North Coast freight rail agency cited for financial losses, clouding future

Citing the persistent financial woes of the public agency overseeing North Coast freight rail, a state transportation board plans to step up its scrutiny of the agency next year.

The Ukiah-based North Coast Railroad Authority is charged with maintaining freight service along a 316-mile rail route from Napa to Eureka. It was faulted by the state board for failing to develop a sound business plan for current rail operations, which resumed in 2011 and typically involve two or three weekly trips along the line that ends at Windsor.

The California Transportation Commission, which oversees state rail operations, said in a report to state lawmakers last week that the 28-year-old local authority had failed to develop a plan “that makes the business case for its existence,” noting that it also is “routinely unable to pay its obligations.”

A committee of stakeholders should be formed to plan NCRA’s future, the report said, without providing specifics.

In response, Mitch Stogner, executive director of the authority, and state Sen. Mike McGuire, D-Healdsburg, pointed to the anomaly of a public agency chartered by the state to preserve North Coast freight service, but given no operational funding to do so.

“The state needs to step up to the plate,” Stogner said, contending the agency needs $1 million a year in assured revenue.

McGuire, whose North Coast district encompasses nearly the entire rail line, said the state’s decision in 1989 to create the railroad authority but deny it a funding base was, in hindsight, unrealistic.

“It is time for all of us to have an honest - and potentially difficult - conversation about exactly where it is practical to operate freight on this line and what is the highest and best use for the remaining miles of track.”

Willits is likely the farthest north freight will ever run on the old Northwestern Pacific tracks, given both the cost - roughly estimated at $1 billion - and strident objections from environmentalists opposed to restoring rail operations to the north in the Eel River canyon, running 95 miles through remote backcountry in Mendocino and Humboldt counties.

McGuire said it is “virtually impossible” to revive rail operations through the flood- and slide-prone canyon in the foreseeable future. Instead, he said, it is time to consider transitioning the rail line to a hiking trail through “some of the most spectacular scenery in the world.”

Stogner, whose agency was established to preserve the North Coast rail line, conceded that restoring the line along the Eel River is “probably not feasible.”

The agency is involved in a yearslong legal battle initiated by environmentalists seeking to force NCRA to study the environmental impacts of restoring service north of Willits.

Stogner acknowledged the agency often operates in the red, depending on property and equipment lease revenue and payments from the Northwestern Pacific Railroad Co., which holds a 99-year lease to haul freight on the rail line. A financial audit of NCRA for the 2016 fiscal year noted that the agency has sustained “recurring losses from operations” and its current liabilities exceed current assets.

“This raises substantial doubt about NCRA’s ability to continue as a going concern,” the audit said.

The agency, with two full-time employees - Stogner and his assistant - and four contract employees, is spending $232,030 on salaries and benefits this year, accounting for nearly half its operating budget of $509,415.

With revenue of $359,920, the agency ran a deficit of $149,495, not including a one-time property settlement of about $220,000, Stogner said.

But Stogner said he is ready to advocate for the agency’s future, starting with presentation of a “strategic plan” at the transportation commission’s next meeting on ?Jan. 31 and Feb. 1.

“We believe a good case can be made that freight rail is efficient (and) good public policy,” he said. “We have a need to maintain the line.”

Allan Hemphill of Cloverdale, chairman of the NCRA board, disputed the need for a new committee of stakeholders, asserting the nine-member board appointed by supervisors in Sonoma, Marin, Mendocino and Humboldt counties serves that purpose.

“It would be a redundancy to form another committee on top of it,” said Hemphill, who will step off the board in January after 24 years of service.

NCRA finances are “in disarray,” he said, because the state has not “contributed a nickel” to rail operations.

The transportation commission would do better to pursue state funding for the North Coast agency, Hemphill said.

Stogner said the key to NCRA’s future is extending the freight service from the current endpoint in Windsor 80 miles farther north to Willits.

The Sonoma-Marin Area Rail Transit system, which now provides passenger service from San Rafael to Santa Rosa, intends to expand north to Cloverdale, with no timetable set for the full extension. That step would leave NCRA with the obligation to rebuild ?57 miles of track from Cloverdale to Willits, a project estimated at $40 million to $60 million that would establish a 142-mile system from Napa to Willits, Stogner said.

The current freight operation from Napa to Windsor hauls lumber products, grain and livestock feed, rock, cement and other commodities in two to three trips a week, said Doug Bosco, a co-owner of Northwestern Pacific, a former North Coast congressman and an investor in Sonoma Media Investments, which owns The Press Democrat.

NWP is a private company that does not release financial reports, he said, while acknowledging that “business comes and goes for us.” He said the company has heard recently from local and national building materials suppliers interested in shipping products by rail for the North Bay’s post-fire rebuilding boom.

“I’m not trying to give you the idea this is a booming business, but it is a profitable business,” Bosco said. “That’s all I really want to say.”

Stogner, who worked for BART for a dozen years before joining NCRA, formerly served as chief of staff for Bosco when he was in the state Assembly and Congress.

Extending freight service to Willits would give NWP access to large timber companies, such as Mendocino Redwood Co. of Ukiah, that would transport products to Willits for rail shipment rather than trucking them down to the Bay Area, Bosco said.

One freight car removes four big rig trucks from Highway 101, according to the NWP and NCRA.

You can reach Staff Writer Guy Kovner at 707-521-5457 or guy.kovner@pressdemocrat.com. ?On Twitter ?@guykovner.