November 23, 2006 in City

Railing against the costs

Richard Roesler Staff writer

Public or private?

Under a complex deal intended to keep rail service running on the Palouse River and Coulee City Railroad lines, Washington state has bought – or is buying – the private company’s hundreds of miles of track. For now, however, the short-line railroad retains its operating rights to run trains on those lines. The state is negotiating to buy those operating rights. Once that’s done, Washington lawmakers must decide whether to run a state-owned rail system, lease the lines to a port or other public entity, or “railbank” the tracks by halting service and preserving them for possible future use.

OLYMPIA – Two years ago, moved by pleas from grain growers and local communities, state lawmakers spent $6.5 million to buy about 200 miles of Palouse River and Coulee City Railroad line. The state is now negotiating a price for the final 108 miles of the ailing railroad’s track, with a deal expected by January.

Growers argue that the line is critical. “If the rail was not there, the people that would suffer the most would be the farmers,” said Bob Holmes, general manager of Whitman County Growers. “The whole economy in our part of the state is based on agriculture. It’s substantial. If all of a sudden you make it so the farmers all go away, so will half the towns in Eastern Washington.”

But buying the tracks, it now seems, was just a down payment. A study last year suggested that unless grain growers or other users boost their rail shipments and thus revenue to levels not seen in years, significant parts of the system may never become self-supporting. Keeping the railroad running, the Washington State University report said, may require “continuous state investments” of $500,000 to $1.4 million a year.

The predicted cost is even higher in a new state Department of Transportation study, which a few lawmakers learned about in September. Over 15 years, it said, taxpayers will spend between $41 million and $49 million to keep the struggling short-line system alive.

Barbara Ivanov, the state DOT’s freight strategy director, alluded to those looming costs during a September Senate hearing in Spokane.

“I want to point out,” she said, “that annual track maintenance and any ongoing state subsidy are not included in the current state budget.”

“It got my attention,” state Rep. Alex Wood, D-Spokane, said of the new study. “If the state is going to step into that, how do we pay for it?”

Run it or mothball it?

Last year, the rail system’s Kansas-based owner, Watco, said it couldn’t keep losing money on parts of the system. In December, the company halted shipments on a branch west of Spokane. Service was restarted only after the state complained to federal regulators. Now that the state’s taking over the track and the operating rights, lawmakers have to figure out what to do with the system.

“We have to make some tough decisions,” said Wood. “Do we subsidize it? Do we take it over as a purely state entity? Do we do a public-private partnership with someone?”

The state has committed itself to buying the old tracks to prevent them from being torn up. But it hasn’t committed to keeping the lines going over the long term. The state has a “rail-banking” program, in which it buys lines simply to preserve them for a potential future use. “You can purchase to preserve,” said Scott Witt, DOT’s freight multimodal program manager. “You don’t necessarily have to operate.”

Seeking self-sustenance

Wood said that some Western Washington lawmakers are floating the idea of ending rail service on parts of the PCC line in hopes of spurring local growers into committing to more shipments. Wood opposes that but predicts “a lot of interesting discussions” about the railroad’s fate when lawmakers convene in January.

“It’s just like the ferry system: How in the hell do we make this self-sustaining for the next 20 years?” Wood said. “And I don’t have the answer.”

It didn’t help matters this August when a combine-triggered brush fire near Colfax torched a 200-foot, decades-old wooden trestle on a southern part of the system.

Initially, proponents had hoped the state would improve the old track enough to run trains at 25 mph, instead of the current 10. That efficiency would mean lower costs, they predicted, and more business for the struggling lines.

But doing so would take considerable track work, Witt said.

“The odds are it will never be up to 25 mph,” he said. “It would take a lot more money and a lot more customers.”

Rail versus roads

From the start, a key argument for the state’s purchase of PCC’s decades-old rail lines has been pragmatic. Without rail, proponents said, the region’s roads would crumble as more trucks haul grain and lumber to barges or distant rail loaders. Keeping these short-line tracks running, it seemed, would cost less than forever rebuilding the roads.

But maybe not.

A new study by a DOT-hired expert on pavement and grain shipping suggests that it would be cheaper for taxpayers – a lot cheaper – to let the rail service on some branches die away and just keep fixing the truck-scarred roads forever.

Take the so-called P&L branch, a stretch of track that runs from the Marshall area south to Pullman, plus a short spur into Idaho. Over 15 years, the DOT study says, the public cost of keeping that line going will be $14 million to $17 million. Fixing local and state roads, on the other hand, would cost just $2.5 million.

The projections were equally as stark for a second stretch of state-owned track: the three-legged “PV Hooper” branch, which stretches from Hooper to Thornton to Moscow, Idaho. The 15-year rail cost: $9 million. Fixing the roads: $2 million.

The only place where the rail-versus-roads savings assumption held true, according to the study, was on the third branch of the system. The CW line runs from Cheney to Coulee City. Rail cost: $18 million to $24 million. Road cost: $18 million to $45 million.

Impact of competition

Growers and some local lawmakers say the benefits of keeping the rail service alive extend far beyond pavement.

“Obviously, you have to look at the financial costs, but when you add that number of grain trucks to all the other trucks on the road, look at the traffic numbers,” said House transportation committee member Rep. Lynn Schindler, R-Otis Orchards. Without the railroad, she worries about highway safety and gridlock during harvests.

And until 1999, according to a WSU study this spring, competition between barges and rail kept rail shipping rates at 1930s prices. If the option of rail shipment disappears, some growers worry, truckers and barges will have less reason to hold their rates down.

“Any time you do away with an alternative, you are certainly going to increase the cost of the other alternative. … I really would not want to lose that (rail) option,” said Holmes.

The seemingly obvious solution – make the short-line system self-supporting by using it more – is more complicated than it sounds, he said. The mainline railroads like BNSF Railway Co. could kneecap any such agreement simply by raising their rates to accept those short-line rail cars and avoid the inefficiency of repeated stops for small loads.

And Ivanov told a Senate committee this fall that the national rail trend is toward large, long-haul “unit trains” with a single commodity. It’s harder and harder, she said, for small shippers to get a few carloads accepted by big railroads. Soaring rail volume has put rail space at a premium. Low-volume shippers of wheat, apple, potato and wood-products in Washington are left struggling to adapt to what she called that “fundamental change” in BNSF’s and Union Pacific’s business model.

Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email