County ties rail upgrade to funds

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Tulare County is moving forward with plans to upgrade short line railways between Exeter and Dinuba following an announcement of a grant to cover the costs.

At its Sept. 11 meeting, the Tulare County Board of Supervisors announced the County was approved for a $1.5 million Congestion Mitigation Air Quality (CMAQ) grant to make rail improvements to the line of the San Joaquin Valley Railroad (SJVR). The grant would replace 13,300 railroad ties and resurfacing of the rails with ballast along the 9 miles of track. In an August interview, Tom Sparks, chairman of the Tulare County Association of Government’s (TCAG) Rail Advisory Committee, said CMAQ funding would cover about two-thirds of the cost of the upgrades. RailAmerica, the parent company for SJVR, is in the process of being purchased by a larger railroad company and both companies have agreed to pay the remainder of the funds for the upgrades, according to Sparks.

At the meeting, the Board of Supervisors voted 4-1 to approve an agreement with TCAG for $25,000 to provide administrative services and oversee the grant. Under the agreement, the County’s Resource Management Agency will insure the work is being performed in accordance with the requirements of the grant, process contractor invoices for work completed, submit invoices to the federal government for reimbursement, prepare all necessary documents and close out the grant. The County will then submit monthly invoices to TCAG for oversight.

The lone dissenting vote was Supervisor Phil Cox, who wanted to remove the item from the Consent Calendar and discuss possible legal issues in closed session. Cox has been opposed to using public money to help the railroad fund improvements they should be making themselves. The board decided to move forward with the vote.

Sparks said the second phase of upgrades to the Exeter-Dinuba railway would be to upgrade the outdated 70-pound rail to the modern standard of 110-115-pound rail and repair trestles and culverts crossing creeks and wash out areas.

Genesee & Wyoming Inc. (GWI) announced in July it would acquire RailAmerica for $27.50 per share in cash. RailAmerica owns Exeter-based San Joaquin Valley Railroad which operates the short-line railway from Strathmore to Dinuba. RailAmerica abandoned the east side railway from Strathmore south to the county line in 2008 and attempted to close the section from Exeter to Dinuba as well.

The transaction, which is subject to Surface Transportation Board (STB) approval, would combine North America’s two largest short-line holding companies, which control 108 railroads. RailAmerica owns and operates 45 regionals and short lines in the United States and Canada; GWI owns and operates 63 regionals and short lines in the United States and Canada. STB is an independent quasi-governmental body that oversees rail abandonment, mergers and rates.

GWI expects to fund the transaction and the simultaneous refinancing of its existing debt with about $2 billion of new debt and $800 million of equity or equity-linked securities. The company expects to close the transaction into a voting trust as early as the third quarter while it awaits formal STB approval. The board’s approval could be issued as early as the fourth quarter but could be delayed until third-quarter 2013, GWI officials said.

SJVR’s eastern line reconnects with the western line in Exeter and the splits off to service Ivanhoe and Dinuba to the north and Visalia and Goshen to the west. The SJVR operates 417 miles of track in Southern California. SJVR interchanges with the Union Pacific Railroad at Fresno, Goshen Junction and Bakersfield and the Burlington Northern Santa Fe at Fresno and Bakersfield.

TCAG’s efforts to preserve the railway have failed, mostly due to RailAmerica’s lack of interest in investing in upgrades. The last deal between TCAG and RailAmerica fell through in October. During a Tulare County Board of Supervisors meeting last October, Supervisor Allen Ishida reported that RailAmerica, the company that operates the 9-mile stretch of rail from Exeter to Dinuba, had reneged on a promise to cover a quarter of the cost to upgrade the railway.

Ishida said TCAG had applied for an $11 million TIGER grant to cover 75% of the project. The Transportation Investment Generating Economic Recovery (TIGER) funds were part of the 2009 federal stimulus package providing more than $1.5 billion in grants to transportation agencies and state and local governments for surface transportation projects.

Rail America attempted to abandon a 9-mile stretch of railway from Strathmore to Exeter in 2008 but was denied Surface Transportation Board (STB) citing SJVR’s own evidence that Tulare Frozen Food (TFF) in Lindsay had increased its traffic on the Line dramatically since 2005.

In addition, TFF provided evidence that there would be a substantial increase in traffic once its new storage facility is completed. However, Ishida said the high cost of continuing rail service through SJVR was a contributing factor that led to TFF’s closure last July. The spinach processing plant is highly dependent on rail transportation for delivery of frozen spinach and greens to distant markets on the East Coast and in the Midwest and South, but could not afford the surcharges over the freight rates. Ishida said without one of its largest users, he fears SJVR will attempt to abandon the line again.

The only segment of track that SJVR has been successful in abandoning was a 30-mile segment from Strathmore to the Tulare-Kern county line, known as Jovista. SJVR discontinued service on the line on Sept. 15, 2008. The tracks have since been pulled out and sold for scrap.

Regardless of past plans of abandonment, GWI seems prime to revitalize the track or at least work with TCAG to upgrade the lines in an effort to operate them, according to statements regarding the acquisition of RailAmerica.

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