Small Towns Hope State Saves Railroad; Decaying Line May Not Be Economically Viable; But To Region, PCC Is A Lifeline

From the "Spokesman-Review."

August 18, 2003

Long gone are the elegant passenger trains that once trundled West Coast-bound merchants and adventurers across Oregon's sagebrush scrub and north through the rolling hills of the Palouse.

But those Palouse rails remain, some dating back to the 1890s. They carry only an occasional train now, usually grain cars creeping across decaying ties and decades-old trestles.

Two years ago, the Palouse River and Coulee City Railroad (PCC) warned state officials that it would have to abandon "significant sections" of its 372-mile network by 2006. The line wasn't making enough money, the railroad said, to cover maintenance costs and the debt from buying the lines in the mid-1990s.

The prospect of losing the railroad has alarmed many in the small towns the rails serve. Grain growers, seed companies, farm chemical dealers and even an Idaho sawmill rely on the line to ship their goods.

"It was a definite panic button," said Pam Kelley, an economic development consultant for Lincoln County. The rail line, she said, "is the lifeline of this region. If we lose it, we're sunk."

That message apparently was received in Olympia. This spring, state lawmakers approved several transportation tax increases that will raise $4.1 billion over the next decade. Included in the spending plan: $7.4 million to buy 302 miles of the PCC railroad this year. The state also is setting aside $8 million in 2010 to repair bridges and reinforce track so the line can carry newer, heavier cars.

It's not a done deal, however. For the past several weeks, state technicians have been inspecting hundreds of miles of track and combing the railroad's books, trying to ensure that buying the rail line - or parts of it - won't turn into an expensive albatross around the state's neck.

"We fully understand that this is the people's money," said Stephen Anderson, rail services manager for the state Department of Transportation.

"There's a lot of political pressure for the acquisition. But if it goes into the red, how do we explain to taxpayers that we've bought something that's (subsequently) running in the red?" said A. Michele Maher, a Spokane freight consultant and a member of the state transportation commission.

Washington has bought decaying rail lines before, but never one this big. The results have been mixed.

In the mid-1990s, the state bought a 25-mile stretch of track between Othello and Royal City, and another 20 mile line from Toppenish to White Swan. The Othello-Royal City line died anyway, although another railroad has now offered to restore service. The Toppenish-White Swan track has flourished, spawning two new sawmills.

All along the PCC line, companies and towns are waiting to see whether the state will save the railroad.

In Idaho, Brett Bennett's family sawmills have relied on trains for decades. A PCC line stretches eight miles into Idaho, to Bennett's sawmill in Princeton.

"It's a vital connection to the world," he said. The mill ships three to five carloads of finished lumber per week, much of it heavy white fir too expensive to truck. The lumber goes throughout the American southeast; train cars full of the mill's shredded bark decorate suburban landscapes in Colorado.

Bennett said he didn't know the PCC railroad was struggling until this spring, when a Latah County commissioner mentioned it.

"Somebody should have told us," he said. "We'd have been beating that drum harder."

He's seen a rail line dry up before. The family's Grangeville mill recently lost its rail connection. Now the planed lumber is trucked to Kooskia, then put on a train - all of which drives up the price of the family's lumber.

A hundred miles to the northwest, entrepreneur John Graff feels the same worry. Graff is about to start a livestock food-supplement plant at Creston, in Lincoln County. That means bringing in railcars full of Midwestern corn, soybean meal and molasses on the PCC line. It's blended into nutrient-rich feed for cattle, horses, hogs and chickens, then shipped back out on rail.

If everything had to come and go on trucks, Graff said, the expense would shut down half his operation.

"I'm a free-enterpriser, so I don't like state involvement in anything," he said. "But making sure this line is going to be here is a good thing for us."

Is it also a good thing for Washington taxpayers? A state Department of Transportation report in February painted a pretty grim financial picture for the PCC. Due to grain-shipping competition from Columbia River barges and millions of dollars in backlogged maintenance, the report concluded, much of the line was "not viable in the long run."

But proponents of the deal argue that an injection of state cash would turn things around. Watco, the Kansas-based company that owns the PCC railroad, wants the state to buy the tracks and lease them back to the company, which would continue to run the trains. That would ease the company's debt load.

If the state then, as planned, pours millions of dollars into upgrading the track, trains could run faster and pull bigger cars. Those efficiencies, Watco argues, would sharply reduce operating costs and make the line profitable.

"This is not one of those `60 Minutes' deals where the state buys a pig in a poke," said Ed McKechnie, Watco's vice president for strategic development. "It makes sense for the state to buy it, and I think it will."

He wouldn't say what Watco paid for the tracks when it bought them from bigger railroads in the mid-1990s. But he said Watco's asking price - about $10 million - is just the scrap value of the steel and the wooden crossties. The state agrees with that assessment.

Proponents also make a flip-side argument: If the state doesn't save the railroad, truck traffic would surge. Highways would crumble faster. Trucking companies, with less competition, would likely raise rates. And businesses and jobs would disappear from already- struggling small towns.

State transportation analysts agree. The PCC railroad keeps more than 29,000 heavy truckloads off state and county roads each year, the February report concluded. Losing the rail line, analyst Ray Allred said, would annually cost local shippers $2 million more, cause $4 million more in damage to state and county roads, and erase $6 million worth of local jobs.

The Department of Transportation's advice to state budget writers was simple: buy it.

"All forms of transportation get some form of public subsidy," said Anderson, the state rail manager. "The highways have all been paid for by taxpayers. And there are legitimate public values to having these railroadsout there."