If you live in Tacoma, you own a railroad – and I think you should sell it.
Let me walk you through this to see if you buy my argument. Because you may get the chance to really buy it or not sometime soon at the ballot booth.
Perhaps you didn’t know the taxpayers of Tacoma own Tacoma Rail, one of the largest short-line railroads in the country.
A short-line railroad, in short, serves as a railcar delivery service of sorts between cargo ships, local rail-dependent businesses and the Big Railroads, such as Union Pacific and BNSF.
Tacoma Rail traces its beginnings to Jan. 2, 1919, and the launch of Tacoma Municipal Railway, a trolley service between downtown and the industrial Tideflats. By the 1950s, as passenger service waned, it morphed into a cargo-handling utility, much like Tacoma Power and Tacoma Water.
So you have owned this asset for a long time.
Why keep it? You shouldn’t. Few cities own railroads. Across the country, mostly private companies own short lines.
Only one argument exists to keep Tacoma Rail – as a public utility, it doesn’t have to make a profit, which means, in theory, it should operate at a lower cost to shippers than a privately held company. The lower the cost, the more competitive the Port of Tacoma looks as a shipping hub.
But Tacoma Rail, as a public bureaucracy, hasn’t operated as nimbly as a private-sector company in its ability to adjust its work force to mesh with the plummeting workload of this down economy.
Bill Gaines, the director of Tacoma Public Utilities, which oversees Tacoma Rail, acknowledged last week that the railway hasn’t furloughed enough workers to match the drop in rail service and probably needs to let more people go.
A private-sector company would have done that already, because it would need to make a profit. The lack of profit motive tends to make public entities slower to react.
Now comes Pacific Harbor Line Inc., which operates the short-line rail service for the Port of Los Angeles-Long Beach. And PHL, a subsidiary of Anacostia & Pacific, wants to buy your railroad.
“I would say this about our interest in Tacoma Rail,” said Andrew Fox, PHL’s president. PHL “has had a positive and friendly relationship with both the Port of Tacoma and Tacoma Rail over the past 10 years. PHL’s operation in Southern California is quite similar to Tacoma Rail.”
“We are aware that privatization of Tacoma Rail was considered in the past and that privatization may be considered in the future,” Fox said. “We are also aware that a number of entities have expressed interest in privatization. Our concern at this point is that if privatization is considered in the future, Anacostia would have a lot to bring to the table and would be very interested in competing for the opportunity.”
To get the best deal for Tacoma Rail, you shouldn’t sell it outright to Fox. But you should open up the sale to competitive bidding.
Gaines doesn’t want to sell Tacoma Rail. And even if he did, he argues, now isn’t the right time. With the port economy down by double digits, the sales value for Tacoma Rail wouldn’t compare with what the taxpayers could have gotten for it two years ago when container traffic peaked.
Timing is everything, certainly. But to get to a sale of Tacoma Rail will take some anyway – time that should see the economy recover to a degree.
Why will it take time? First, your City Council will have to debate it and then vote to put the issue on a ballot for you to decide. To dissolve a public utility requires a vote of the people who own it.
And then it would take time to follow federal protocols, inventory the system, appraise the assets and solicit bids from as many competitors as possible to get the best deal.
One railroad insider gave me a wide ballpark value range for Tacoma Rail at $20 million to $40 million, depending on how you merge present value and future growth. The City Council should at least order a detailed professional appraisal.
Maybe you read all this and say, “Who cares if we own a railroad or not?”
You should. Because whatever money you get from a sale goes back to the general fund of city government to solve whatever problems vex you most. As a one-time cash infusion, the smart play calls for using the profits on a one-time cost.
“I do think Tacoma taxpayers, if there’s a benefit for us getting out of the railroad business and letting someone else take that over and we can get (the dollars) for our other infrastructure needs, then it should be considered,” Councilman Rick Talbert said.
Imagine, then, if the City Council framed the ballot issue for you this way:
Should the City of Tacoma sell Tacoma Rail, its assets and customer contracts to the highest qualified bidder with 100 percent of the proceeds from the sale dedicated solely to the repair and resurfacing of Tacoma streets? Yes or No?
The City Council could do that. And I’ll bet you’d vote “Yes.”
Dan Voelpel: 253-597-8785
dan.voelpel@thenewstribune.com
The Book on Tacoma Rail
Annual operating revenue: $18,409,074
Miles of track: 204
Customers: 73
Diesel locomotives: 18
Tacoma gross earnings tax paid: $1,279,984
Total taxes paid: $3,139,429
Source: Tacoma Rail at mytpu.org, 2008
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