SUMMARY OF DISCUSSIONS

ABOUT POTENTIAL SALE OF THE PANHANDLE:

ORDC RETREAT, AUGUST 17, 2004

On August 17, 2004, Ohio Rail Development Commission (ORDC) Commissioners held a discussion concerning the potential sale of the 161 mile long Columbus to Mingo Junction “Panhandle” Rail Line at ORDC’s annual retreat. The discussions lasted over two hours. The handouts staff provided Commissioners, a summary of the draft appraisal, a summary of the State’s past investment in the Panhandle, and a list of possible questions to address are included herein as exhibits. Here is a summary of some of the key points of discussion.

Director Jim Seney began the discussion by giving a brief overview of where ORDC stood on the potential sale. He noted that the Columbus & Ohio River Railroad (C&OR), the operator of the line since the State acquired it in 1992, has made a request to purchase the line. Director Seney noted that an appraisal yet to be finalized by ORDC’s appraisal review consultants estimates the possible Fair Market Value of the Panhandle to be between $26 and $30 million. He noted that the Panhandle is no longer in any jeopardy of being abandoned and that ORDC could potentially use the proceeds from the sale of the Panhandle to rehabilitate and reconstruct short line corridors elsewhere in the state which are in dire need of upgrades.

Director Seney ran through some of the options which ORDC could consider including selling the entire line, selling a 50% interest in the line, selling just the track and fixtures and retaining the property, or selling nothing at all. Director Seney noted that ORDC has already gathered much public input and that under any sale scenario ORDC would retain certain key rights to protect the public interest in the line. He asked Commissioners to provide staff direction so that ORDC could potentially present a plan of sale to the public and line shippers, if such a sale plan appears to be feasible. He noted that any proposed plan would be adjusted appropriately to consider public and shipper input.

Commissioners Wolfe and Creighton questioned whether any proceeds from a sale would indeed go into ORDC coffers. Director Seney stated that of course ORDC would not proceed with any sale unless it was certain that proceeds would benefit ORDC. ORDC staff member Lou Jannazo added that Commissioners would want to know if the proceeds from a sale went into an ORDC grant or loan fund. Secretary-Treasurer Matt Dietrich clarified that as ORDC is currently structured, proceeds from any sale would go into the 4N4 account which is now a loan fund, but could be used for grants if the Office of Budget & Management so allowed. Chairman Jim Betts summarized the conversations by noting that ORDC would need to weight the good ORDC could do with proceeds from a sale against the benefits of ORDC maintaining continued ownership.

Commissioner Solomon Jackson commented that not all of ORDC’s deliberations could be couched in dollars and cents terms. He noted that rail lines had non-quantifiable value that must also be considered.

Commissioner Tom McOwen noted that $30 million was most likely more than any railroad could actually pay for the line because the business would not justify such a high cost.

After other discussions, the Commissioners generally agreed that ORDC staff can not really present a proposal for sale of the Panhandle until it negotiates with the C&OR over terms and conditions, and until it is known whether or not the proceeds could go into ORDC coffers. Commissioner Dan Roberts summarized the general feelings of the Commissioners stating that he believed that staff should conduct whatever negotiations and investigations were needed to develop a potential plan for the sale of all or part of the Panhandle, but that he and the other Commissioners reserved the right to reject the staff plan once they see it.

The ORDC Retreat was open to the public. Chairman Betts welcomed comments from those present.

Jim Ong of the Brotherhood of Locomotive Engineers noted that one option to consider was that of a local port authority buying the line. He stated local officials had investigated that option. He also asked what would happen if ORDC sells the line and the rail business on the line goes bad. He also noted that there could be a great value for fiber optics easements along the line. Chairman Betts noted that ORDC would be examining the fiber optics issue.

Rick Platt, Director of the Heath, Newark, Licking County Port Authority provided the letter herein attached as an exhibit. He stated that with CSX selling its 50% portion of the Panhandle between Newark and Columbus to the C&OR, Licking County would be a one railroad county if ORDC sold out to the C&OR also. He also noted that taking the proceeds from a sale of the Panhandle to save railroads elsewhere would be tantamount to Panhandle shippers saving the railroads in other places because the rates the Panhandle shippers would pay would provide the C&OR the funds it needed to buy the Panhandle from ORDC.

Gene Tollaty, one of the local leaders who fought for years to keep the Panhandle from being torn up, noted that ORDC could make money from the Panhandle without selling it. He noted that once the Panhandle debt is retired, the C&OR could pay ORDC directly for use of the line. (Under the current financial arrangement, the Panhandle debt will be paid off in 2012.)

Daniel Van Epps, a doctoral candidate at West Virginia University, noted that ORDC needs to consider that the AEP Conesville power plant could be reconfigured to use gas instead of coal in the near future making debt payments by the C&OR problematic after the loss of the coal traffic. He also urged ORDC to consider making the Panhandle and experiment in “open access” i.e. ORDC maintaining the line through usage fees, but allowing any railroad willing to pay usage fees to operate on the line.

Ed Lee of Coshocton Grain, a major Panhandle shipper, noted that a sale of the Panhandle could have an adverse impact on grain rates, especially to new ethanol plants being developed along the line.

PanhandleRetreatSummary