Proposal made to transfer ownership of rail spur

The Red Oak Chamber and Industry Association is looking to transfer ownership of the Burlington Northern Santa Fe rail spur.
The Red Oak City Council and the Montgomery County Board of Supervisors heard a request from the Red Oak Chamber and Industry Association to transfer ownership of the spur from the Chamber to the Montgomery County Development Corporation, with the joint support of the city and county for repairs and operational costs.
MCDC executive director Steve Adams first met with the Red Oak City Council at its regular meeting June 19. Red Oak Mayor Shawnna Silvius updated the council on the outstanding costs associated with the spur.
“The repairs that are needed to make the spur operational are around $26,000. Annually, the chamber currently pays insurance of $12,000. They also pay taxes, and we may be looking at whether those can be abated. Also, they pay to do all the weeds, so there’s an annual fee as well. The proposal is for the city and county to consider supporting those fees moving forward through the development agreement that we have with MCDC,” Silvius said.
Once the $26,000 in repairs are made, there would be a roughly $5,000 annual maintenance fee, with the fees split between the county and the city.
Adams addressed the council, stating that one of the tasks they plan to do is review the fees per car for use of the spur.
“Right now we’re charging $50 per car. We’re going to find out what the going rate is and discount that for Bunge. They’re currently planning on two cars per week, but that number of cars is probably going to go up if everything goes smoothly with Burlington Northern. Obviously we’re going to charge a higher fee when we re-negotiate that lease, and that money will go into reserve and hopefully cover that ongoing maintenance cost. At least that’s the hope,” Adams said.
Councilperson Jeanice Lester was in agreement with the transfer in ownership from the Chamber.
“While the Chamber is the owner, in reality it should be MCDC that owns it, and the Chamber shouldn’t be burdened with all those expenses because they don’t have the income to do that. Also, we don’t want to lose our rail spur, because if we do, it’s more than $1 million to get it back,” said Lester.
Adams said the City of Corning was a prime example of a community that had to replace a spur.
“Nobody was using their spur and so they tore it out. A company came in and said they needed to use the rail, and it cost the Adams County Economic Development group more than $1 million to replace it,” advised Adams.
ROCIA executive director Elaine Carlson added Red Oak’s spur was one of only 11 in the state that were directly connected to the main Burlington Northern Line, out of 31 spurs in the state.
Silvius agreed the spur was an important tool, even though it hadn’t been used very frequently in the past. Also, Silvius expected a move from trucking to rail due to the higher costs of transportation on roadways. Adams agreed.
“There will be a big shift between road transport and rail transport. That’s the direction it’s heading. Around 20 years ago it was exactly the opposite, so what goes around comes around,” Adams stated.
Carlson said Bunge already has an agreement with Burlington Northern to service them, and they can start using the spur in August or sooner if repairs are done. Another fundraising mechanism was a lease agreement with Bunge and Clarios.
“It was an annual agreement that they paid of $5,000 per company. That helped offset the taxes and insurance. For the last three years, we’ve been upside down on that. Bunge and Clarios have both agreed that they will continue with that lease agreement, so that will also help offset those costs. It wouldn’t solely be incurred by the city and the county.
The council approved an intent to support MCDC in the acquisition of the spur. The city will also be looking at the possibility of TIF funding to help with a portion of the costs, and other bonding possibilities that may be available. Further action will be discussed at the next regular council meeting.
Adams and MCDC Board Chair Ann Carder then met with the Montgomery County Board of Supervisors at its June 20 meeting. Adams once again shared the details that had been shared with the council with the supervisors.
Following Adams’ presentation, Supervisor Donna Robinson asked if anyone was currently using it. Adams confirmed it was not in use. Robinson asked if United Farmers Cooperative had an interest in using the spur. Adams said they had not expressed interest since the COVID-19 pandemic.
“Back during COVID, they were talking about storing cars on that rail spur line, and that discussion with the Chamber really made some great progress. For some reason, of which I am not aware of, UFC decided they did not need that line for storage,” Adams advised.
Since the county was being asked to assist in repairs and annual fees, Robinson asked what the return on the investment would be for the county. Adams said it could be looked at in several ways.
“This is important to Montgomery County as it’s the only industrial park we’ve got. It’s where future job expansion is coming from Clarios is talking about expansion, FRESCO is already undergoing expansion, and who knows where we may go in the future,” Adams explained. “Also, if we’re creating enough revenue, we’re certainly not going to ask the county to make up any of this shortfall.”
Supervisors Chair Mike Olson said during initial conversations, plans were to have any revenue be put into a fund that could only be used for the rail spur. That money would be left to build for around five years so it would be available to make the next repair that needed to be made. Adams confirmed that was the plan.
“General maintenance is required every three to five years because the ballast wears out, and the ties wear out. The more traffic that is on there, the quicker the maintenance has to occur, and we can’t defer the maintenance for very long because Burlington Northern will come in and do an inspection and tell us they can’t run engines down to pick up any more cars because the rail line itself is not safe,” Adams said.
Adams said MCDC was initially seeking defrayment of the cost of the spur line repair, and to make up the shortfall if there was one. As stated before, Adams said if they could take care of the shortfall, they would, but also wanted to keep some money in reserve for the line’s ongoing maintenance.
Carder told the supervisors that the bid for the rail spur repairs would be good for 20 days to allow for the council and supervisors to authorize the repairs. If confirmed by the end of June, the repairs could be completed by the end of July.
The supervisors agreed they wanted an exact number on the bid for the rail spur before they took any action.
Further discussion is planned at a future Board of Supervisors meeting.