Op-Ed: Freight Rail Agreement Unfair to Taxpayers

By Bernie Meyers

Two train systems will soon share the tracks running through Marin — one into northern Sonoma County for commuter service (the Sonoma-Marin Area Rail Transit) and one perhaps eventually to the Eureka area for freight (the North Coast Railroad Authority). No trains have run for a decade, but freight trains could soon be running through Novato up to Windsor if the last hurdles are cleared.

NCRA’s efforts to rehabilitate the right-of-way are to be commended, but NCRA’s lack of transparency and fiscal prudence are to be reproved.

The prime example of these shortcomings is the lease that NCRA agreed to in 2006 with a new train operating company, NWP. The lease was not fully presented to the public. A press release simply called it “a five-year contract” to operate trains from Eureka to Novato. The release failed to state that while the initial term was five years, NWP has a unilateral option to extend the lease for up to 99 years without meaningful NCRA oversight. Other egregious provisions include the paucity of payments by NWP and the need for NCRA to obtain many hundreds of millions of taxpayer dollars to rehabilitate the line. Incredibly, there has been no analysis as to whether the lease is fiscally prudent.

The fees that may be paid by NWP to NCRA are indeterminate, but are certainly far, far less than the public funds needed to rehabilitate the line. The lease requires NCRA obtain and expend public funds without limitation. Recently NCRA/NWP asserted that $68 million has been expended just for the rehabilitation between Lombard (Napa) and Windsor. Many tens of millions will be needed for the Windsor-to-Willits rehab. Hundreds of millions are estimated for rehab through the Eel River Canyon. Additional tens of millions are estimated for the Eureka area. When, over the term of the lease, there are major storms and earthquakes (no doubt there will be … the only questions are how frequently and how bad), NCRA is responsible to get further public funds to cover such damages.

Yet NWP could conceivably pay NCRA almost nothing under the lease. Payments begin the year after NWP has a net annual profit of $5 million. If NWP makes payments, they will not be to NCRA, but into a “kitty” which NWP jointly controls. The kitty has an upper limit, and when reached, NWP need not make additional payments until funds are siphoned from the kitty. At the end of the lease, all funds in the kitty are given to — you guessed it — NWP.

Similar leases are for terms of between five and 20 years, with provisions for limited renewal. For example, Ohio provides a term of five years and possible renewals if various conditions are met, such as shipper satisfaction, safety, car loadings, track maintenance and financials. Other leases have provisions for percentages of operator revenues to the line owner, percentages of public property leases, a “no conflict of interest” requirement, energy efficiency and environmental practice provisions, hazardous substances and waste provisions. Our lease does not.

Primary responsibility for the lease deficiencies lies with NCRA for its lack of transparency and shortsightedness. Some board members apparently think that we should be thankful for NWP’s efforts and that the need to get the line up and running to Humboldt Bay overrides the lease’s defects. I respectfully disagree. If the lease is left as is, hundreds of millions of taxpayer dollars will be expended apparently for private gain and limited public benefit. Fiscal prudence and transparency have been swept aside in an effort to bring freight rail to the four-county area. While restoration of freight service may be desirable, we can welcome it while working to correct the lop-sided lease.

Editor’s note: Bernie Meyers, a former member of the Novato City Council, was first appointed to the North Coast Rail Authority board in 2007. The views presented here are his own and not necessarily those of the NCRA board.