Thursday, December 17, 2015

Washington State Department of Transportation Continues Palouse River, Coulee City Railroad Analysis

WADOT news release from March 3, 2006.

The Palouse River and Coulee City Railroad's CW Branch, which runs between Cheney and Coulee City, has consistently run fewer carloads than needed to cover its operating costs and pay for annual railroad maintenance, according to a report conducted by Washington State University under contract to Washington State Department of Transportation.

WSDOT is working closely with legislators, other officials and stakeholders to support informed policy choices for the PCC Railroad. In late 2005, WSDOT contracted with WSU for an analysis of:
* The CW Line market: current and potential
* The impacts to state highways and county roads if the CW Line was no longer operational
* Financial results on the CW Line in 2005

The WSU market analysis of the CW line, which is owned and operated by Watco Company/Palouse River andCoulee City Railroad, Inc., also found that the most probable operating scenario is that the line will continue to be marginally profitable or unprofitable depending on shifting market conditions and shipper commitments. That leaves ownership of the line - whether by Watco, the state or a port entity - requiring an annual operating cost investment to maintain the rail line.

"The shippers we're working with know that they need to make carload commitments on the CW line, and this report supports that," said Barb Ivanov, WSDOT Freight Strategy and Policy director," said Barb Ivanov, WSDOT Freight Strategy and Policy director.

WSDOT negotiated with Watco, the railroad owner, to buy all three segments of the PCC lines for $7.998 million, which included cash and forgiveness of existing rehabilitation loans. The $6.486 million purchase of the P&L and Hooper branches, funded in the state's 2003-2005 budget, was finalized in November 2004.

Unfortunately, the remaining funds needed to finalize the deal for the third segment were not available at that time and were included in the state's 2005-2007 budget. WSDOT and Watco had completed all draft documents and intended to finalize the purchase of the CW branch in September 2005. Then, Watco withdrew its offer to sell the CW line on Sept. 13, 2005.

Meanwhile, Sen. Bob Morton, R-Orient, said BNSF Railroad issued a written offer to Watco on March 2 offering to provide haulage on the CW branch for a period of up to five years. BNSF said the offer would remain on the table for 45 days while the two companies work out a formal agreement.

WSDOT has ordered three separate, independent appraisals of the CW branch's Net Liquidation Value (NLV). The first appraisal by Cahill and Associates set the NLV at $1,397,458, as of February 8, 2006. The other two appraisals by HDR and Railroad Industries will be completed and reported to stakeholders by March 10. WSDOT recently sent a formal request to Watco to provide current net liquidation value, supporting information and a description of the CW line and any appurtenant facilities by April 1, 2006.

The WSU market and pavement analysis for the P & L and Hooper branches of the PCC, owned by WSDOT and operated by Watco, will be available April 15.

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