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SMART hires operator to run freight operations for three months, at cost of $395,000

As the North Bay’s passenger rail agency prepares to enter the freight business, it has hired a private company to serve as an interim operator.

Sonoma-Marin Area Rail Transit officials say they’ll need time to develop an in-house freight operation after the agency completes its state-funded $4 million buyout of Northwestern Pacific Railroad Co. on Feb. 28.

On Wednesday, the board voted to approve a three-month, $395,000 contract with Summit Signal, a Mendocino County company, to run interim freight operations. The deal includes an option for an extension.

Summit Signal will begin running freight cars March 1.

Northwestern Pacific Railroad currently has four freight customers in Petaluma, mostly for grain and feed shipments. The company also stores tanker cars for oil refineries and other customers.

SMART’s contract with Summit Signal directs the company to run twice weekly nighttime deliveries to the Petaluma customers and to any new ones the agency signs.

“It’s an exciting time. It’s all uncharted right now,” SMART board Vice Chair Barbara Pahre said during Wednesday’s meeting.

With the urging of state Sen. Mike McGuire, D-Healdsburg, SMART has embarked into freight rail despite questions about sustainability and a lack of insight into Northwest Pacific’s financial information.

Private companies are not subject to the state’s public records law, and the company’s co-owner, former North Coast Rep. Doug Bosco, has resisted calls to open his books.

Bosco, an investor in Sonoma Media Investments, owner of The Press Democrat, told the newspaper last week he believes his company’s records should not be subject to California’s public record laws for proprietary reasons.

Even without that financial information, SMART officials calculate that freight operations will run at roughly a $200,000 annual loss until they can drum up new customers — something those familiar with North Bay freight rail say will be a challenge. The loss comes principally because of the board’s decision to ditch the politically unpopular but, according to Bosco, highly lucrative oil tanker storage business.

Neighbors in the Sonoma Valley, where as many as 80 gas tankers at a time are stored, fear the gas tankers could explode or be pushed adrift during flooding, given that the section of track outside Schellville where they are kept is toward the edge of low-lying wetlands.

The board has directed SMART to eliminate the gas tanker storage by the end of June. The move is estimated to cost around $500,000 in annual revenue, but SMART Chief Financial Officer Heather McKillo said she found about $300,000 in savings on NWP’s operating costs to cushion the blow.

Along with the $4 million to buy out Northwest Pacific, the California Legislature, with McGuire’s guidance, has allotted SMART $6 million over two bills, including the fiscal year 2022 state budget, for track maintenance and operations. SMART officials predict around $487,000 in annual revenues from the existing freight customers.

Some SMART critics have said the passenger rail agency is taking on too much, without having completed its promise to Sonoma and Marin county voters that trains would run from Larkspur to Cloverdale. A disclosure by SMART staff that as many as nine private firms had expressed an interest in operating the freight shipments inflamed those questions for the only member of the public to speak Wednesday.

David Schonbrunn, president of Bay Area public transit watchdog organization the Transportation Solutions Defense and Education Fund, called it “outrageous” SMART directors had not discussed or seemingly been aware of the interest of nine private companies in running freight when they chose to launch an in-house operation.

SMART directors have said they are confident the agency can find customers to make freight rail pay, and have argued consolidated control over the North Bay’s rail lines will be a public benefit.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88.

Andrew Graham

Business enterprise and investigations, The Press Democrat 

I dig into businesses, utility companies and nonprofits to learn how their actions, or inactions, impact the lives of North Bay residents. I’m looking to dive deep into public utilities, labor struggles and real estate deals. I try to approach my work with the journalism axioms of giving voice to the voiceless, comforting the afflicted and afflicting the comfortable in mind.

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