SMART approves multimillion-dollar plan to acquire North Bay freight rail service
SMART is set to assume control over the North Bay's freight rail and perhaps take over hauling by the end of the year under a multimillion-dollar, state-sponsored plan approved by the passenger train service's board of directors on Wednesday.
The complex agreement years in the making was hailed by board members as a major milestone and generational opportunity for the 2½-year-old Sonoma-Marin Area Rail Transit system, allowing it also to have sole ownership of the rail line from Larkspur to north of Cloverdale. The board voted 11-0 during its virtual meeting to back the proposal, with one member choosing to abstain.
“This is really a watershed moment here,” said Marin County Supervisor Judy Arnold, a SMART board member and two-time chairwoman. “This has been a long time coming. Whoever runs it, whether it's SMART or if we contract with someone, businesses are now going to have a chance to … send their goods by rail and get some of the (trucks) off of the road.”
The framework for the sale was established in a 2018 bill sponsored by state Sen. Mike McGuire, D-Healdsburg, that provided SMART with $4 million to buy from Northwestern Pacific Railroad Co. its equipment and exclusive freight rights to the track. An obscure and insolvent state agency, the North Coast Railroad Authority, would ultimately be dissolved under the plan, ceding 21 miles of track not owned by SMART from downtown Healdsburg to the Mendocino County line to help one day complete its planned 70-mile passenger line north to Cloverdale.
SMART, meanwhile, faces its own financial challenges after voters in the two counties in March defeated an early extension of the sales tax that funds the majority of the agency's operations. The measure was designed to allow the agency to refinance over another 30 years rising bond debt tied to the buildout of its initial 43-mile line from San Rafael to north of Santa Rosa, and save as much as $12 million per year to reinvest into operations.
Instead, SMART is now trying to settle on how to cut at least $6 million, or roughly 15%, from its annual budget while also fending off further economic hardship caused by the coronavirus pandemic. Ridership has fallen 90% as a result of the stay-at-home orders, taking a large bite out of fare box revenues. The agency has temporarily suspended weekend service and dropped its usual number of trains during the workweek by more than half.
The agency's current quarter-cent sales tax returns are projected to take a 20% hit through June, and much is unknown beyond that. The CARES Act has already granted nearly $10.4 million in emergency federal aid to SMART, and the next round of funding through the region's public transportation agency is expected to offer upward of $6.6 million more.
But the $4 million SMART received from the state to make the acquisition of NWP Co. was dedicated specifically for the purpose of taking over responsibility of freight on the line. SMART also identified $10 million in deferred maintenance throughout the system for freight operations, of which McGuire has committed to finding in other state funds in the coming years, including $2 million once the deal is completed. Without approval, the money would go back to the state.
The endorsement also advances McGuire's effort over the coming decades to construct a 320-mile recreation pathway from the San Francisco Bay to the Humboldt Bay, lends momentum to extending SMART service on an existing east-west railway along Highway 37.
The freight proposal drew mixed reviews from members of the public who spoke during the two hours of board discussion on the item. Several residents who came out against the plan questioned SMART's long-term commitment to freight operations, saying the agency lacks both the expertise to run a commercial hauling enterprise as well as a full understanding of potential liabilities without deeper study of NWP Co.'s historical financial records.
Doug Kerr of Healdsburg voiced concerns that approval would lead SMART to take its eye off its primary objective of delivering passenger service along the 22 miles of line north of Windsor, to his city of residence and then the planned northern terminus in Cloverdale. Construction is underway to extend service to Windsor by the end of next year, but nothing beyond.
“We cannot forget that is the mission of SMART. That mission is not complete.” Kerr told the board. “If you're going to be distracted by other things, that is not a good thing at all.”
San Rafael Mayor Gary Phillips, a board member and its chairman last year, said he agreed, believing the agency did not have enough detailed information to make an informed decision. Phillips, a corporate business consultant, abstained from voting on the item, calling the up-down decision both “startling” and “troubling” on such a tight window as one meeting.