As the City of Tacoma grapples with its $63-million recession hangover with layoffs and cutbacks, one branch of city government, its municipal railroad, Tacoma Rail, may be putting hard times behind it.
Credit a combination of a rush of new business as well as timely deals to shed expenses for the turnaround.
While the city plans to lay off 217 workers in other departments, Tacoma Rail is hiring. While general government revenues have declined, Tacoma Rail’s are rising.
Tacoma Rail is a rarity, a city-owned railroad. With 204 miles of track, Tacoma Rail is the largest municipally-owned and operated freight railroad in the country. Tacoma Rail is part of Tacoma’s Public Utilities operation that includes Tacoma Power and Tacoma Water. Tacoma Rail serves industrial customers on the Tacoma Tideflats, in the Frederickson Industrial Development in south Pierce County and in the Nalley Valley in South Tacoma. It also provides switching service for the ports of Olympia and Tacoma and their terminals.
It is the Port of Tacoma’s burgeoning business that has improved the railroad’s fortunes in recent months.
“We had our best month ever in July,” said Tacoma Rail Superintendent Dale King. “Then August was even better. September didn’t exceed August, but it was our best September ever,” he said. “October is shaping up to be another record-setter.”
The arrival of a handful of new shipping lines at the Port of Tacoma beginning in July is largely responsible for that boost in Tacoma Rail’s business. The Grand Alliance consortium of shipping lines helped the Port of Tacoma raise its benchmark container shipping volumes by 37 percent in September compared with September 2011.
The Grand Alliance moved to the port’s Washington United Terminal from Seattle after the port and Washington United Terminals operator, Hyundai Merchant Marine, promised more efficient, less costly container handling than Seattle.
Tacoma Rail benefits because it moves the long container trains between the port’s terminals and the mainline railroads, Union Pacific and BNSF.
In July alone, Tacoma Rail’s port volume increased by more than 50 percent.
The railroad has hired five new workers to handle the increased volume. Next year the workforce at Tacoma Rail is expected to reach 101, up from the low of 89 workers at the recesssion’s nadir.
The new business comes after a deep decline in port business beginning in 2008 when the port’s volume declined by 25 percent and with it the rail switching business that it fostered.
During that decline, Tacoma Rail took advantage of its miles of little-used track in rural Pierce, Thurston and Lewis counties, to make money on one of the side effects of the recession. If Tacoma Rail couldn’t make money switching and moving rail cars full of import containers, it would make money storing the container train cars idled by the decline in the import business.
The railroad contracted with four major railcar leasing companies to store their cars on Tacoma Rail tracks near Fort Lewis and on the west side of Interstate 5 near Centralia. The railroad also stored railcars used during more prosperous times to transport lumber and wood chips. “At one time, we had nearly 14 miles of rail cars stored on our tracks,” said King. The car leasing companies typically paid Tacoma Rail about $1.50 per day per platform in storage fees. With hundreds of cars in storage, those storage fees brought hundreds of thousands of dollars in extra income annually to the railroad.
Now, with the import business reviving or because leasing companies have decided to scrap some of the older cars instead of continuing to pay storage fees, leasing companies are paying Tacoma Rail fees to bring the cars out of storage.
Some of those cars are being refurbished. Others, typically cars originally built to carry domestic 48-foot-long containers, are being scrapped. The railroad has also begun leasing its right-of-way for communications cables and pipelines, another use that provides continuing income from miles of line that no longer see the kind of railroad use for which they were built.
Meanwhile, business is improving at one of the major industrial areas, Frederickson, that Tacoma Rail serves. A new metal recycling firm, Pacific Steel Supply, is bringing in metal by rail from other parts of the West to its Frederickson plant where its is processed and sorted, packed into containers and then sent by train to the Port of Tacoma for export.
Another Frederickson customer, James Hardie Building Products, is bringing raw materials by train to produce its fiber cement siding. Likewise, Boeing’s Frederickson plant uses rail to transport materials.
To solve one of the railroad’s more difficult problems, the cost of maintaining its 204 miles of track, the railroad is planning to lease or sell portions of that rail line to others who will maintain the tracks and pay Tacoma Rail money for the privilege. The maintenance costs of that large network of rails which stretches from Morton in Lewis County to the Tacoma Tideflats and from Frederickson to Centralia, is one reason the city-owned Mountain Division of the railroad has accumulated some $6.25 million in internal city debt over recent years.
The city bought the Mountain Division from Weyerhaeuser Co. 14 years ago with the idea of using that division’s rails to launch a “Train to the Mountain,” a tourist train that would enhance Tacoma’s visitor revenues by connecting Freighthouse Square near the Tacoma Dome with Mount Rainier National Park. The original builder of the Mountain Division, the Tacoma Eastern Railway, once ran regular passenger trains from Seattle and Tacoma to the park over the rails that passed through Eatonville and Elbe to Ashford near the park boundary.
The notion was that the freight business generated by the industries at Frederickson would generate enough profit to offset any losses from tourist operation.
Despite several attempts to establish passenger service on the line, no permanent tourist train has emerged. Both the American Orient Express and Grandluxe Rail Journeys used the line on an occasional basis to carry passengers to the vicinity of the park as part of extensive rail tours of the West. Grandluxe entered bankruptcy in August 2008 as its train was carrying passengers on the Mountain Division rails toward Mount Rainier.
The Spirit of Washington Dinner Train successfully operated for years from Renton to Woodinville on the east side of Lake Washingon. It moved to Tacoma when a bridge on its route was closed by highway construction. Although the dinner train began its use of the Mountain Division with great civic fanfare, it abruptly closed down after a few months. Another attempt at a tourist train operation on city rails, the Great Northern Pacific, never really launched a regular service. Even Tacoma Rail’s own attempt to promote train travel on the division, the Train-to-Trek, fell victim to falling ridership after three years.
King said the summertime weekends-only train trip from Tacoma to Eatonville to visit the Northwest Trek wildlife park, operated profitably the first and second year but the third year it went into the red. The Train to Trek was a joint venture with the Metropolitan Park District. It used Tacoma Rail’s own passenger cars, which the railroad bought from Amtrak.
The Train to the Mountain concept has several problems, said Brian Wise, general manager of the Mount Rainier Scenic Railroad, which operates steam trains from Elbe to Mineral Lake.
Tourists typically are unwilling to spend the time sitting on the train that would be necessary to go from Tacoma to the edge of the park unless the roadbed is upgraded substantially to allow higher speeds, he said.
“Most people won’t take a three-hour train ride when there’s a parallel highway they can drive that takes a little more than an hour.”
Much of the journey lacks the kind of scenery that has made famous tourist railroads such as Colorado’s Durango and Silverton and Alaska’s White Pass & Yukon successful. At least for the first dozen or more miles, the Mountain Division track passes through Tacoma backyards and industrial areas.
Tacoma Rail’s King said despite the attraction of the “Train to the Mountain” concept, the idea isn’t financially feasible unless a benefactor is willing to donate the $30 million necessary for infrastructure and track upgrades and the annual subsidy necessary to make the operation work.
At the mountain end of the track, however, the 31-year-old Mount Rainier Scenic Railroad, is willing to bet that tourists will continue to find that tourist railroad’s attractions alluring.
This year, the Mount Rainier Scenic will attract about 25,000 passengers for its steam-powered ride between Elbe and Mineral Lake.
Tacoma Rail and Mount Rainier Scenic are near signing a long-term lease on 24 miles of Mountain Division track between Eatonville and Morton. That lease will reduce costs for Tacoma Rail because the lease says Mount Rainier Scenic will maintain the rails and roadbed on that stretch.
It will give the tourist railroad greater latitude to make investments in its operation, said the railroad’s general manager Wise. The railroad, for instance, plans to upgrade the track on its route from Elbe to Mineral to allow trains to operate faster to allow passengers more time at Mineral. The railroad is already planning to create a destination at Mineral where the tourist line’s restoration shops are located. The tourist operation is bringing to Mineral elements that were once part of Point Defiance Park’s defunct Camp Six logging camp exhibit.
The museum at Mineral will give visitors a flavor of the logging operations and the rail operations that supported them on the flanks of Mount Rainier. The train now stops at a picnic area at Mineral Lake for just 15 minutes. With an improved roadbed, beginning next June, passengers would have at least 30 minutes to tour the museum and restoration shops.
In another track deal, Tacoma Rail has negotiated a trial lease with a private railroad operator to operate a 5-mile strip of Tacoma Rail track near Centralia. That would cut Tacoma Rail’s responsibility for maintenance of that track and generate revenues from car storage fees shared with the private operator of that track.
NEGOTIATIONS WITH SOUND TRANSIT
Perhaps the largest problem-solver for the city and Tacoma Rail may be the on-going negotiations between Tacoma Rail and Sound Transit for the purchase of a key 1.3-mile stretch of Tacoma Rail track between the BNSF mainline near River Road and Sound Transit’s rehabilitated Lakewood Line from Freighthouse Square to Lakewood. That commuter line opened Oct. 8.
Sound Transit has used that key stretch of track for commuter train service to Freighthouse Square since 1999 without a longterm operating agreement. King told city officials that purchase by Sound Transit or back usage payments could generate enough revenue to more than wipe out the $6.25 million debt the city has accrued for operating the Mountain Division. Talks are ongoing.
In addition to the building Tideflats business, King said two other operations on Tacoma Rail lines could generate more revenue in the future. Sygnet Rail Technologies, a locomotive and railcar rebuilding company, is leasing a former Weyerhaeuser rail repair facility on Tacoma Rail tracks near Tenino. The firm has ambitions to expand its locomotive repowering business around the world. Already, it has signed a contract to repower locomotives from Brazil.
A gravel mine near Maytown on property once owned by the Port of Tacoma is beginning to ramp up production. According to an agreement with the port, at least half the mine’s output must be shipped from the site by rail. Tacoma Rail serves the site.John Gillie: 253-597-8663