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State panel says debt-ridden North Coast rail agency needs clearer plans

For the second time in two months, a state transportation board has faulted the public agency that oversees North Coast freight rail service for failing to present a detailed account of its finances or plans for future operations.

Members and staff of the California Transportation Commission ripped a plan drafted by the North Coast Railroad Authority for failing to include enough material to make “informed decisions” on the debt-ridden 28-year-old local agency’s future.

NCRA’s seven-page strategic plan, submitted last month, lacked details on NCRA’s current finances, debt, market analysis, expected benefits, funding partners and “accountability measures,” Susan Bransen, the commission’s executive director, said in a report to the board.

She called the plan a “high level visionary document” that does not suitably inform state legislators and other stakeholders in North Coast rail transportation.

Commissioner James Ghielmetti, CEO of a Pleasanton -based land development firm, said during a Jan. 31 public meeting the plan “in its current form doesn’t make any sense at all.”

“There’s just no confidence level there,” said Commissioner Fran Inman, an official with a national real estate development company.

In December, the commission — which oversees state rail operations — said in a report to state lawmakers that NCRA, an obscure Ukiah-based agency charged with maintaining freight service along a 316-mile rail route from Napa to Eureka, had failed to develop a plan “that makes a business case for its existence.”

State Sen. Mike McGuire said Tuesday he shares the commission’s concerns.

“NCRA has to answer the pressing question: How are they financially viable long term?” he said.

The answer needs to come before the Legislature will consider any funding for the agency, McGuire said.

NCRA officials — including Mitch Stogner, the executive director of the agency that operates on a $510,000 annual budget, and board member John McCowen, a Mendocino County supervisor — said the agency’s future depends on securing a state subsidy of $500,000 to $1 million a year.

“The problem is obvious,” Stogner said. “The state hasn’t seen fit to provide (us) any operating revenue.”

Established by the Legislature in 1989, the agency was twice denied funding on vetoes by then-Gov. Arnold Schwarzenegger. Freight service on the line resumed to great fanfare in 2011 under a contract with Northwestern Pacific Railroad Co., which currently runs two trains a week at night from Napa to Petaluma and Windsor.

“We have struggled mightily with the (funding) problem,” Stogner said. “Again we take a public whipping from the CTC.”

NCRA has a debt of about $5 million and with revenues of about $500,000 a year, primarily from property and equipment leases, loses about $250,000 a year, Stogner said.

With a state subsidy of $500,000, it could pay its bills, he said.

In his comments to the commission, McCowen acknowledged the need for more information.

“There are many questions that need to be answered,” he said, adding that the funding issue is paramount.

“I do believe the original vision to preserve railroad service on the North Coast is valid,” McCowen said.

David Keller of Petaluma, a longtime NCRA critic and a director with the Friends of the Eel River environmental group, said in an interview the agency has been “totally unresponsive” to the commission’s requests for a detailed business plan.

“They still say they want money, but they haven’t accounted for what they have,” he said.

Critics frequently point to NCRA’s 99-year freight-hauling contract with Northwestern Pacific, which requires the rail operator to pay NCRA 20 percent of its net income — on profit above $5 million, a mark it has never reached.

Instead, the railroad pays $180,000 a year to cover principle and interest on a $3.2 million loan NCRA obtained from the federal government to complete restoration of the track, Stogner said.

Doug Bosco, a co-owner of Northwestern Pacific, said it was anticipated in 2006, when the contract was approved, that the railroad would soon earn $5 million. But protracted legal battles, which he said have recently been settled, curbed the railroad’s expansion.

Bosco is a former North Coast congressman and an investor in Sonoma Media Investments, which owns The Press Democrat.

Bosco and NCRA officials agree it is time to renegotiate the contract.

The revised pact needs to guarantee NCRA a “fixed monthly payment” by the railroad with no revenue threshold, McCowen said. The existing agreement is “not realistic and it’s unworkable,” he said.

Bosco said the railroad is profitable, but declined to cite recent annual revenues.

Both he and McCowen also believe there are major new freight customers to be gained if freight service can be extended from Windsor about 80 miles north to Willits in Mendocino County.

“If the state wants to see NCRA fulfill its original purpose, it could do so for a modest appropriation,” McCowen said.