PORT AND OMNITRAX: PUBLIC BE DAMNED, KEEP IN THE DARK

"Mr. Montoya – I have attached a copy of the Franchise Agreement between OmniTrax, Inc. and the District.We are requesting an Attorney General Opinion on the release of the progress report. I have also attached a copy of the letter to the Attorney General making this request.

I will keep you informed as we hear back from the Attorney General.

Deborah Lee Duke / Director of Administrative Services / Port of Brownsville (Click on graphic in text to enlarge.)

By Juan Montoya
On May 8, 2014, the Brownsville Navigation District and Denver, Colo.-based OmniTrax Inc. agreed on a 30-year franchise that would give the franchisee total control of the port's Brownsville Rio

Grande Railroad in exchange for a number of promises made by the company.

At the time of the agreement, and in previous years before that, the BRGR was a profit-making enterprise which had been financed annually by the taxpayers of the BND.

In fact, the port's railroad was a moneymaker.

One of our readers – Mario Villarreal, a local businessman and former port commissioner – questioned the franchise deal.

"Last year the railroad's revenues increased by $1,009,138, or 12 percent. In fact, revenues from its switching yard operations went up by $773,683, or 10.8 percent, so you can't say it's losing money.

And you want to sell its capital assets valued at $5,855,000 for $2.5 million, with OmniTrax paying $500,000 now and the other $2 million over the next five years. Why?

In contrast, OmniTrax doesn't have to produce the results of its promised $8.5 million investment, the Industrial Park, or Incubator until five years from now."

Under the terms of the franchise agreement, OmniTrax was to  "contribute and attract" not less than $8.5 million of direct capital investment in the common elements of the Industrial Park during the period of five years following the acceptance of a Master Plan to be produced by OmniTrax

– OmniTrax promises to produce the Master Plan one year after the acceptance date of the franchise agreement

– Pay the port $3,693 a month rent on 1,200 acres of land

– OmniTrax will pay the district $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. This includes two steel warehouses, the administration building, back office additions, engineers' lunch rooms, an open warehouse for heavy equipment and diesel track, main office vehicle maintenance warehouse, and a diesel track warehouse built in 2011.

– 1. A fee for each loaded railcar (including an empty car delivered to a district lessee for the purpose of dismantling) originated or terminated on the BRG yard.

– $20 for each loaded railcar for the first $35,000 cars per year

– $25 for each loaded railcar above$35 cars per year, and

– Beginning on the sixth anniversary of the Commencement Date, OmniTrax shall pay 5 percent of the gross revenues from railroad operations above $10,500,000 per year.

– In no event shall the annual loaded railcar revenue paid by OmniTrax to district under #1 be less than $550,000.

– OminTrax shall not increase the rates in public tariffs issued by the franchisee which are charged to existing BRG customers, or their successors or assigns to an existing facility at the port...without the consent of the Board of Commissioners. Nothing in this section shall restrict the ability of OmniTrax to charge a special rate for additional services provided to a BRG customer, or to enter into future Transportation Service Agreements with existing or new customers."

– The agreement also calls for all BRG employees to be transferred to it and become its employees "subject to the results of drug testing, criminal background checks, and post-employment physical abilities testing."
Upon becoming OmniTrax employees, they will maintain their same level of seniority, level of service, and similar compensation and benefits."

– OmniTrax also is beholden to assume the Junior Lien Bonds Series 2003 issued by BRG for rail improvements. It assumes all payments on those bonds as they become due as of the effective date of the agreement not to exceed $2.228 million excluding late fees.

– The so-called incubator parcel consisting of 227 acres will be exclusively developed, used and operated by OmniTrax and it will develop, construct, market, and operate it at its sole expense. Upon receiving rental income from the first user, it will pay the district $500 per acre per year based on the actual acreage.

– OmniTrax will begin construction of the Incubator Site within 365 days of the commencement date of the agreement. Any portion of the incubator site not developed within five years after the agreement is signed shall be added to the Industrial Park.

Not later than six months, in November, OmniTrax assigned its liability under the franchise to the BRGR, effectively washing its hans of the responsibilities and assigning them to the BRGR. (See graphic at right.) 

There are a host of other promises that OmniTrax made to the port (and its taxpayers) in exchange for the railroad and the exclusive right to the industrial park and incubator included in the franchise agreement.

Has OmniTrax kept its promises? So far as we know, there is not one tenant in the so-called "incubator" industrial park. And the reactivation of the grain elevator for unloading sugar was never part of the original franchise agreement. We asked for an update on the progress and were told OmniTrax objected to releasing the information to the public. So, as correspondence from the port indicates, does the port.

Why are the port and OmniTrax hiding behind the so-called "proprietary" rights in their appeal to the Texas Attorney General? What is so "proprietary" about a railroad monopoly at the Port of Brownsville. No one else can compete with them since they hold exclusive rights to operate a railroad there.

If the port's board of commissioner gave up a multi-million profitable railroad and exclusive rights of port real estate to OmniTrax, doesn't the public who elected them and owns the port have a right to know if its tax-funded assets have been well managed? In fact, the port taxpayers have more "proprietary" rights then either the board or OmniTrax.

Will they come clean?