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Shortfall in MRL contract may cost taxpayers

 

By Michael Howell

Last May, facing a possible shut down of the Bitterroot rail spur, Julie Foster, the director of the Ravalli County Economic Development Authority, helped broker a deal between Montana Rail Link, several rail shippers in the Bitterroot and local county and municipal governments to keep the line open for a year. The deal involved the shippers, the county and the municipalities of Stevensville and Hamilton guaranteeing a certain amount of income to MRL for the coming year. It now appears that shipping volumes on the rail line have fallen below expectations and the government agencies will have to kick in their share to meet those contract obligations.

Last year MRL estimated that it was losing close to $256,000 a year keeping the line in operation. The railroad company agreed to keep the line open if the shippers could guarantee enough business to make it a break even operation. Several companies agreed to guarantee a certain amount of shipping to meet those expectations but it was not enough to meet the break even point. As a result the County, Stevensville and Hamilton agreed to guarantee a certain amount of funds to meet that shortfall. Hamilton agreed to cover up to $10,000, Stevensville agreed to put up $20,000 and the County agreed to cover up to $32,000. Selway Corporation, one of the shippers, at the last minute also increased its obligation by an additional $6,000 to cover the potential shortfall. All did so in the hopes that the businesses would do enough shipping on the line to cover the whole shortfall and make it a break even operation for the railroad.

At a meeting of shippers and government officials last week, it was made evident that, barring some drastic changes in the next few months, the projected use of the rail line will not meet expectations. According to RCEDA Director Julie Foster, due to events outside their control, Selway Corporation is close to 50% behind in its shipping volumes. Selway Corporation committed to the largest volume of shipping and meeting its obligation to MRL will cost it quite bit of money. It will also likely require the county and municipal governments to come up with their shares at the end of the contract period, which expires at the end of May.

“We always knew this could happen,” said Foster. She noted that there are two more months to go under the contract and the picture could improve. For instance, there is still the potential for the county to do some shipping of magnesium chloride on the rail line that would be credited toward meeting its obligation.

Both Stevensville Mayor Gene Mim Mack and County Commissioner Jeff Burrows said that after the recent meeting they are fairly certain that the participating government entities will have to come up with their share of the pledged funds. Both men also expressed a reluctance to consider any future guarantees, and both stated that the shippers also expressed an unwillingness to make any guarantees for future rail line use.

Officials at Selway Corporation could not be reached for comment in time for publication.

Foster said that a meeting between the shippers, government officials and MRL representatives was planned for March 25 to discuss the situation.

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