is barged in from other sources. Power company dislikes barge reliability and seeks alternative supplies. Potential additional 4,000 to 6,000 annual carloads from both mines (not all would go to this power station). Some coal is metallurgical grade and other is only fit for steam coal.

Employees: 4 T&E; 3 MOW. To be adjusted as required by growth.

Equipment:

Locomotives: 2 4 axle units(2000hp) and 4 six axle units (3,000+hp)

MOW: Hirail inspection truck, Hirail Boom truck, backhoe, tamper, regulator others as deemed necessary.

Acquisition cost from owner $1.2Million

Financial structure to be determined depending upon need. Hope this is enough to give you some idea. Questions?

LC

[tormadel]

Doesn't how far you haul it effect the revenue?

[Anonymous]

QUOTE: Originally posted by tormadel

Doesn't how far you haul it effect the revenue?

With short lines, not necessarily. Depends upon your agreement with the Class 1s.

LC

[jeaton]

I wouldn't sell the farm to make the investment, but I would consider adding some share of the railroad to a diversified portfolio.

If I was younger, I might consider taking more shares, thus increasing my level of risk, but I would also be looking for some form of active participation in the venture.

[SALfan]

Other than the coal mines, sure sounds a lot like the Chattahoochee Industrial Railroad.

I'd be interested in making the investment, if I had the money.

[tormadel]

yeah, dang this money thing eh Jodom?

[88gta350]

I wouldn't want to buy a share or two just to say I owned it, but if I had the money to buy a sizeable stake (say at least 10 shares or 1%) and was reasonably assured that I could see a nice return on my investment, then sure, I'm always looking for new investment opportunities.

[tormadel]

Yeah I think Guilford is a good example of what can go wrong when you have someone with money buy into the industry who doesn't really seem to understand it. Guilford has been the black sheep of the family for as long as I can remember now.

[edblysard]

Good so far...
Interchange points, single yard or multiple points?
Last bridge inspections were done when?
And next ones are due?

6 locomotives and 4 T&E...guessing two trains a day working as a turn plus a twice weekly coal drag....
What is the current debt load, and last, why is current owner getting rid of it?

Ed

[tormadel]

I'm assuming the debt load is 0 because it's being had off a class 1. As to why they would want to get rid of it when it has blooming potential, don't know about that one........

[MichaelSol]

QUOTE: Originally posted by edblysard
6 locomotives and 4 T&E...guessing two trains a day working as a turn plus a twice weekly coal drag....

Currently handling an average of 15 carloads a day.

At twice a week, each "coal drag" would average 23 carloads.

The rest of the traffic would generate 8.2 carloads per day, 11.5 per day if its a five day-a-week railroad.

"Two trains a day" sounds high ... and a bit expensive.

QUOTE:
Locomotives: 2 4 axle units(2000hp) and 4 six axle units (3,000+hp)

That's 16,000 available horsepower for something between 11 and 34 carloads a day. The proposal suggests a substantially "over-powered" railroad. Is there a reason for that much available horsepower for these size trains?

Best regards, Michael Sol

[PNWRMNM]

I agree with Michael, sounds like a lot more power than required. Like your experience level for President and Board. It is more than I would expect.

I am constitutionally skeptical of growth projections. Shippers lie. Traffic is where my research efforts would go.

Mac

[edblysard]

Retired or second hand/third hand SD40s...a few GP38s...Models were not listed....you buy or lease what you can get for the money you have, weather it "overpowers" your needs or not.

Before we purchased the MK1500Ds, you would find us flat yard switching with SD9s, SD40-2s, GP 30s, 38s, U30s...just about anything we could beg, borrow or lease...even had one of the last UP rebuilt SW10s for a few years...little rascal worked great, till the electrical cabinet caught on fire!

Ed

[MichaelSol]

QUOTE: Originally posted by Limitedclear
Proposed Management Team:

1. President.
2. Vice President.
3. Board Member.
4. Controller
5. Manager Mechanical.
6. General Manager .
7. 4 T&E
8. 3 MOW

Employees: 4 T&E; 3 MOW. To be adjusted as required by growth.

That's about one management level employee per "worker" bee.

I created an Excel model that shows the following payscales:
1. $70,000
2. $60,000
3. $5,000
4. $50,000
5. $50,000
6. $50,000
7. $40,000
8. $30,000

Total payroll including FICA, FUTA and SUTA is $592,000. Assuming little or no deferred maintenance, that cost should run about $6,451 per mile, maybe less, or about $206,451. $21,000 to finance hyrail and other operating equipment, that leaves the locomotives to be financed over 10 years and that would have to be at $100,000 for each 2,000 hp unit, and about $500,000 for each 3,000 hp unit.

Have to do some real bargain hunting to get under $1.2 million in operating costs.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by edblysard

Good so far...
Interchange points, single yard or multiple points?
Last bridge inspections were done when?
And next ones are due?

6 locomotives and 4 T&E...guessing two trains a day working as a turn plus a twice weekly coal drag....
What is the current debt load, and last, why is current owner getting rid of it?

Ed

Interchange points are at a runaround and a small yard respectively. You are correct two crews. Probably 1-2 jobs daily depending upon coal flows.

Locomotives were projected at six for two reasons. One is there is a local currently that spends a great deal of its time shuttling woodchips and cardboard between a couple of plants. This would likely be one or both 4 axle units. As to the six axles there is the coal. The thought with the six axles is they are cheap now and good protect power and there is a significant possibility of pooling power with one of the Class 1s which would take 2 units off the property for a week at a time. This can create a very favorable horsepower hours situation and will help avoid downtime due to locomotive failures. The offlline move is longer than the online for these coal trains and as such these units should quickly pay for themselves. Also, not all the locomotives are needed immediately. You'd probably want 2 4axles and 2 6 axles to start and grow from there.

Owner is seeking to abandon part of this property to salvage rail. The short line makes sense only if you get the entire line. The purchase price represents a slight discout on the NLV.

LC

[Anonymous]

QUOTE: Originally posted by edblysard

Retired or second hand/third hand SD40s...a few GP38s...Models were not listed....you buy or lease what you can get for the money you have, weather it "overpowers" your needs or not.

Before we purchased the MK1500Ds, you would find us flat yard switching with SD9s, SD40-2s, GP 30s, 38s, U30s...just about anything we could beg, borrow or lease...even had one of the last UP rebuilt SW10s for a few years...little rascal worked great, till the electrical cabinet caught on fire!

Ed

Exactly. Given what I know is available out there right now I'd be looking for B23-7s for the 4 axles (12cyl fuel misers) and perhaps SD40-2s for the 6 axles or possibly GEs, but I don't care much for C30s. I have found them to not be terribly reliable.

LC

[Anonymous]

QUOTE: Originally posted by tormadel

I'm assuming the debt load is 0 because it's being had off a class 1. As to why they would want to get rid of it when it has blooming potential, don't know about that one........

As I said, the financial structure is not set. Management might choose to take on some debt. Is there debt coming in the acquisition, no.

LC

[Anonymous]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by edblysard
6 locomotives and 4 T&E...guessing two trains a day working as a turn plus a twice weekly coal drag....

Currently handling an average of 15 carloads a day.

At twice a week, each "coal drag" would average 23 carloads.

The rest of the traffic would generate 8.2 carloads per day, 11.5 per day if its a five day-a-week railroad.

"Two trains a day" sounds high ... and a bit expensive.

QUOTE:
Locomotives: 2 4 axle units(2000hp) and 4 six axle units (3,000+hp)

That's 16,000 available horsepower for something between 11 and 34 carloads a day. The proposal suggests a substantially "over-powered" railroad. Is there a reason for that much available horsepower for these size trains?

Best regards, Michael Sol

Michael -

You can't apply big road metrics to a short line of this size. Too few resources. See my comments below concerning locomotive reliability and the need to pool power to offline destinations. I'm not sure where the two trains daily is coming from. I'd see a local plus coal trains as needed. Coal trains now are typically once weekly and are 80 cars. Obviously, the trains will grow as the customers do. Given that this line is much closer to the coal than the loadouts that the two new customers are currently trucking to it seems likely they will use it. You'll notice our projections are at the low end of the range given that customers tend to inflate numbers.

LC

[Anonymous]

Michael -

With respect to your pay scale and payroll calculations they are very high. This is Appalachia we are talking about so your payroll numbers are also high. One other point. I'd probably start with my GM and Mechanical guy being among my 7 employees for the first line. Also, senior management will likely have to make concessions initially in exchange for later gains. The Board Member and perhaps Sr. Mgt will receive part or all of their compernsation in stock. Again, the financial structure is open for the time being.

As far as the payroll goes, I make it to be a total of $448,950 including full Railroad Retirement (Tier 1 and Tier 2). An additional $81,000 would give all employees full medical coverage. Total $529,950. People love to work for an employer with great retirement and medical benefits even if the wages are a bit lower.

Concerning locomotives.

B23-7s. I can lease these units (due to industry connections) at $40/day/unit or $14,600/unit annually. Total $29,200.

SD40-2 or SD50. I can lease these units from a friendly source for $200/day or $146,000 for two annually. As mentioned above, I will likely be able to trade horsepower hours with the Class 1 involved as part of the deal meaning I will effectively be getting the equivalent of 5 locomotives for my investment of 2 to haul the coal. This multiple keeps rising the more coal I move until I max out the capability of the available locomotives.

MOW Equipment

Boomtruck, Backhoe and trailer should be a total of about $75,000 from the right suppliers in good shape. Hirail inspection truck will be another $30,000 assuming good used vehicle with hirail mounted and FRA certified. I'd buy these with cash from the invested capital unless I was offered excellent lease terms.

So far, I'm only at $705,150 and I've covered many of my largest costs. I think $1.2M is not only doable, but I might have a few bucks left over, depending upon fuel costs, but as I intend to be junction settlement I'll ask for a cut of the Class 1 surcharge.

LC

[edblysard]

Mike...
Yes, two trains a day.
If you are switching out local plants, in this case, a woodchip and a cardboard plant, you have two choices...send the crew with a locomotive out from the "home" terminal to the plants, or park the locomotive out near one or the other and cab the crew back and forth...handled by one of the management folks.
At some point, you will have to bring some of those cars into and out of your yard for interchange...cardboard plants need more than just wood chips.

So who pulls and spots your interchange with the class 1s assuming you generate enough cars for a daily or every other day interchange?

Even if you don’t, you still have to serve the woodchip/cardboard guys, along with any other customers, and if you throw in a coal drag, you could have the interchange crew drag out the outbound to the interchange, leave them, pick up the coal at the interchange point, take the load to the plant, and pull the empty, return to the interchange point, leave the outbound empty coal, pick up any inbound freight and head back in to the yard...someone has to switch out the inbounds...more work than one crew could do in a 8 or a 12 hour shift.

Either way, you are going to need two crews/train a day to keep everyone happy.

Assume you can use the Class 1 power that arrives on the coal train to go spot the plant, and pull the empties, perform an initial terminal air test, hang the Fred, take the whole deal to the interchange point, write the air test slip, and leave the intact train for NS or CSX to pick up at their leisure, get on your power and return with any cars they left for you.

We do somewhat the same thing with grain trains, saves swapping power, doing more than one air test, keeps thing flowing.

Another concept would be the crew that does the coal move, on the days there is no coal, works the yard, switching and lining up spots for the local, blocking out the NS and CSX cars, while the local does their thing...still need two crews a day... even if your a 8am to 4pm five day a week operation.

Ed

[mudchicken]

Hydraulic or Air tools / I-R Compressor or Hydraulic Power Unit? (Off the truck please) - Oh man have I seen the falacy of just two men, a truck and a backhoe....The small tool availability issue gets scary, especially with those who don't take care of the equipment.

Surfacing Gang every 30 Mos? (rent/subcontract?) Availability of TSR or TKO machine? How fast does it fall apart?

Qualified Welder or are we parts changers & cannibals? (Kills your supply materials budget)

Speed? (You guys with the mirriors always wanna go faster)...Track class 1 0r 2?

[MichaelSol]

QUOTE: Originally posted by Limitedclear
As far as the payroll goes, I make it to be a total ... $529,950.

Well, that's close enough to my $592,000 estimate that regional variations in pay certainly makes $529,950 reasonable enough. Still seems like a lot of managers.

QUOTE:
Concerning Locomotives.

B23-7s. I can lease these units (due to industry connections) at $40/day/unit or $14,600/unit annually. Total $29,200.

SD40-2 or SD50. I can lease these units from a friendly source for $200/day or $146,000 for two annually.

My estimate was $313,230.51 annual lease charges for all of your estimated motive power, yours for four SD-40s and 2, 2000 hp units is $321,200. Pretty close.

QUOTE:
MOW Equipment

Boomtruck, Backhoe and trailer should be a total of about $75,000 from the right suppliers in good shape. Hirail inspection truck will be another $30,000 assuming good used vehicle with hirail mounted and FRA certified. I'd buy these with cash from the invested capital unless I was offered excellent lease terms.

Well, I estimated $150,000 for the lot, a $21,356 annual cost if financed or part of a financing package.

QUOTE:
So far, I'm only at $705,150 and I've covered many of my largest costs. I think $1.2M is not only doable, but I might have a few bucks left over, depending upon fuel costs, but as I intend to be junction settlement I'll ask for a cut of the Class 1 surcharge.

Fuel is a little tough to estimate because of the off-property use, but I would bet annual costs at between $110,00 and $156,000. Not sure if the estimated revenue includes or excludes a surcharge. I estimated $126,366 in annual fuel costs using a $1.76 per gallon figure.

I just got done with a business plan estimate that has generalized operating expenses at about $94,000; insurance, garbage, utilities, permits, licenses, the usual etc etc. It's always a surprise how fast those add up. I would guess, for hypothetical purposes, the general operating costs of a 30 mile railroad, including shop utility bills, parts/maintenance, insurance, lubricants, legal, professional, MOW supplies, garbage, licenses, permits, etc, at about $180,000 per year.

Still not sure about the extent of deferred maintenance, if any. How would heavy track work be done?

Based on my estimates,I get $1,232,952 in overall operating expenses. Pretty close to yours. Without knowing more, it does appear that you might well be able to beat those costs.

Still seems like a lot of managers.

Good luck.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by mudchicken

Hydraulic or Air tools / I-R Compressor or Hydraulic Power Unit? (Off the truck please) - Oh man have I seen the falacy of just two men, a truck and a backhoe....The small tool availability issue gets scary, especially with those who don't take care of the equipment.

Surfacing Gang every 30 Mos? (rent/subcontract?) Availability of TSR or TKO machine? How fast does it fall apart?

Qualified Welder or are we parts changers & cannibals? (Kills your supply materials budget)

Speed? (You guys with the mirriors always wanna go faster)...Track class 1 0r 2?

About half is Class 2 the rest is class 1 currently. We have gone the compressor route in the past. I haven't had problems getting that gear resonably. I prefer 3 men. I usually cross train as trainmen as soon as I can. I also expect everyone to pitch in on the track to a degree (I know many of my fellow T&E folks hate it, but, cry me a river). I am a stickler on equipment. Those who don't take care of company material and equipment, don't last.

Surfacing gang, what's that?! Seriously, that will depend. We will be putting in a good number of ties out of the gate and repairing a couple of small washouts on the OOS portion. Remember that initially we should have the better part of a year to reopen about half of the line and that is where we will focus. That will mean contractors and machines on the property and a good chance to get off to a great start.

We have had good luck hiring welders locally in the past. If that is not possible we have people we can send.

LC

[Anonymous]

Michael -

Yeah, your numbers aren't too terribly out there, but I think we can still make it go. We could come in at $1.2M perhaps a little higher or lower. Again, the management team is talented enough to make it go and won't shy from hard work. Gotta be a GOOD deal to get me out from behind my control stand. This thing could have real legs and not be a highly leveraged house of cards like some short line groups...

LC

[MichaelSol]

QUOTE: Originally posted by Limitedclear

Michael -

Yeah, your numbers aren't too terribly out there, but I think we can still make it go. We could come in at $1.2M perhaps a little higher or lower. Again, the management team is talented enough to make it go and won't shy from hard work. Gotta be a GOOD deal to get me out from behind my control stand. This thing could have real legs and not be a highly leveraged house of cards like some short line groups...

LC

Wouldn't it be fun though ...

Best regards, Michael Sol

[tormadel]

QUOTE: Originally posted by mudchicken

Hydraulic or Air tools / I-R Compressor or Hydraulic Power Unit? (Off the truck please) - Oh man have I seen the falacy of just two men, a truck and a backhoe....The small tool availability issue gets scary, especially with those who don't take care of the equipment.

Surfacing Gang every 30 Mos? (rent/subcontract?) Availability of TSR or TKO machine? How fast does it fall apart?

Qualified Welder or are we parts changers & cannibals? (Kills your supply materials budget)

Speed? (You guys with the mirriors always wanna go faster)...Track class 1 0r 2?

I would push for at least class 2 track. Not only to go alittle faster but for the increased safety and reduced chances of pesky derailments and such. I'm a believer in keeping the physical plant in the best shape that is economically practical. I know my father in law is a qualifed welder with 30yrs experiance who's looking for a new job but dunno if he'd want that kind of relocation <smile>. (alot of welders in my wife's side of the family actually)

And I should say this thread gets my excitement up just talking about it.

[tormadel]

QUOTE: Originally posted by Limitedclear

Michael -

Concerning locomotives.

B23-7s. I can lease these units (due to industry connections) at $40/day/unit or $14,600/unit annually. Total $29,200.

SD40-2 or SD50. I can lease these units from a friendly source for $200/day or $146,000 for two annually. As mentioned above, I will likely be able to trade horsepower hours with the Class 1 involved as part of the deal meaning I will effectively be getting the equivalent of 5 locomotives for my investment of 2 to haul the coal. This multiple keeps rising the more coal I move until I max out the capability of the available locomotives.

LC

This almost makes me wish SD59's had been produced at all. 3000hp from a 12cyl gas meiser sounds like an awesome idea. But they didn't go over. There are what? 10 GP59's all in posession of Norfolk Southern?

[kenneo]

This is an interesting thread.

I would have just one or two suggestions.

Contract out the MofW unless you can keep a "full M of W crew" busy at least 4 days a week. You can have your train crews assist, but I would not wi***o depend on them to handle most of these jobs. If you are going to need to use two train crews, I doubt that they will have much time to work on the track.

The engine and train crews will also be needed to assist your Round House Forman in the maintainence of your motors. Your RHF will also need to be versed in diesel electronics and electrical applications. Like how to locate and fix ground faults, etc.

The Bridge work requires a certified bridge engineer. I would think that you would have to hire this out to a contractor which specializes in bridges.

With careful planning, you can operate a unit train fo 10 cars. This should be considered if you can get trackage rights to the off-line destination of the coal (is it the mine or the plant that is off line?) or get an agreement with the union folk for a wage cost that you can afford and have your Class 1 provide your coal crew. You may be able to operate such a train 3 days per week (36 crew hours).

Your local crews could go on duty at "HQ", get their cars from the Class 1's, and head out for the paper mills and do thier shucking and jiving for 12 hours. Then, the second crew goes on duty at "HQ" and auto's out to the local, the crews exchange vehicles, the early crew drives home, the late crew finishes up the work and motors home to "HQ". If you can actually keep each crew to 8 hours, then the auto would be kept out at a tie-up point to auto back to "HQ" to make the crew change.

Lastly, double your cost of operations figure. You won't exceed that, but you will certainly exceed the numbers talked about above. You have taxes, insurances, bonds yada-yada that will cost you big bucks and you won't even think about before hand. Until you can get a good credit rating, you will be required to pay deposits in advance for supplies, for example.

I helped start up a short line in the early 1990's. I had been a RR for nearly 30 years by then and had diligently learned my craft (station services), dispatching, train and engine duties to name a few. I had proposed, costed and sold interline unit train services. I was not prepared for what ended up happening.

[tormadel]

This is great! [:D] Just what we need all these people who have been there to bring this knowledge together. These are some great things going on in this thread, I'm glad to be a part of it.

[Anonymous]

QUOTE: Originally posted by kenneo

This is an interesting thread.

Lastly, double your cost of operations figure. You won't exceed that, but you will certainly exceed the numbers talked about above. You have taxes, insurances, bonds yada-yada that will cost you big bucks and you won't even think about before hand. Until you can get a good credit rating, you will be required to pay deposits in advance for supplies, for example.

Yep yep, very interesting thread, I know for this lifelong shortline rail to read. I used to do cost sheets like this. I'd get all the est. expenses wrapped together for operating costs, and then double it. Yep, thats right, DOUBLE IT! That would then be the est. operating cost. YES INDEED, due to taxes taxes taxes( diesel fuel and payroll just to name a few! ), pesky variable costs / and unforeseen expenditure changes from the original spread sheets, blah blah blah the works. Shortline railroading can be done. And I'm psyched about the new Evansville Western. So phsyched, I already put together a EW yahoogroup. Although, the EW has the P & L backing it, so it's kind of out of league for this thread. Heres the link if anyone wants to join.: http://finance.groups.yahoo.com/group/EvansvilleWesternRailway/

[Anonymous]

then there is the issue of escrow for those rainy days of future maintenance projects like track /bridge structure upgrades( those dangblasted axle loadings ), engine overhauls, wheels, tractions motors, more blah blah blah

[Anonymous]

QUOTE: Originally posted by tormadel

QUOTE: Originally posted by Limitedclear

Michael -

Concerning locomotives.

This almost makes me wish SD59's had been produced at all. 3000hp from a 12cyl gas meiser sounds like an awesome idea. But they didn't go over. There are what? 10 GP59's all in posession of Norfolk Southern?

I don't want to get into about locos, because some people like Fords and Chevys, well I'm into SD38/39s, SD40-2s, 6-axle Alcos, and anything with a 12 cyl 645 in it( turbo'd or othewise). And I can babble on for hours and hours of fun bs about locos. But I've always wished there would have been a market for an SD59 model. Thing could have looked like a SD40-2 too. Same concept as with the SD38/39/40/SD45 scenario. Big porches for the 12 & 16 cyls, big hood for the 20 cyl obviously. Same with a SD59/60 combo: big hood for the SD60, big porches for the SD59. And all vanity aside, a SD59 could have been a modern age/ fuel mizing/cost concious mean & lean freight lugging / hauling machine. A third gen SD39 on steroids of 710 pills. Plop some HTCRs under it, and it's even more on the side of saving dollars. Alright, enough of my loco bs. Back to the regular program.....

[Anonymous]

QUOTE: Originally posted by tormadel

QUOTE: Originally posted by Limitedclear

Michael -

Yeah, your numbers aren't too terribly out there, but I think we can still make it go. We could come in at $1.2M perhaps a little higher or lower. Again, the management team is talented enough to make it go and won't shy from hard work. Gotta be a GOOD deal to get me out from behind my control stand. This thing could have real legs and not be a highly leveraged house of cards like some short line groups...

LC

Ok, so $1.2 million a year in operating costs that's good to know, and I believe in LC and Ed that it can be done. But I would like to better grasp what the projected carloadings translate to in estimated income. Doesn't have to be hard facts just ballpark.

Take a look at my revenue numbers above. Its all there. Same post as the expenses and EBITDA projection (cashflow) as well.

LC

[Anonymous]

QUOTE: Originally posted by tormadel

QUOTE: Originally posted by mudchicken

Hydraulic or Air tools / I-R Compressor or Hydraulic Power Unit? (Off the truck please) - Oh man have I seen the falacy of just two men, a truck and a backhoe....The small tool availability issue gets scary, especially with those who don't take care of the equipment.

Surfacing Gang every 30 Mos? (rent/subcontract?) Availability of TSR or TKO machine? How fast does it fall apart?

Qualified Welder or are we parts changers & cannibals? (Kills your supply materials budget)

Speed? (You guys with the mirriors always wanna go faster)...Track class 1 0r 2?

I would push for at least class 2 track. Not only to go alittle faster but for the increased safety and reduced chances of pesky derailments and such. I'm a believer in keeping the physical plant in the best shape that is economically practical. I know my father in law is a qualifed welder with 30yrs experiance who's looking for a new job but dunno if he'd want that kind of relocation <smile>. (alot of welders in my wife's side of the family actually)

And I should say this thread gets my excitement up just talking about it.

WHOA there junior...

Why do we need higher speeds???

We don't. This is a common misconception outside the short line world. 10mph is just fine. I'd like to have better track but have you ever seen the difference between a 10 mph derailment and a 25 mph derailment?! The cost is at least triple to go along with the ugliness. Keep in mind that the 10 mph derailment is already gonna cost you $50,000 to $100,000 or more depending upon any number of factors. So, the 25 mph $150,000 to $300,000+ derailment expense will really put a damper on that balance sheet fast... I'd probably keep the track excepted too, even though maintained better as it tones down the FRA issues considerably.

LC

[MichaelSol]

I did not take into account business (equipment) and property taxes. No idea what they would be on railroad property in that neck of the woods.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by MichaelSol

I did not take into account business (equipment) and property taxes. No idea what they would be on railroad property in that neck of the woods.

Best regards, Michael Sol

Based upon similar properties my best guess on property taxes is $50,000 or less. That would be the number for the entire ad valorem tax including equipment.

LC

[Anonymous]

QUOTE: Originally posted by Limitedclear
[

WHOA there junior...

Why do we need higher speeds???

We don't. This is a common misconception outside the short line world. 10mph is just fine. I'd like to have better track but have you ever seen the difference between a 10 mph derailment and a 25 mph derailment?! The cost is at least triple to go along with the ugliness. Keep in mind that the 10 mph derailment is already gonna cost you $50,000 to $100,000 or more depending upon any number of factors. So, the 25 mph $150,000 to $300,000+ derailment expense will really put a damper on that balance sheet fast... I'd probably keep the track excepted too, even though maintained better as it tones down the FRA issues considerably.

LC

[mudchicken]

Tormadel: I kinda dropped a hint (LC caught it)...The operating types that go fast just because they can are a threat to the future viability of the line. What I asked LC about was what speed was going to do to the biggest asset you have here (track structure).

That shiny locomotive is worthless junk if the track is not there to generate income. Paperpushers and pure operating types get themselves in a hole quick on new startups frequently by ignoring the track structure and NOT having a good trained trackman around. The question was posed to see how much we could maximize the utility with.

LC: Would concur on the use of air tools like MT-4s, a pavement breaker and one inch Impact Wrenches along with a gas saw and gas bolthole machine. Local mechanics can usually fix them easier. (although air impacts usually fail early due to JoeBob not understanding how to take care of it...the joys of Marvel Mystery Oil!) .....We have yellow stickers around here that say in one inch letters: Take care of this equipment. If it doesn't work - neither do you!" [tup][tup][tup]

[MichaelSol]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by MichaelSol

I did not take into account business (equipment) and property taxes. No idea what they would be on railroad property in that neck of the woods.

Best regards, Michael Sol

Based upon similar properties my best guess on property taxes is $50,000 or less. That would be the number for the entire ad valorem tax including equipment.
LC

Well, that's reasonable.

I guess if I had a concern on the revenue side of things, it would be the high reliance of the line on the cardboard and woodchip traffic.

I've followed the industry since 1957, when one of the largest Kraft process mills in the world was built, literally next door. I've known every General Manager since 1957, beginnng with Roy Countryman, and including the current manager, Bob Boschee, with whom I spend a couple or three hours a week on a regular basis discussing business issues. They have about a $30 million a year transportation budget. Big operation, originally located on the Milwaukee mainline by Milwaukee's industrial department, served off of a short spur by NP.

The industry is so competitve, that many plants have been shut down in recent years. A new plant is so cost-effective compared to an older facility, and the margins so tight, older facilities have to work hard to make a profit. At the same time, the lumber industry has been on such a rollercoaster due to the Canadian timber tariff brouhaha, sources of chips have ranged from near to very far, naturally affecting overall costs of operation quite dramatically. Makes a big difference to the cardboard plant if it can buy waste chips, or has to make or purchase "custom" chips.

The pulp industry constantly oscillates between lean and plenty, that is, shortage and overcapacity. During the overcapacity periods -- which occur about every 5-7 years -- the industry generally loses two or three North American plants. These tend to be older and smaller plants. Compared to the Smurfitt-Stone operation that I am familiar with, the cardboard operation you are looking at appears to be quite small.

Bob reports that since Milwaukee left, most of the Smurfitt-Stone plant's transportation needs have shifted to truck. "BNSF's service has deteriorated to just awful; we try and use them as little as possible." He reports that MRL, which provides the service link to BNSF, does a good job, but once the traffic in on BNSF, "we just don't get service and with our margins as tight as they are, we can't afford to use the rail system if we can avoid it." Naturally, this sounds a little bit like the hypothetical Appalachian railroad -- dependent on someone else to actually provide most of the service, and being at their mercy.

Now, with regard to the overall proposition. If I were investing in something like this, on technical matters I happen to be a believer in expert, third party opinions -- consultants. I would probably hire someone with some time and expertise, such as Bill Brodsky or Alex Huff, to go look over the railroad and offer his opinion. Probably cost about $10,000 or so.

I would also hire someone like Bob Boschee to fly out and look over the pulp and chip operations to see if he thinks they will even be there in three years. I think I could get Bob to do that for about $10,000. If I wanted fancy reports and numbers, I could double those estimates. But, these would be gentlemen whose opinions I would accept without a written report.

I don't know anything about coal mining as an industry, but I do advise the owner of a coal mine, truck serviced, somewhere down there in West Virginia. He doesn't know anything about coal mining either, but he does seem to trust their current manager who appears to have done a good job with a combination facility. I would probably see what a visit for that purpose would cost as well.

So, from an investor's perspective, there's about a $20,000-$30,000 investment to see if it's feasible -- due diligence -- and that's before actually making any investment. To justify that, a person would have to be willing to purchase at least $300,000 of shares expecting a 25% return in order to justify the entire "cost" of the investment, and to be able to generate at least a 10% return over a safe investment in order to justify the risk. I am not looking at a spreadsheet, just ballparking some percentages.

As I mentioned on another thread, the railroad isn't the important factor in the decision -- the "lay of the land" from a revenue perspective is. I would need to know all about that cardboard plant and the chip or lumber mill. How old are they? Where's the industry going? Are those plants currently profitable? What are their earning and operating histories? Do they pay their bills on time? Do they have expansion plans or are they being "harvested"? How do their managements size up? Young and aggressive, or about to retire? Am I believer in their businesses? Can I help them succeed? Will I be a part of their success or a victim of their failure? Same questions for the coal operations.

I can walk the railroad and get a pretty good idea of what the railroad is like, what it needs, and ballpark some costs. I can price some engines. I can generate a capital budget and an operating budget.

Ironically, that tells me almost nothing about what I really need to know.

Best regards, Michael Sol

[Junctionfan]

Ya-with only 2 trains a day, I would also have to say that it would be better to contract our MOW work.

If there is going to be some mining haulage in the future, you might want to make sure the tracks are strong enough to take the load or you might run into what CONRAIL did with their wide-body locomotives.

[Anonymous]

Thanks for the input guys , but I don't contract all of my MOW out. That is a quick way to par far TOO MUCH for too little. Contractors have profit margins. I can't afford them unless there is a significant value add. That is one of the reasons we have a great management team for this project. Our track people manage projects including contractors when required. The contractors are used for specific tasks for which they are well qualified and capable of doing the job more quickly, conveniently and with less cost than our employees.

Also, you don't need a "Certified" bridge engineer to inspect a bridge. A B&B foreman is fine. We certainly don't need a bridge contractor to do that. That is just one way of opening your wallet. If I need more than replacement of existing compenents I of course use a state licensed Professional Engineer specializing in structures.

LC

[tormadel]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by tormadel

QUOTE: Originally posted by mudchicken

Hydraulic or Air tools / I-R Compressor or Hydraulic Power Unit? (Off the truck please) - Oh man have I seen the falacy of just two men, a truck and a backhoe....The small tool availability issue gets scary, especially with those who don't take care of the equipment.

Surfacing Gang every 30 Mos? (rent/subcontract?) Availability of TSR or TKO machine? How fast does it fall apart?

Qualified Welder or are we parts changers & cannibals? (Kills your supply materials budget)

Speed? (You guys with the mirriors always wanna go faster)...Track class 1 0r 2?

I would push for at least class 2 track. Not only to go alittle faster but for the increased safety and reduced chances of pesky derailments and such. I'm a believer in keeping the physical plant in the best shape that is economically practical. I know my father in law is a qualifed welder with 30yrs experiance who's looking for a new job but dunno if he'd want that kind of relocation <smile>. (alot of welders in my wife's side of the family actually)

And I should say this thread gets my excitement up just talking about it.

WHOA there junior...

Why do we need higher speeds???

We don't. This is a common misconception outside the short line world. 10mph is just fine. I'd like to have better track but have you ever seen the difference between a 10 mph derailment and a 25 mph derailment?! The cost is at least triple to go along with the ugliness. Keep in mind that the 10 mph derailment is already gonna cost you $50,000 to $100,000 or more depending upon any number of factors. So, the 25 mph $150,000 to $300,000+ derailment expense will really put a damper on that balance sheet fast... I'd probably keep the track excepted too, even though maintained better as it tones down the FRA issues considerably.

LC

Ok, granted I don't know all the facts about this line but I was making some assumptions. But, I was equating this to the Wisconsin & Southerns class 1 track. It's from crappy ballast and really old 80-90lb rail. So they have been haveing all kinds of problems with like 3 times more derailments, snapped rail etc etc. And they've managed to get the state to sign a bill for $6million a year for 10 years to upgrade all of they're 640miles to brand new rail and class 2 specs. So that is where my thinking was coming from. Your right the faster you are going the worse an accident is, but I was just thinking of reducing the likelyhood of accidents, my bad. Because I had been given the impression that class 1 track was the swirling in the toilet bowl kinda line, sorry.

[tormadel]

Opps appearently I was tired when I posted earlier. My mistake, a roots blown would be a SD58 <blush> and I would have to guess that horsepower at like 2600-2700(& 16 cylinders). The SD59 would have a turbocharger but only the 12 cylinders.

[Anonymous]

Be offline for a day or so, keep the faith...

LC

[tormadel]

QUOTE: Originally posted by Limitedclear

Be offline for a day or so, keep the faith...

LC

Ok LC, have a good one. Hope to hear from you again soon

[Junctionfan]

Well.........depending on what kind of tonnage a train from those mines are, I have to ask if it would better to use 115lb rail. I just don't see a bunch of loaded quad or bethgon hoppers staying on track with under 115lb rail.

[edblysard]

QUOTE: Originally posted by Limitedclear


32 miles. 115# and 112# with some 100# in sidings. Jointed. 2 miles of 115# CWR.
timber ties. 6 bridges all steel. Ruling grade 0.7%. Max curvature 10 degrees. Runs along river. Interchange: NS and CSX. Paper barriers possible.

Employees: 4 T&E; 3 MOW. To be adjusted as required by growth.

Equipment:

Locomotives: 2 4 axle units(2000hp) and 4 six axle units (3,000+hp)

MOW: Hirail inspection truck, Hirail Boom truck, backhoe, tamper, regulator others as deemed necessary.

Andrew, note the rail numbers, 115#, 112# and 100# jointed in some sidings...
As long as you run at restricted speed, its a good track base...would have to see how it was maintained, but thats what mudchickens do!

[Anonymous]

An interesting thread.

If I were a potential investor the most important variable for me would be the ability to develop other customers along the line. The cardboard plant, as it was already pointed out, seems too "iffy" for me. The plant could close, depriving the short line of almost half its revenue. But if there was suitable land along the right of way which could be developed into an industrial park of some sort then there may be an additional source of revenue.

In my area short lines have to be creative and aggressive when it comes to potential sources of revenue. Purchasing, rebuilding and then leasing motive power is something one short line in my area does to increase its revenues. Other short lines have gotten involved in hauling construction waste from transfer stations they build and operate themselves. Team tracks are also used.

[MichaelSol]

I remain puzzled over the six engine, high horsepower requirement for a $1.2 million revenue railroad.

Here's why. Where I grew up, the Milwaukee had one switch engine, a little SW1200, # 627. It ran just about every day for the 20 years that I knew it.

Through that little switch engine's eyes, it "operated" a railroad just about 50 miles in length. It did a Missoula patrol every weekday and a Blackfoot run on Saturdays.

Every morning, after it had breakfast it went six miles east from the Missoula depot to the Anaconda Company's Bonner (AFP) mill. There, it dropped empties and picked up lumber and woodchips. It hauled these back to Missoula where it set off the lumber and proceeded west to the Intermountain Lumber mill where it picked up both woodchips and lumber. Sometimes there were chemical cars waiting there for Stone Container as well, from the previous evening's freights. The sidings at the Intermountain Mill (actually part of the Missoula Yard) were also the "Traffic Gateway" to the BN resulting from the BN merger conditions, and BN cars would be spotted off the BN's Bitterroot branch at that location, waiting for Milwaukee pickup, or delivered there by Milwaukee for BN pickup.

Chip cars spotted from the previous evening's DFW from the Deer Lodge LP Mill would also be at this siding, ready to be taken to Stone Container.

After pickup of those carloads, #627 backed up about half a mile and put the Intermountain Lumber Co. cars with the AFP lumber cars, then proceeded west again with the AFP and Intermountain woodchip cars fifteen miles out to Schilling, the Stone Container pulp mill yard. There, it dropped off the woodchips, and went around to the other side of the mill and gathered the finished product cars. It hauled these back east to Missoula in the afternoon. The Stone Container cars would be blocked in whatever order with the lumber cars, along with chemical empties from Stone, and placed for pickup by the evening west or eastbound mainline freights.

On Saturdays, it took the morning off and went up the Blackfoot branch, an extraordinarily scenic and easy trip of about 35 miles, to pick up lumber, woodchips, and in former days sometimes sheep, cows or hay. Sometimes an Elk or a Deer was known to ride the caboose back down to Missoula.

It did all this at a blistering 10-12 mph. Sometimes they got excited and would go 15.

Now, that single switch engine was the heart of a $7 million operation in the early 1970s. That's $26,219,269 in 2005 dollars.

That little 1200 hp switch engine earned its keep. Including empties, it was handling anywhere from 30-50 cars a day on a 50 mile long railroad. It finally wore out and was replaced by a MP15AC.

While on the one hand that $26 million spoke to both the value of Milwaukee freight on its Transcon and of course the long haul revenues of that freight, I am still not clear why a single 1200 hp switch engine would be able to haul nearly three times the carloads on a longer line, whereas 6,000 hp would be necessary to haul substantially fewer cars on a shorter line.

The difference is an operating cost of about $300,000 per year, and so the question goes to a signficant cost factor.

Best regards, Michael Sol

[tormadel]

QUOTE: Originally posted by edblysard

QUOTE: Originally posted by Limitedclear


32 miles. 115# and 112# with some 100# in sidings. Jointed. 2 miles of 115# CWR.
timber ties. 6 bridges all steel. Ruling grade 0.7%. Max curvature 10 degrees. Runs along river. Interchange: NS and CSX. Paper barriers possible.

Employees: 4 T&E; 3 MOW. To be adjusted as required by growth.

Equipment:

Locomotives: 2 4 axle units(2000hp) and 4 six axle units (3,000+hp)

MOW: Hirail inspection truck, Hirail Boom truck, backhoe, tamper, regulator others as deemed necessary.

Andrew, note the rail numbers, 115#, 112# and 100# jointed in some sidings...
As long as you run at restricted speed, its a good track base...would have to see how it was maintained, but thats what mudchickens do!

Hehe, hell yeah [:)]

[tormadel]

I'm not sure the answer there Micheal. But, I can't remember the last time I saw just a switch engine doing anything but jockying around a yard. Wisconsin Central runs around the valley here working paper mills and everything else with either a GP40, a pair of GP38's or a pair of GP40s. I've seen 2 '38s heading back to the yard with 12 cars, why that much for so little? I have no idea. Maybe they had alot more when they headed out. But also I believe in the mid 70's there you were still having a majority of 70ton cars, not the 100 and now 125 ton thugs you see today. Just my 2 cents.

[tormadel]

Well, I can see what Micheal is saying basically in the early years if revenue needs time to come up perhaps be more stingy with how much you spend on locomotive leases. But, on the other hand, if you short yourself too much power and have any problems you're service could suffer, and good service is the golden rule for survival here. We need to give our customers every reason to believe that we are the best choice for every<logical> shipping need. I can believe LC when he says good deals can be had on SD40's these days, alot of them floating around now. I could see the arguements for lesser power, SD38's or something, but would they really be significantly cheaper? (I don't think there was such a thing as a C23-7 build, and it would probably have some problems like the C30's LC refers too). I'm thinking for the coal hauling we're talking about SD9's wouldn't cut the mustard, or Milwaukee rebuilt SD18s or ICG SD20s. Also a question of what kinds of deals can LC get on longer term leases? Could these lesser units I'm talking about do the trick on a 1 or 2 year lease untill the new traffic warrents the SD40's? Could it be that in those couple years down the road that SD40's won't be available at such a good price? (The SD50 mention pique's my interest, I like alittle variety and something alittle different).

It would sound like that next good question is that trackage rights to the powerplant even a possiblity? We don't want to be choked by the class 1 being tardy about picking up our loads or doing they're share on the unit train. Is the power plant on the main line or another spur? Is purchase of the spur the powerplants on an option? (Class 1 may be more open in negotiation if they would have to short haul themselves otherwise) This could also be effected by the traffic density the class 1 has on these related lines. I'm sure they wouldn't want a shortline mucking around already congested pathways. Are we connecting to NS & CSX mainlines or branches?

[jeaton]

Looking at the comments Michael and LC have made on staffing, I'd like to add a couple things.

I am inclined to go with the idea that 5 managers (6 with the board member) might be taking too large a slice out of the revenue stream. I think that the organization might do without a Controller and function OK with an administrative/accounting clerk backed up by a CPA on retainer. However, if everyone on the management team is willing and able to perform everything from the most menial tasks on up, then I think the staffing can be justified. And when I speak of "most" menial tasks, I am thinking of things such as cleaning locomotive windshields, sweeping the office floors and hauling out the waste. Of course, a manager would set priorties for tasks from most important to least important, but if the five are not putting in about 250 hours on a slow week, staffing would need to be reviewed.

Fun thread, though.

[tormadel]

I doubt the boardmember(s) are going to work 50hrs a week for$5000 a year. But I would not worry about the others. Getting this company up and started, then keeping it alive will take alot of work. Given these officers back grounds I do not think it's likely that they would shirk they're responsabilites. There is no room in the budget for assistants or the office toady, so it seems set out to me that the whole staff is dedicated to rolling up they're sleeves and doing it all.

[MichaelSol]

QUOTE: Originally posted by SD38SD39locomotives
I used to do cost sheets like this. I'd get all the est. expenses wrapped together for operating costs, and then double it. Yep, thats right, DOUBLE IT! That would then be the est. operating cost.

This approach is accurate probably more often than not. But, that's why pro forma operating numbers for any business need to be worked and worked.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by SD38SD39locomotives
I used to do cost sheets like this. I'd get all the est. expenses wrapped together for operating costs, and then double it. Yep, thats right, DOUBLE IT! That would then be the est. operating cost.

This approach is accurate probably more often than not. But, that's why pro forma operating numbers for any business need to be worked and worked.

Best regards, Michael Sol

Hi Mike,
I couldn't agree with you more. The numbers always have to be being worked and worked. It's a never ending job and a necessity. Plain and simple. The scheme of kicking the op. costs by double, just gives a nice blanket to be able work those numbers without even giving the chance for everything falling apart out of the gates. I don't care how talented a controller / accounting team is. I want the security blanket. For one thing, because I've seen too many so-called "professional" operations fall apart in the past around this part of the country. Including a company my dad worked for. Look no further then Enron of all things, to put a face on the phrase -so-called professional operation-. Now I'm more conservative then liberal, when it comes to talking about money, but my view is this: if you don't have the costs liberally covered with some slack to go along with them, might as well not bother with even going into business then. Thats just my way of doing things business wise. And it's worked for me too in real life. And I had to learn this the hard way, so it's beaten into me now, which I consider a good thing. The phrase 'if it ain't broken, don't fix it' does actually have some meaning to it. And this way of doing things for me ain't broken, so I'm not going to try and fix it. God's Peace

[Anonymous]

QUOTE: Originally posted by tormadel

I could see the arguements for lesser power, SD38's or something, but would they really be significantly cheaper? (I don't think there was such a thing as a C23-7 build, and it would probably have some problems like the C30's LC refers too). I'm thinking for the coal hauling we're talking about SD9's wouldn't cut the mustard, or Milwaukee rebuilt SD18s or ICG SD20s. Also a question of what kinds of deals can LC get on longer term leases? Could these lesser units I'm talking about do the trick on a 1 or 2 year lease untill the new traffic warrents the SD40's? Could it be that in those couple years down the road that SD40's won't be available at such a good price? (The SD50 mention pique's my interest, I like alittle variety and something alittle different).

It would sound like that next good question is that trackage rights to the powerplant even a possiblity? We don't want to be choked by the class 1 being tardy about picking up our loads or doing they're share on the unit train. Is the power plant on the main line or another spur? Is purchase of the spur the powerplants on an option? (Class 1 may be more open in negotiation if they would have to short haul themselves otherwise) This could also be effected by the traffic density the class 1 has on these related lines. I'm sure they wouldn't want a shortline mucking around already congested pathways. Are we connecting to NS & CSX mainlines or branches?

Heres one simple beauty about SD40s and shortline start up: If you get a good deal on 1 or 2 or 3 or how many involved. And if the per-axle weight of them is reasonable for the line being purchased. And you buy them, and then turns out ya got too much juice for the operation, then what was originally estimated/planned. Ya go the deturbo route. Now about this comment of SD9s not being able to cut the mustard? Examples are still ABOUND, of SD9s cutting the mustard to this very day.
And older SDs are pretty darn cheap these days, but the loco market is always a changing. Right now, serviceable SD40-2s can be had for deluxe pick up truck prices. But after watching ( and studying the past history of the diesel loco market for 15 years now ), there are no guarentees on the used loco market prices. The only guarentee, is that used locos ( especially and most practicaly EMDs ) can be rebuilt, upgraded, and modified. And last I knew, there were only roots blowers available for HP capacity of only up to 3000horses. But with a flood of SD50s on the market, and they are out there now indeed, deturbo'd SD50s could be more attractive and practicle to the shortlines, bantam shortlines, and regional roads.

[Anonymous]

QUOTE: Originally posted by SD38SD39locomotives

because I've seen too many so-called "professional" operations fall apart in the past around this part of the country.

I need to quick rephrase my post. I meant operations as in businesses in general.