[audio:SenateHearingRailLink.mp3]According to testimony before the Oregon State Senate Finance and Revenue Committee regarding HB 3276 which will exempt the Coos Bay Rail Link, purchased from RailAmerica by the Port of Coos Bay, from property taxes and forgive a $183K tax bill owed to the Coos, Douglas and Lane Counties. Attending the meeting were co-sponsors Representative Caddy McKeown and Senator Arnie Roblan and representing the Port was Martin Callery. Callery testified that the Port has spent more than $30 million in addition to the $16.6 million acquisition price to refurbish the line with public funds, “federal or state grant monies”. “We are near the end of much of the rehabilitation,” claims Callery, before contradicting himself. “But we still have a lot left to do, ah we have a lot of bridges and a few more tunnel issues to deal with.”

McKeown, who sat on the port commission during the acquisition of the rail line tells a story about when the previous owner embargoed the line. “RailAmerica was purchased by a hedge fund and – called Fortress, and when the economy tanked in 2007 Fortress found itself in very difficult financial conditions and started liquidating assets, so they ah, just opted to – in fact they had regulations in place that required them to give our shippers 120 days’ notice to close the line and they did not, they closed the line in one day with no notice to anyone…”. At this point it should be noted that a condition of the port receiving $5 million of $60 million in dredging funds was a contract with a container shipping operator and a railroad.

4)(a) Prior to the distribution of bond proceeds described in section 13 (2)(a) of this 2007 Act, the primary sponsor shall provide to the director a budget document outlining expenditures for the Coos Bay Channel Project and verify and certify to the director that:
(A) The primary sponsor has entered into a commercially reasonable agreement with a cargo terminal developer to construct and operate cargo terminal facilities on the Coos Bay channel; [emphasis mine]
(B) The Secretary of the Army has authorized the performance of environmental studies on the channel pursuant to section 203 of the Water Resources Development Act of 1986 (P.L. 99-662); and
(C) The cargo terminal developer has entered into, or made appropriate progress in negotiations toward, a contract with rail service providers to ensure adequate rail infrastructure and service capacity to serve the cargo terminal facilities to be developed as part of the Coos Bay Channel Project.

The port met neither of these requirements but told the Commerce Department they had and promptly spent the $5 million the day after the embargo. Approximately half went to David Evans and Associates for an EIS report on the dredging but to my knowledge, even though this money was spent in 2007, the report has still not been made public. You may read an account here

Not to defend RailAmerica but the company actually did give warning of the embargo. RailAmerica approached the State after Weyerhaeuser shut down to request $7 million in funds to repair the tunnels but was accused of not properly maintaining the line and rebuffed. RailAmerica may well have deferred maintenance to improve its quarterly returns to its investors, unfortunately companies do that all the time, like PG&E and its exploding pipelines as an example. However, when the last major shipper dropped off the line there is no requirement that the company operate at a loss. RailAmerica determined the line would not be able to operate at a profit but deferred its decision because the port led it on with claims that APM Terminals was serious about establishing a container terminal on the North Spit. Once the company saw the actual “agreement” it decided to check its losses and shut down immediately. All this happened under McKeown’s watch who now says we need to “plow” as much money as we can into this rail line.

McKeown claims there are “eleven or twelve” shippers using the line although only four or five move significant quantities. Basically, the port has invested $47 million to date to assist five local shippers or $9 million apiece and it isn’t through yet. Neither Roblan nor McKeown’s testimony offers any specifics about why they are convinced, where RailAmerica wasn’t, that continued investment in this line is going to pay off for the taxpayer. The duo claim that up to 500 rail cars will traverse the line beginning next month and that each shipper is paying a surcharge to help pay for the future improvements of the line but no specifics are provided to allow for an informed decision.

The projected fiscal impact of this bill is $500K over the next ten years, or per biennium depending upon who is speaking during the hearing to be borne by the counties. It should be noted that the previous owners did pay property taxes on the line.

To date, the legislature has given the port a free rein and trusted in the government appointed commission to provide oversight. Unfortunately, oversight is non existent and the port continues to operate with a “build it and they will come” approach to development that permeates the minds of people using other peoples money.

The committee members can be contacted through this link. Tell them that we want a full accounting of the monies spent by this port over the last twenty years in the name of job creation and ask the co-sponsors to provide an actual business plan or analysis documenting the expected rate of return to the taxpayer before they plow any more money into the port projects.

UPDATE HB 3276 passed through the Senate Finance and Revenue Committee hearing with a due pass recommendation. McKeown attended the hearing but wasn’t required to speak.