Initial steps to judge the feasibility of acquiring a short line?

Trains Magazine General Discussion
1

Long time listener, first time caller.

As the title states, I am in the preliminary stages of studying the feasibility of acquiring a local short line. I am trying to figure out what I need to read and research and who exactly to contact to get the ball rolling in the right direction.
The various forums I’ve read are very helpful, but it seems most suggestions go straight to the more mature steps, i.e., contacting customers for shipping forecasts, joining ASLRRA, hiring good employees, budgeting maintenance/payroll.
Ditto the STBs “So you want to start a small railroad”. It explains the purchasing process and related laws and regulations surrounding such transactions but nothing on how to get to that point.
What should be step 1, step 2, etc.?
Price and funding source is a big hurdle right off the bat. I can’t imagine cold calling the railroad that owns the line asking for a price with no immediate plan for purchase. I also can’t imagine putting months of research into the market conditions, rules, and regulations only to find out the railroad isn’t willing to sell or holds a firm over-valuation of the line. What does a private appraisal typically cost?

2

Suggest you contact the principles in ‘East Terminal Railway’

https://www.youtube.com/watch?v=ulYMoZYYA3E

They are undertaking a similar project.

3

Some simple observation might answer some of your questions.

Who are the shippers/receivers? How much traffic do they appear to generate?

Is there the potential for more traffic? Are there potential customers already in place? Is there space to add more customers? Is there local demand for the products and services they may provide?

Consider the current company. Are they independent, or part of a larger organization (ie, GVT, G&W, etc). What does the plant and the rolling stock look like? Well maintained or suffering from deferred maintenance?

Are they actively trying to sell the property, or are you looking to buy a healthy property? If they are trying to sell, why? Local scuttlebutt can be telling.

Check your local tax maps. What are the property taxes?

You can learn a lot before you ever contact them directly.

4

I have been following them since the beginning but never thought to contact them. Thats an excellent idea. The scope of the line in question is a touch different than their situation, and I will explain below. But the root startup procedure is probably very similar.

[quote user=“tree68”]

Some simple observation might answer some of your questions.

Who are the shippers/receivers? How much traffic do they appear to generate?

Is there the potential for more traffic? Are there potential customers already in place? Is there space to add more customers? Is there local demand for the products and services they may provide?

Consider the current company. Are they independent, or part of a larger organization (ie, GVT, G&W, etc). What does the plant and the rolling stock look like? Well maintained or suffering from deferred maintenance?

Are they actively trying to sell the property, or are you looking to buy a healthy property? If they are trying to sell, why? Local scuttlebutt can be telling.

5

Sounds like the old Pittsburg and Shawmut.

6

You would be correct

7

East Terminal Railroad is an accident looking for a place to happen.

Start with things like the STB, ASLRRA , FRA and AAR basic instruction publications before going off to play with the shiny toys. Starting a shortline requires building a qualified team to cover all the bases.

8

I appreciate the advice. I dug deeper into the ASLRRA site and found the webinar subscription. I will definitely start there.

9

Hey, they just began replacing (a handful) of their ties.
If you mean physically, they (Brian, Graham, and whoever else) do know safety around rail oerations as their full time business is attending to railcar issues (they have shown this a few times, such as repairing a boxcar door that fell off or rerailing a covered hopper under which the track spread).
Now, if you mean finanically, well, maybe - I believe that section of track went inactive in 2012 when the Ball company can plant closed (IIRC the “South Yard” they talk about were the sidings to that plant). Now, Brian keeps talking about restarting service to Orlando Bakery and perhaps the company that uses carbon black, but then why didn’t the Ohio Central system try this in the years prior?

10

So?

They have yet to get through even the basics of FRA/STB/AAR/OH-PUC reporting compliance. It isn’t showing up where one would expect to find it.

All they are right now is a glorified industry track owner. They are more like a contractor (derailment & mechanical) with a few non-main track storage tracks that they happen to own. Maybe a few Code-1s (at $10K a pop) from FRA or Ohio PUC with a court order shutting them down will get their attention. (hiding behind a shortline with its own shortcoming isn’t helping the situation … FRA will probably get in their business first)

Show me the STB finance docket where they even have the basics covered to operate as a railroad capable of interstate commerce. Not sure if AAR even knows who they are. Operating certificate? Interchange agreement?

11

Asking as someone with no legal training, but who is curious -

If they are currently just a glorified industry track owner, what jurisdiction does the FRA have over them?

12

Well, just taking Brian’s statements over the past 15 months or so at face value:
Scenario A) They just end up using the ETR trackage for rail-car storage, interchanging with (what I think is) the Ohio Central (OC) system at the north end of their line with their pride and joy GE 2021. No service to any on-line/tranload clients.
Does this require less STB/FRA et.al. approvals than…
Scenario B) They service on-line clients - they get Orlando back on line, they get Jacobi Carbons, maybe they get a contract to service Amcore Plastics (it was a bit vague when they discussed this during the ‘measuring the ETR’ episodes), maybe the mysterious client looking to locate on-line that they mention in this week’s video (its Elon Musk, the answer nowadays is always Elon Musk [%-)]), they get that pole transload yard, and so on…now you have real clients requiring interchange revenue traffic with other railroads. What are the minimum set of requirements needed for that?

13

Becoming a “real” railroad is going to put a damper on their vlogging, too.

14

Tale of a Masochist, in search of sadists…

Next step will be to plant an orchard of money trees in your back acreage…You may start off with George Washingtons but your second crop will need to be Benjamin Franklins; or better![:-^]

P.S. Wish you all the best, maybe you can win the next Lottery… [4:-)]

15

I’ve always thought that it’s nice that they have a hobby. They should be alright keeping their activities within their own and railroad customer trackage. Their problems would come with connecting to a real railroad or with having rolling stock certified for interchange. Kinda like a 1:1 model railroad.

Rick

16

Well I appreciate the words of encouragement! But it is noted. A PowerBall win would definitely get the whole plan kicked into gear quite nicely. As I stated above I’m well aware this could be an impossible endeavor. I’ve just seen quite a few startups that started from humble roots instead of robber barons, and was curious to the how of the accomplishment. Not looking to get rich, just make a living, help the community and preserve a little bit of history.

Plan B involved getting a group together to start a nonprofit and attempt to get ahold of the severed northern section located in the county seat, that holds the shops and yard, with a nice viaduct that connects to an overflow yard that still has the original scalehouse. 4 miles of track or so and a historic shop complex would make a nice little working historical attraction. It connects to the G&W in the largest city in that county through an ex Pennsy/Conrail line that winds about 20 miles through wild creek valleys with several trestles. The shops were used by the G&W until the mid 2010s when they consolidated them to another location. Now it is used to serve to a locomotive company next to the shop complex. Down the road I could see the potential for mileage excursions over that line that is used for little else.

I’d still prefer option A to benefit the community b

17

Your track is connected to the interstate commerce (rail) system. Anything coming or going is subject to FRA/STB/PUC/PHMSA rules and inspection. Track safety, inspection, operation and geometry rules apply to the private track owner (not exempt). PUC/RR Commission will enforce clearance and crossing rule (by memorandum of agreement letter between each state and FRA). As a track owner/operator, they can be fined or shut down like any common carrier. (“I dunno” does not fly with FRA or the state agencies (PUC et al), especially where there has been an incident, fatality or injury…railroad is only responsible for inspection to division of ownership in its reporting, but railroad inspectors will call out defects anywhere they see them, any discipline.)

Bubbawits in Columbus is in really deep doo-doo if he misrepresents himself as a railroad doing inter- or intra-state business and can’t back up the claim with the appropriate documentation. The question is which agency will do the biting. (and is it straying into the fraud statutes?) … Several freshly minted shortlines have been shut down by FRA for basic compliance failures.

Several shipper industries decided to incorporate as railroads to bypass local NIMBY/BANANA regulation and then discovered a new set of headaches they had not counted on. (the grass is NOT greener on the other side of the R/W fence)

18

If I recall correctly the rule of thumb for success of a shorltine to make it financially is 100 cars per mile per year.

Are there transload opportunities to expand the customer base?

How often can you interchange with the Class I?

Can you store cars on the stub end of the line?

Can you access any State of PA grants for some of the needed ongoing track maintenance?

How much cash will you have available at startup?

How large of a locomotive will you need to lease to operate the line? Can a 1,500 HP locomotive such as an old GP9 make it work or do you need something larger like a GP-38?

Where will you get it serviced and inspected?

Who will handle your accounting?

Who will handle your legal filings for the purchase?

Are you able to get insurance?

There will be 1,001 more questions you will have to answer.

I have not ever bought a railroad but I have worked in finance all my life and of course, revenue is king, but also as a startup you do not want to get overextended on your capital cost payments.

Watch the expenses, pinch pennies and don’t get overextended to the bank.

Wishing you good luck and the fates smiling upon you!

19

Multiple trestles will also add greatly to your MoW costs.

20

[quote user=“kgbw49”]

If I recall correctly the rule of thumb for success of a shorltine to make it financially is 100 cars per mile per year.

Are there transload opportunities to expand the customer base?

Indeed, as I mentioned in my not so short story above, the active portion of the line includes a yard and light facilities with a set of team tracks for transloading, located within minutes of major East/West and North/South highway interchange. There is also a large intermodal facility at the southern end that is truck/river/rail served.

How often can you interchange with the Class I?

Im not sure at what rate interchange would be done with the Class 1. The G&W interchanges with them at a few other points on the system, I imagine we would have to underbid the G&W to capture some traffic that would otherwise be routed further north. As far as prompt service, the Class 1 switches the intermodal facility daily, according to their website.

Can you store cars on the stub end of the line?

Indeed, there is 8 miles of track beyond the last customer that is stub ended. A further 3 miles still appears on the latest route maps but the rails are lifted and have been for roughly 8-10 years probably due to deterioration of the tunnel that accesses that section of ROW.

Can you access any State of PA grants for some of the needed ongoing track maintenance?

Great question and part of the information I’m attempting to gather here!

How much cash will you have available at startup?

Again, I’m not independently wealthy, unfortunately. I’m a solid median income earner with roughly 40k in liquidable assets. As such I did propose the question about funding sources and methods.

How large of a locomotive will you ne