OMNITRAX REFUSES TO LET COMMUNITY KNOW ITS PROGRESS

By Juan Montoya

On May 8, 2014, Denver-based OmniTrax – a part of the Broe Group – convinced the commissioners of the Brownsville Navigation District that if they would sell them the profitable port's railroad on payments, they would deliver an industrial park, a manufacturing incubator, and great riches beyond their wildest dreams.

In return, the BND agreed to give them a 30-year franchise that would give the company total control (a monopoly) of the port's Brownsville Rio Grande Railroad.

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 proven moneymaker.

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

"Last year (2014) 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."

And when we asked the port (and OmniTrax) for a progress report, they quickly had their attorney object that release of anything else than the franchise agreement would "disclose information that, if released, would give advantage to a competitor or bidder."

Fair enough you say?
It would be until you realize that the port railroad has a monopoly on all rail traffic at the navigation district and that no other "competitors" or "bidders" exist. So how and any other so-called competitors or bidders have an advantage over the monopoly holder?

"OmniTrax states the information at issue would reveal information pertaining to its costs, pricing, sand vendors, and release of the information would give its competitors an advantage in future bidding situations."

C'mon, man! OmniTrax has a monopoly on the rail traffic at the port for the next 26 years under the 30-year franchise agreement. How can any "competitor" bid for the business?

However, Texas Attorney General Ken Paxton's Office agreed with OmniTrax that the taxpayers of the district to whom the railroad belongs can be kept in the dark on whether OmniTrax is living up to its promises.

Under the terms of that agreement, OmniTrax was to:

– Produce the Master Plan one year after the acceptance date of the franchise agreement

– "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 also is beholden to assume the Junior Lien Bonds Series 2003 issued by BRGR 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 was to 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 hands 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. OmniTrax has consistently 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.

Now, apparently, OmniTrax is taking credit for the possible expansion of Big River Steel to the Port of Brownsville. That Arkansas-based company has said Brownsville is one of two sites being considered for its steel-plant expansion, but has not decided either way. Big River Steel, by the way, was not included in the original franchise agreement.

So when will OmniTrax and the port of Brownsville come clean?