MEETING SET WEDNESDAY FOR FIRST READING OF PORT RAILROAD 30-YEAR FRANCHISE WITH OMNITRAX

By Juan Montoya
Like a runaway train hurtling down the tracks, the first move to turn over the Brownsville Rio Grande International Railroad to OmniTrax Inc. for the next 30 years will come in a vote of the Port of Brownsville commissioners tomorrow at their 5:30 p.m meeting at the Brownsville Navigation office.
This will be the first of three readings (and votes) needed to approve the long-term commitment to the Colorado-based Broe Group-owned railroad company. Two other meetings are scheduled for May 1 and May 8, with the final reading and vote coming just two days before the May 10 elections for port commissioners.

Port observers say that Martin Arambula, the outgoing commissioner who decided not to run for the board after he failed to make the Democratic Party runoff for the Cameron County Judge's nomination, will be able to vote before his departure. There are five members on the port board. It takes three votes to approve any agreement.
Arambula is said to favor granting OmniTrax the 30-year franchise.
Of the the four other members of the board – John Reed, Tito Lopez, Ralph Cowen and Carlos Masso – Lopez and Cowen are said to be reluctant to enter into the franchise under the existing terms while Reed and Masso are said to be leaning toward approval. With an election in the offing, many are saying that if the franchise is such a good deal for the port, that perhaps the board should wait for the new members to come on board since they will be seated at the beginning of the franchise term.
In fact, some people say that Arambula should abstain from voting since he is scheduled to leave the board May 10.
"The current board is tying the hands of the new commissioners," said a port observer with ties to the commissioners leaning away from voting for the franchise agreement.
Masso faces two opponents, Henry Najera and Joe Wallace Garcia. Arambula's seat is being contested by former county commissioner and candidate for county judge Jon Wood and local restaurateur Steve Guerra.
If by some chance Najera or Wallace Garcia were to win, they would have no say-so on voting on the agreement but would be bound by the decision of the former commissioner in their place. Likewise, if Arambula were to vote for the agreement, his would be the third vote and it wouldn't matter whether either Wood or Guerra prevails.
The 30-year franchise agreement virtually gives OmniTrax control of a profitable working railroad before it is required to plunk down any money on a promised Industrial Park and "small-business incubator." The company wants to lease 1,200 acres from the port and use 227 acres for the incubator.
But none of this will happen until the company finalizes its Master Plan a year after the agreement is signed.
Additionally, OmniTrax promises in the proposed agreement to "contribute and attract franchise consideration of not less than $8.5 million (Franchise Consideration) of direct capital investment in the common elements in the Industrial Park area. (OmniTrax) will provide Franchise Consideration during the period of five years following acceptance of the Master plan."
Until then, the only thing the port can expect from the Colorado-based railroad is:
– $3,693 a month for the (1,200 acres) of real estate
– $10,714 per month rent on the railroad's buildings and locomotive pit for seven years. Upon payment of 7 years rent ($900,000), OmniTrax will own free and clear, all rights and title to real estate listed, not including the land itself. Those are valued on the 2013 Long  and Chilton audit at $987,600.
It also wants to buy the railroad's capital assets (machinery and equipment, tools, etc.) for $2.5 million with $500,000 30 days after the agreement is signed and the rest ($2 million) to be paid over seven years.

The 2013 audit by Long and Chilton lists the BRG's capital assets at $11.1 million, minus $5.3 million accumulated depreciation, for a total capital assets net of $5.85 million.
In fact, the BRG has funneled millions into capital improvements of the rail system.
"The railroad's investment in capital assets as of December 31, 2013 totaled $5,855,055 (net of accumulated depreciation)," the audit states. "The investment in capital assets includes buildings, machinery and equipment, railroad system and leasehold improvements."
It is, in fact, a profitable rail operation that – according to the 2013 audit, compared to FY 2012, – its "railroad operating revenues increased by $1,009,138 or 12.48 percent ( from $7,861 .2 million to $8,807.4 million) and operating expenses increased by $679,390 (from $7.628.1 million to $8.307.5 million) or 8.91 percent over the previous year.
"The railroad's major source of revenue is derived from switching (yards) revenues which increased $773,883 or 10.80 percent from the previous year," the audit states. "The increase in incidental revenue and switching is primarily due to scrap customers moving their traffic by rail again. Revenues have increased $404,151 or 4.47 percent since 2011."
"Scrap commodities were up in 2013 since the railroad was able to regain scrap customers by rail again. As the railroad completed the year, its net position reported a balance of $8.4 million, an increase of 9.40 percent compared to the precious year. Of this, $4.1 million represents unrestricted net position which are available to meet the railroad's current and future needs."
The question facing port commissioners as they get ready to vote for or against the franchise to OmniTrax is: Are they ready to hand over a working and profitable railroad operation at a cut rate price to a private investor on the promise of future economic investment by it in the port in the form of an industrial park?
And since the increase in scrap metal transport and future gas and oil will pump millions into the BRG, will this same cash flow be used by OmniTrax to pay the port from money it already owned?