By Michael Howell
Following a meeting with Montana Rail Link President Tom Walsh, a deal was finally struck between MRL and Ravalli County that will keep the railroad operating for another year at least as far as Victor. The deal, as originally initiated, involved only five Bitterroot Valley shippers using the rail line who were going to guarantee in advance, through bonds and irrevocable letters of credit, enough volume in shipping to make running the line a break-even project for the company. That deficit, at the time, was estimated by MRL at about $256,000.
Although the shippers initially gathered enough commitments among themselves to meet the potential shortfall, due to contract uncertainties at the last minute some commitments were withdrawn reducing the total commitment to $193,000, leaving a shortfall from the breakeven point estimated at $62,000. It’s at that point that the county commissioners jumped in and began discussions with the municipalities located along the line about making a joint commitment to meet the $62,000 potential shortfall with taxpayer backed commitments.
The county initially agreed to commit to the whole amount due to the deadline involved, but with the understanding that this commitment would be offset by additional commitments from the municipalities of Hamilton and Stevensville, reducing the county’s total potential obligation to only $22,000.
The City of Hamilton did agree to commit up to $10,000. But the Town of Stevensville balked at committing the $30,000 that county officials were expecting.
The county then heard from MRL that it expected a check for $62,000 up front for the deal to go down. The county commissioners saw this as a deal killing condition. They had initially agreed to making a commitment to meet a shortfall that would be determined at the end of the year and were not willing to pay in advance for an estimated shortfall that could actually turn into a profit.
At a meeting between MRL President Tom Walsh, two county commissioners, the mayor of Stevensville and the director of the Ravalli County Economic Development Authority, the deal was put back on track when Walsh agreed to accept a letter of guarantee from the county instead of money up front, with any payment conditioned upon the actual shortfall, if any, at the end of the year. Complicating matters, however, was the fact that MRL’s estimate of the potential shortfall that needed to be guaranteed went up from $62,000 to an estimated $78,000. The boost in the estimated potential shortfall was attributed to another reduction in shipper commitments from Energy Partners to the tune of about $12,230 and additional costs to MRL of about $4,200 when it was determined that the trains would have to run on a 39-week schedule rather than 36.
At a special meeting held on April 4, the Stevensville Town Council finally agreed to cover up to $20,000 of any shortfall to MRL’s break-even point.
Councilor Ron Klaphake said that he initially had a lot of concerns with the town committing tax money to the deal, but when it was clarified that the money, if spent, would not come from the general fund, but from the newly created Tax Increment Financing District (TIFD), and would be paid out of those district funds, it changed his mind.
Klaphake said that he was still concerned about the fairness of the deal when comparing the town’s commitment with the county. He said that even though Selway Corporation is located in Stevensville that only about 21 percent of the employees live in Stevensville. He assumes most of the rest are county residents. He also noted that any contribution from the Town of Stevensville is spread over a much smaller population base than the county. In addition, he noted that Stevensville residents also pay county taxes.
Councilor Bill Perrin stated that he believed it was important to support local businesses and postpone for as long as possible any potential job losses in the area and to hold open future economic development potential along the rail line. He said that from his analysis of the TIFD income, a $20,000 commitment could be accommodated if it came to that. Councilor Robin Holcomb agreed.
A commitment of up to $20,000 to be backed by TIFD funds was approved on a 3 to 0 vote, with Councilor Desera Towle absent.
The following day, three county commissioners considered the new deal. With a revised potential shortfall of $78,000 and $10,000 committed by Hamilton, $20,000 from Stevensville and an additional $6,000 increase in Selway Corporation’s shipping commitment, the county’s share of the potential shortfall had grown to about $42,000.
Stevensville Mayor Gene Mim Mack told the commissioners that the town’s commitment was based on what it believed the TIFD in Stevensville could realistically support. He said that economic development always involved a risk and that the Town’s commitment was based on some hope that the economic picture would improve and the line actually become profitable for MRL. He said it was also the council’s view that it was important to support economic development and also important to participate in a joint endeavor of this kind with the county and with other municipalities and businesses in the valley.
“The signal we send by participating is an important one,” he said.
Commissioner Suzy Foss echoed Mim Mack’s remarks about the importance of the county, towns and businesses cooperating in economic development.
“We are looking at the big picture for the future here,” said Foss. She said preserving one of the county’s transportation options was critical.
Commissioner Greg Chilcott agreed, saying that his concerns extended beyond the five businesses currently involved and included the future of timber harvesting on the Bitterroot National Forest as well as potential future industrial development along the rail line, possibly all the way to Darby, where a few big projects are pending that could use the rail.
An e-mail was read from Commission Chairman Matt Kanenwisher, who attended the meeting with MRL President Walsh, but was not in attendance at the subsequent commission meeting. In that e-mail Kanenwisher stated, “I obviously don’t speak for MRL but it is my understanding that there doesn’t seem to be any real potential for enough increase in shippers or freight in the near future.” He said the TIGER grant, which the county has submitted, would only buy the county another one or two years for the economy to recover, while the required match would require a debt which may last for 10 years.
He said given the low chance for winning the grant, the limited benefit of only a one to two year extension even with the grant, and the industry assessment that the line won’t become profitable in the near future, he could not support spending the funds to buy one year of time.
“I believe we have all done the best we can but to me, this truly is a bridge too far. What we have before us is the consequence of several different situations from decreased timber production to a shortage of manufacturing, to the national economic condition. In some ways we are trying to plug a whole [sic] in a dam after it has already broken,” he wrote.
Chilcott went on to say that the shortfall might be reduced by another $20,000 if the county’s supplier of magnesium chloride, used for dust abatement on county roads, would agree to shipping by rail. The meeting was continued to the next morning so that this possibility could be nailed down.
The next morning, according to unofficial minutes of the meeting, the commissioners noted that Dustbusters, the low bidder on the contract to provide magnesium chloride to the Road Department, was agreeable to ship by rail into the Bitterroot. The increase in cost was estimated at $5 to $7 per ton. The county would cover the increased cost but that amount would be credited toward its share in the shortfall match. Recalculated on that basis it was agreed that the county needed to commit to $32,000 to MRL for the deal to work. Commissioner J.R. Iman made a motion to that effect and it was approved on a 3 to 1 vote. Commissioner Ron Stoltz cast the lone dissenting vote. Commission Chairman Matt Kanenwisher was absent.