RAILROAD CONTRACTS FOR FINANCIAL REVIEW

- Bill Rautenstrauch

The Observer

WALLOWA — An upcoming financial review from the Northeast Oregon Economic Development District could pave the way for a reduction in debt for the taxpayer-owned Wallowa Union Railroad.

In a meeting Monday, the Wallowa-Union Railroad Authority Board of Directors voted unanimously to approve a personal services contract for the review with NEOEDD. Cost for the services is $30,000, half covered by a state Special Public Works Fund grant to Union County.

The review is a requirement from the Oregon Economic and Community Development Department, which loaned Union and Wallowa counties money to buy the railroad in 2002.

According to a report from WURA Chair Steve McClure, $4.5 million of the debt is negated by a federal earmark, but the railroad still owes the state $850,000 in principle and $800,000 in interest.

After the review is complete and a refined business plan is in place, the railroad and the OECDD will discuss new terms, McClure told the board.

"The department can forgive the interest. In November we'll go back and renegotiate," he said.

McClure said the review will consider several scenarios, including liquidating enough assets to satisfy the remaining debt.

Other options to be studied include changing operations to reduce expenses and increase revenues, making the railroad a turn-key operation, or continuing under the current situation.

McClure said he solicited several bids for the review, but selected NEOEDD to do the work because of its experience with the line.

"They're familiar with the railroad. They've done our books," he said.

Because the contract is for only $30,000, state statute allowed him to select the bidder under an informal process, he said.

McClure noted that the railroad's financial picture has changed over the past couple of years.

He said the line, stretching from Elgin in Union County to Joseph in Wallowa County, is worth considerably more than what it was at the time of purchase.

"The value is in excess of $8 million, depending on who you talk to. Not that it's what we want to do, but if we had to liquidate, it would more than cover the debt exposure," McClure said.

He stressed that ownership of the railroad has never had a negative impact on Union and Wallowa County funds.

"There's a misconception we've put red money into the railroad and we have not. We have not taken money from either county to make this work," he said.

For fiscal year 2007-2008, the railroad is operating under a $534,000 budget. The largest sources of revenue are excursion trains, which are expected to bring in $192,000, and sale of assets, which are projected to account for $100,000.

The freight side of the business is lagging, mainly because the railroad no longer hauls logs from the Wallowa Forest Products mill.

In 2007-2008, the line expects to earn $50,000 in freight revenue, half of it from transporting propane, the other half from miscellaneous orders.

People involved with the excursion trains, which run mostly in the Wallowa River Canyon between Elgin and Wallowa, say they see business picking up.

During Monday's meeting, Excursion Train Coordinator Mary Ann Keyser said this season's ridership numbers are well above last year's.

"In some months, it's double, or double-plus. I think the increased advertising we've done has helped substantially," she said.

Union County Tourism Executive Director Janet Dodson told the board she thinks ridership may top 2,000 this season.

She had more to say on the subject in a press release issued at the end of the meeting. The release announced the contract with the NEOEDD, but also touched on the popularity of the excursions.

"The train has become one of the most important attractions in Union and Wallowa counties," Dodson said. "Individual travelers and groups are coming from throughout the West, and even from overseas, to ride it."