worth more dead than alive?rrdc.com/speech_nwk_trf_06_2014_slides_print.pdf · 2020. 1. 8. · risk...
TRANSCRIPT
1
WORTH MORE DEAD THAN ALIVE?
Lessons in railroading from Guatemala,
Estonia and… New Jersey
Henry Posner III Chairman
Railroad Development Corp.
www.RRDC.com
Presented to: Transportation Research Forum
NY Chapter, Newark Club June 25, 2014
www.RRDC.com
2
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
3
RDC – General
Pittsburgh-based, privately held railway investment and management company
Focus: Emerging Corridors in Emerging Markets
Financial structure based on Joint Ventures
www.RRDC.com
4
RDC – Businesses Overview Country Entity Length
Km (Miles) Employees Avg Annual Tons (in millions)
CURRENT:
USA Iowa Interstate 954 (592) 215 14.0
Peru Ferrocarril Central Andino 535 (332) 588 1.8
Germany Hamburg-Köln-Express 450 (280) 60 Passengers— start 7/2012
Colombia Ferrocarril del Pacifico 196 (122) 135 Start 7/2012
France RegioRail various 40 Start 12/2012
PAST: Tons Last Yr of Investment
Malawi Central East African Railways 797 (495) 417 0.22 (2008)
Mozambique Nacala Corridor 873 (542) 404 Rail 209 Port
0.2 Rail (2008) 0.9 Port (2008)
Estonia Eesti Raudtee 693 (431) 2,345 44.4 (2006)
Argentina ALL Central 5,690 (3,535) 1,200 2.3
ALL Mesopotamica 2,704 (1,680) 300 1.0
Guatemala Ferrovias Guatemala 322 (200) 13 N/A
www.RRDC.com
5
USA: Iowa Interstate Railroad
1,000 km of former Rock Island trackage between Chicago and Omaha
Rock Island liquidation in 1980 a major reason for deregulation
Abandoned as through route from 1980 to 1984; recapitalized 1991, 1997, 2005
Paralleled by BNSF, CN and UP
100% owned by RDC from January 2004
www.RRDC.com
6
SAFETY
Gold Harriman Award 2004 and 2008 for Safety Performance in Years 2003 and 2007
Iowa Interstate Railroad (cont.)
18
12
16
10
6 6
0
5
12 13
3
20
57 6
5 6
0
5
10
15
20
1997 1999 2001 2003 2005 2007 2009 2011 2013
FRA Reportable Injuries
www.RRDC.com
7
Iowa Interstate Railroad (cont.)
Traffic
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
CARLOADS 53,310 52,874 47,986 52,367 62,401 65,394 63,593 64,508 59,213 57,961 57,203 65,307 64,221 65,115 73,436 74,078 75,890 78,339 94,345 105,00 109,00 122,00 115,00
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
www.RRDC.com
8
Iowa Interstate Railroad (cont.)
New GE ES44ACs
Intermodal Facilities
Investment
Photo © Tom McNair
www.RRDC.com
9
Germany: Hamburg-Köln-Express
Service began July 2012, up to three roundtrips/day
“A rough start”…but a start!
www.RRDC.com
10
Hamburg-Köln-Express (cont.)
Yes, this is passenger service
No, there is no subsidy
No, we are not out to cannibalize DB
www.RRDC.com
11
www.RRDC.com
12
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
13
Unique!
Abandoned by public sector
Restored by private sector
100% equity financing (including funds diverted by government)
“Right of Way” development: electricity distribution, pipelines, lease of stations, etc.
Guatemala: Ferrovías Guatemala
www.RRDC.com
14
Ferrovías Guatemala (cont.)
“This isn’t Switzerland”
www.RRDC.com
Ferrovías Guatemala (cont.) SAFETY – 1.5 Years with No Personal Injuries
15
www.RRDC.com
2006 – “A License to Steal”
Pacific right-of-way seized by sugar and electricity industries
Ferrovías Guatemala (cont.)
16
www.RRDC.com
Ferrovías Guatemala (cont.)
17
2007 – Rail service suspended
www.RRDC.com
18
Ferrovías Guatemala (cont.)
2008-2012
Theft
www.RRDC.com
19
Ferrovías Guatemala (cont.)
1996 Abandoned by public sector
1999 Restored to operation by private sector
2005 Oligarch “offer” to become 50% shareholder without compensation “Offer” based on value of real estate
2006 “Lesivo” declaration = Indirect Expropriation
Culture of Impunity Jun 2007 Sep 2007
First-ever CAFTA claim: arbitration initiated at ICSID Operations suspended
2008 – 2012 Infrastructure stolen
2012 Arbitration award 2013 RDC paid $14.6 Million (6 years later)
TIME LINE
www.RRDC.com
20
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
21
Estonia: Eesti Raudtee
www.RRDC.com
22
Eesti Raudtee (cont.)
2001 Privatized Traffic increased from 38.7 M tons in 2001 to 44.4 M tons in 2006 Personal injuries reduced 75% between 2001 and 2006 Road locomotive fleet completely replaced
2003 Railways Act = Indirect Expropriation of Franchise Value Culture of Impunity
2005 Arbitration initiated
2007 Re-nationalized Win for politicians… …draw for investors… …loss for people…
TIME LINE
www.RRDC.com
23
The Centre Party’s View of Re-nationalization
“We bought the Railway back!”
www.RRDC.com
24
The Press View of Re-nationalization
“We’ve brought the ESSR back!”
www.RRDC.com
25
Eesti Raudtee (cont.)
2007 Political conflict with Russia decimated traffic 4 months after re-nationalization
2014 “Monopoly” handling 45 million tons in private
hands now handling 16 million tons in public hands
TIME LINE
www.RRDC.com
26
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
27
Risk vs. Reward
RISK REWARD Anticipated Actual Reward Mitigation
Estonia Traffic Expropriation Sale Privatization Agreement
Guatemala Traffic, Financing Expropriation Arbitration CAFTA
(Public Sector = Primary Source of Risk)
www.RRDC.com
28
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
29
Industry Conclusions
Public sector = biggest source of risk
Railways are worth more dead than alive… (and worth more than they used to be…)
Expropriation is not limited to developing countries (Example: Estonia, a member of the EU)
Value + Regulation = Corruption
www.RRDC.com
30
Industry Conclusions (cont.)
Rail is a viable private sector business…as confirmed by value-driven expropriations
Shareholder Structure is best form of risk mitigation, not Business Plans
Rule of Law is a secondary defense and more important than Privatization Agreements
31
“The only struggle that is lost is that which is abandoned”
31
www.RRDC.com
32
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
33
Princeton: Facts “Then”
Daily ridership: 2,000 Photo courtesy: savethedinky.org
Photo courtesy “Metro” Magazine
www.RRDC.com
34
Princeton: Facts
Proposed Terminus Move
www.RRDC.com
35
Princeton: Facts (cont.) “Now”
Daily ridership down 13% (3rd Qtr. 2013)
www.RRDC.com
36
“Governor Chris Christie Personal Fitness Trail”
Princeton: Facts (cont.) “Now”
www.RRDC.com
37
Princeton: Facts (cont.)
^ ^
www.RRDC.com
38
Princeton: Time Line
1970s railroad crisis / 1st Save The Dinky committee
1976 Princeton branch designated to Conrail, operated via NJ DOT contract
1983 branch transferred to NJ Transit Rail operations
Mar 1984 Jun 1984 Oct 1984
station placed on NJ Register of Historic Sites Conrail transfers title to NJ DOT
NJT transfers station property to Princeton U. for approx. $900,000, reserving easement & operating rights; contract has provision giving Univ. right to move terminus southward (never submitted to NJ DEP for approval)
1988 terminus moved to southern half of platform, track removed from northern half
www.RRDC.com
39
Princeton: Time Line (cont.)
1996 contract amended to provide for relocation of passenger facilities from northern bldg to southern bldg; however, never relocated
Jan 2006
Sep 2006
Univ. announces largest-ever gift of $101 M from Peter Lewis for a Performing Arts Center to be located near McCarter
Univ. announces plans for new driveway to Lot 7 garage; “It’s very helpful to move the terminus 500 feet closer to Princeton Junction”
2008 Plan to move terminus draws strong opposition from community at Univ. meeting (Feb 20th)
2006 – 2009 Univ. discusses terminus relocation plan w/ NJT & Gov. Corzine admin
www.RRDC.com
40
Princeton: Time Line (cont.)
May 2009
Nov 2009
NJT staff communication that State Historic Preservation Office (SHPO) will ask NJT to make formal statement that grade crossing is “absolutely not permitted” to promote “reasonable compromise in order to save the historic location and setting of the station.” NJT staff member replies, “this is not NJTransit’s project…the University is responsible for all the planning, engineering and approvals for this project.”
Gov. Corzine defeated; Chris Christie elected, assuming Univ. board seat
2010 Univ. begins discussions with Governor Christie
Jan 2011 Per Univ. report, Christie admin (including Chief of Staff, Lt. Governor, and Transportation Commissioner), people responsible for “the funding for the Dinky” are strongly supportive of Univ. project
www.RRDC.com
41
Princeton: Time Line (cont.)
2010 - 2011
Responding to terminus relocation threat and BRT proposal, Save the Dinky group forms & attracts 7,000 members to oppose the BRT plan 2010 (Dec.); Princeton Regional Planning Board rejects BRT proposal, passes resolution approving retention and strengthening Dinky service
Faced with continuing opposition to the terminus relocation proposal, Univ. & NJT now argue that the Univ. has the “right” to move the terminus southward again under 1984 contract
Oct 2010
Dec 2010
Univ. notifies NJT that it “intends to exercise its right pursuant to… (the 1984 contract)…to move the terminus southward…”
NJT Planning & Projects Director responds that he is “your point of contact”
www.RRDC.com
42
Princeton: Time Line (cont.)
Jan 2011
Princeton Borough Council & Princeton Township Committee hold a joint zoning meeting:
Univ. delivers ultimatum: either Univ. gets its zoning or it will relocate the arts project elsewhere
Univ. states that alternatives have been explored and grade crossing has been definitively ruled out
Univ. presents letter from Gov Christie to the Mayors urging support for arts project, stating that relocation is best plan for Dinky
Governing bodies decline to vote; many in audience speak in opposition
www.RRDC.com
43
Princeton: Time Line (cont.)
Mar 2011
Univ. states that NJT & Atty General’s office are in full agreement that Univ. has unilateral right to move the terminus southward as long as it covers cost
25th – NJT letter to Univ. stating “no objection” to proposal to move terminus 460 ft southward, understanding that such a move was “specifically contemplated in the 1984 contract and that even if agreement were silent, agreement does not prohibit
Jun 2011
NJT meets with Borough Council, states:
Univ. has “legal binding right to move the station under the 1984 purchase contract”
Dinky doing better financially than overall system
“The big economic development opportunity will increase ridership with marginal impact on present users”
Dinky station topic will not go before NJT’s Board since there is an existing contract that is binding (according to Atty Gen)
www.RRDC.com
44
Princeton: Time Line (cont.)
Aug 2011 RDC proposal for a public-private partnership for Borough to acquire Dinky land through eminent domain
Nov 2011
Save the Dinky and individual plaintiffs file lawsuit in NJ Chancery Division based on the `84 contract seeking determination that the contract does not permit a second terminus move. Princeton U. named as defendant; NJT named as potential intervener and subsequently added as defendant.
Princeton Borough & Township vote to consolidate effective Jan 2013
Jan 2012 NJT files a “Track Removal Application” with NJ State Office of Historic Preservation (SHPO) seeking approval for plan to “prematurely abandon” its easement at the northern end of the Princeton Branch
www.RRDC.com
45
Princeton: Time Line (cont.)
Apr 2012 Historic Sites Council (HSC) recommends approval, relying on advice from SHPO who defers to NJT and says little choice under `84 contract
May 2012 DEP adopts the HSC resolution and authorizes the track removal
Jun 2012
NJT states that neither state or federal laws require NJT to hold a stand-alone hearing “because service is not being eliminated. The station location is merely being slightly adjusted.”
25th – Save the Dinky appeals the May 11th DEP ruling to the Appellate Div.
www.RRDC.com
46
Princeton: Time Line (cont.)
Jun 2013
Contract case ruling that plaintiffs have standing to make arguments under the 1984 contract but do not have standing to enforce pedestrian (?) easement
24th – NARP & NJARP petition with Surface Transportation Board (STB) seeking ruling that plan to abandon the Station facility is subject to STB abandonment jurisdiction, requiring STB approval
25th – NJT Board holds a last-minute meeting to authorize various property transfers to Univ., including authorization to exchange the easement on almost 3 acres of the station and adjacent property for an easement on a lesser acreage farther to the south; Univ. the difference in value, which sum is to be determined via appraisal.
www.RRDC.com
47
Princeton: Time Line (cont.)
Aug 2013
16th – Save the Dinky applies to DEP to stay authorization of track removal project since it appears that NJT plans to abandon easement when temporary station is in operation. Commissioner Bob Martin eventually denies stay; Appellate Division declines to grant a stay but does grant an accelerated appeal
23rd – Save the Dinky also applies to Judge Innes for temporary injunction, which Judge Innes denies
26th – branch cut back to temporary station 1,200 ft to south of historic station
University claims it will indemnify NJT for restoration costs if court finding against NJT.
www.RRDC.com
48
Princeton: Time Line (cont.)
Sep 2013
9th – NJARP and Save the Dinky file appeal to Appellate Division re: June 25th NJT Board ruling, arguing that:
Under Public Transportation Act of 1979 abandonment of station facility required full public hearing
Gov. Christie should have recused himself because he serves ex officio on the Univ. Board of Trustees
Oct 2013 NJT reports ridership down by 13% for 3rd quarter 2013
www.RRDC.com
49
Princeton: Time Line (cont.)
Dec 2013
23rd – Judge Innes issues opinion in contract case:
Dismissing complaint that Univ. does not have right to move terminus
States that contract did NOT give the Univ. the unilateral right to move terminus and that NJT retained full power to approve or disapprove, and that NJT had approved
Jan 2014 “Bridgegate”
Feb 2014 NJT reports ridership down 10% for 4th quarter 2013
www.RRDC.com
50
AGENDA
Background on RDC Lessons from:
Guatemala Estonia
Risk vs. Reward Industry Conclusions Princeton - Facts Princeton - Options
www.RRDC.com
51
www.pacer.org/bullying | www.stopbullying.gov
Princeton: Options
www.RRDC.com
52
Princeton: Options (cont.)
CAUSES DEFENSES ROOT CONTRIBUTING PRIMARY SECONDARY Value Culture of Impunity Rule of Law Reputation
Guatemala Real Estate “Lesivo” CAFTA “Replacement Investors”
Estonia Access Charges Railways Act Privatization Agreement EU Accession
Princeton Station Real Estate “The Fix is In”
• Selected NJ Venues • National Venues such as STB
• New Jersey − Press
• Princeton Univ. − Alums − Brand
• Allies − Community Groups − Transportation Groups − Environmental Groups
www.RRDC.com
53
Facts on the Ground: June 2014
Station relocated, but NJT indemnified
Ridership down
Leadership changes at Princeton U., NJT
“Bridgegate”
www.RRDC.com
54
Questions and Answers