Wallowa Union Railroad Board get look at draft business plan

Union and Wallowa counties financed purchase of the railroad from Idaho Northern in 2002, borrowing a total of $5.5 million from the state. Some $2 million of the $6.5 million purchase price was paid with Oregon Lottery funds. - The Observer/BILL RAUTENSTRAUCH

In a meeting Dec. 11, the WURA board of directors looked at a draft of the plan, including an executive summary. The board had seen portions of the plan earlier, but delayed detailed discussion until completion of the summary.

Board Co-Chair Steve McClure said Monday some minor revisions will be made before the plan is sent on the OECDD, which loaned money for the railroad's purchase in 2002.

"We looked at the plan and suggested some changes, though nothing major," McClure said, adding that another review of the document is planned this week.

Union and Wallowa counties financed purchase of the railroad from Idaho Northern in 2002, borrowing a total of $5.5 million from the state. Some $2 million of the $6.5 million purchase price was paid with Oregon Lottery funds.

U.S. Congressman Greg Walden helped the railroad secure federal money to help pay the debt. The money was earmarked for the Oregon Department of Transportation and is to be passed on to the OECDD.

Gary Whitney of the OECDD on Monday said he doesn't think the money from ODOT has begun coming in. When it does, it will not come in a lump sum, he said.

"The amount is received over a period of years," he said.

According to the draft business plan, about $4.4 million — $3.5 million in principal and $925,000 in interest — was paid on the loan, leaving a balance of $1.8 million in principal. Interest rate on money drawn from the WURA's line of credit is 5.52 percent.

The railroad board hopes to renegotiate terms of the loan, including an adjustment of the interest. The business plan must be complete before the negotiations take place.

The plan, formulated by the Northeast Oregon Economic Development District and David Duncan, a Portland-based consultant from Portland who specializes in excursion trains, considers three different scenarios.

In "continued operation" scenarios, railroad infrastructure would be kept wholly intact from Elgin to Joseph. The option assumes that a partial or full relief of debt to the state can be negotiated. The current excursion operation from Elgin would continue, with increased opportunities developed for 2009.

A "partial liquidation" scenario was developed as an option to repay the debt to the state. The scenario proposes removal and sale of 39 miles of rail, ties and other materials from Joseph to a point near Wallowa.

According to the plan, salvage of that portion of the line would generate enough funds to repay all but $611,958 of reamortized debt.

The WURA board is unanimous in the opinion this is the least preferable option, since replacement of railroad infrastructure will be difficult, if not impossible, once it is taken out.

Removal of any track will require approval for abandonment by the federal Surface Transportation Board. According to statements made in the business plan, abandonment is opposed both by the Oregon Dept. of Transportation and the OECDD.

The third scenario involves possible acquisition of the Idaho Northern and Pacific operations from La Grande to Elgin, a consolidation of the two short lines.

"The acquisition would allow the Wallowa-Union to access the freight traffic base base and cash flow currently enjoyed by the IN&P," the business plan states.

But the plan also lists disadvantages and risks, including addition of debt, and the possibility that some shippers along the line, including Boise Cascade timber processing plants in Elgin and La Grande, could possibly go out of business.