Category Archives: Kellar Branch

City of Peoria, Kellar Branch

Carver Lumber pleads for Kellar access

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Carver Lumber recently wrote the Surface Transportation Board (STB) and pleaded with them to let Pioneer Industrial Railway provide them service over the Kellar Branch. It’s technically called a petition for “Alternative Rail Service.” The idea is that everyone is kind of in limbo waiting for the STB to rule on whether service over the Kellar Branch should be discontinued or not, but in the meantime Central Illinois Railroad (CIRY), the city’s current carrier, refuses to run on the old Kellar Branch, even though they have an obligation to do so until the STB gives them approval to stop.

So, during this “limbo” period that CIRY is refusing to carry out their common carrier obligation, Pioneer is offering to provide that service instead. Clear as mud? Carver writes:

Several weeks ago Carver Lumber Company requested that the board restore our rail service over the Kellar Branch in Peoria County, Illinois. On July 27, 2006, Pioneer Industrial Railway Co. filed an Alternative Rail Service Request, which we support. To date, Central Illinois Railroad Company continues to refuse to provide service over the Kellar Branch, despite its common carrier obligation to do so.

Our business desperately needs reliable rail service. We urge the board to act as quickly as possible to grant Pioneer Industrial’s Alternative Service request.

It’s kind of sad that Carver has to appeal to the STB to get any relief. You’d think that Peoria, that’s supposedly trying to become more business-friendly, would be on Carver’s side, trying to get them the rail service they need. You’d think that Steve Van Winkle, who promised Carver in writing that “the City stands ready and willing to enforce all aspects of its contract with [CIRY]” would stand by his word and actually seek relief for Carver’s unnecessary expenses due to CIRY’s breach of contract.

But no. The city lied. The city wants Carver to go away. The city wants to throw away those 50 jobs, sales taxes, property taxes, and of course the $565,000 rail asset. All for a hiking/biking trail.

UPDATE: CIRY and the City have written the STB in response to Carver Lumber’s request. They point out that once a car is placed on the new western spur by Union Pacific, CIRY promptly delivers the car to Carver Lumber. Thus, they claim CIRY is fulfilling its common carrier service. Completely ignored is the fact that Carver could have gotten that shipment sooner had CIRY (or Pioneer) picked up the car downtown and taken it up the Kellar Branch instead of waiting for UP to place it on the western spur. It would be cheaper, too. Just one more example of how the City has no interest in dealing fairly with Carver Lumber Company.

Kellar Branch

Is City fabricating evidence in Kellar Branch dispute?

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The latest goings-on regarding the Kellar Branch involves the cost to make the embattled rail line operational again. As reported in a previous post, the City contends that it would be too expensive now to make the Kellar Branch operable, originally claiming that it would cost over $2 million to make the necessary upgrades. Then, just a few days later, they claimed it would only cost $50,000.

Well, now they say, in a Surface Transportation Board (STB) filing on August 16, that what they really meant to say was $500,000, not $50,000. That was a typo — a typo it took them apparently 14 days (August 2-16) to discover. Oops! Then, in the very next breath, they say “On August 4, 2006, Central Railgroup Construction Services, LLC provided a more detailed estimate of the cost of that rehabilitation in the amount of $546,705.”

Ah, okay, let me see if I’ve got this straight now. It’s not $2 million, or $50,000, or $500,000. Those figures were all wrong. The real figure is $546,705. Okay, got it.

It seems the city can’t quite make up their minds how much it costs, frankly. There was no source given for the original estimate of $50,000 (or $500,000, if you believe it was a typo). Yet two days later, they received an exact quote for roughly the same amount. What a coincidence! And just where did that figure come from?

The last figure comes from a company called “Central Railgroup Construction Services, LLC.” According to the State of Illinois LLC file, that company was established on August 2, 2006, and lists the same address and agent as Central Illinois Railroad Holdings, LLC, which just acquired CIRY. On August 4, this brand new company was able, based on their two-days worth of experience, to estimate how much it would cost to rehabilitate the Kellar Branch. And, by jove, it’s right around $500,000, the new and improved, if unverified, estimate from the city.

Meanwhile, Pioneer Railcorp, which has been in business considerably longer than two days and has extensive experience actually running trains successfully over the Kellar Branch, has estimated it would only cost a little under $10,000 to rehab the line, and they’re willing to do that out of their own pocket.

Furthermore, the rail line was operable when Pioneer was forced off the line, and the contract between the City of Peoria and Central Illinois Railroad (CIRY), specifically stated (at 3.4):

DOT [parent company of CIRY] shall assume responsibility for all maintenance of tracks, crossing protection, and roadbed including weed, brush, snow and ice control thereon, all drainage control maintenance, and all weed and brush control on the remainder of the right-of-way, following the guidelines set forth by the Federal Railroad Administration (FRA).

That contract didn’t expire until 60 days after the ciy completed the western spur. The western spur was just completed in March of this year, meaning the contract expired in May. Thus, CIRY (through its shell company Central Railgroup Construction Services) essentially admits that they broke their contract to keep the line maintained.

We already knew that CIRY broke their contract to provide service over the Kellar Branch by never delivering one shipment successfully over the line. The only time they even attempted it, they were so inept that they lost control of the train and endangered the lives of Peoria citizens.

And the City, which promised Carver Lumber they would take legal action against CIRY if they broke their contract, never so much as filed a complaint against CIRY. Never. Now, their continuous unverified cost estimates to repair the Kellar Branch is just the latest in a series of obfuscations and fabrications by the city to dupe the STB into killing the Kellar Branch, regardless of the money lost, assets destroyed, or businesses ruined.

Call your council members and demand they stop wasting our money and sell the Kellar Branch to Pioneer Railcorp.

City Council, City of Peoria, Kellar Branch

City walking over dollars, looking for dime

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On Tuesday night, the city council was reminded again about the impending budget crunch due to new accounting regulations known as GASB45:

GASB refers to the General Accounting Standards Board, an operating arm of the private Financial Accounting Foundation. GASB establishes standards of state and local government accounting. And Section 45 is a policy adopted by the board in 2004. It requires that governments must account today for future costs of guaranteed medical benefits for retirees…. [Those] higher costs, when the bills eventually come due, must be paid for by higher taxes or reduced services.

Standard and Poor’s, which takes this seriously because it rates government credit, said in a December 2004 report that GASB could uncover much higher costs that could “seriously strain operations” or uncover conditions in which governments “are unable or unwilling to fulfill these obligations,” which could hurt governments’ credit ratings.

So, Peoria is going to be facing some potentially drastic measures, such as making cuts in health care coverage for employees. Since that’s unpopular, every item of business, no matter how small, came under scrutiny. They even spent time haggling over hiring a part-time training coordinator for a mere $5,000.

I would be more sympathetic to these conscientious cost-cutting measures if it weren’t for the fact that the city council is poised to throw away a $565,000 asset without giving it a second thought. While they’re haggling over $5,000, the park district can hardly wait to get the word that it’s okay to tear out a half-million dollar rail line known as the Kellar Branch — a rail line for which there is a willing buyer or lessee — so they can turn it into a hiking trail. The irony is that the city could get the money and the trail, too, if they’d accept Pioneer Railcorp’s offer to buy or lease the line.

If the city council is really interested in plugging the GASB45 gap, then they should stop walking over dollars to pick up a dime.

City of Peoria, Kellar Branch

How much does it cost to rehab Kellar rail line?

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On July 24, the City of Peoria stated in a filing with the Surface Transportation Board (STB) that, according to a 2000 estimate from IDOT, it would cost approximately $2,015,469 to rehabilitate just 6.29 miles of the Kellar Branch rail line.

On August 2, just a week and a half later, the City of Peoria stated in a filing with the STB that, according to a 2006 Federal Railroad Administration (FRA) inspection report, it would only take $50,000 to rehabilitate 8 miles of the Kellar Branch rail line.

That’s a difference of about $1,965,469.

It sounds like the city is not only not putting forth a good-faith effort to provide Carver Lumber the level of service they promised, but is also reporting outdated and misleading estimates to the STB to make the track rehabilitation costs sound worse than they really are.

Kellar Branch, Peoria Journal Star

Why should city allow park district to destroy $565,000 asset?

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That’s the question the Journal Star’s editorial doesn’t ask or answer.

Pioneer Railcorp has a standing offer to purchase the Kellar Branch for $565,000 or accept a long-term lease on it.  The Peoria Park District wants to lease the right-of-way for $1 per year for 99 years and remove the rails and ties, thus destroying this half-million dollar asset owned by the city.

The city is going to begin budget negotiations soon.  On their plate: figuring out a way to fully staff fire station 11, increase police protection, and comply with GASB 45, all without raising taxes or spurious “garbage fees.”

Maybe one would argue that the trail will be more profitable than the rail line.  Of course, that’s patently ridiculous, but even if it were true, who says you have to have one or the other?  Pioneer has also offered $100,000 as well as equipment to help build the trail next to the Kellar Branch rail line.  Between that money and the state grants the park district has already applied for and received, there’s no reason we can’t have both.

In the Journal Star’s world, they would rather rob the fire department to fund the police department and give the park district a half-million dollar asset to squander.  Hopefully the city will come to its senses and not continue pursuing such short-sighted and ruinous advice.

Kellar Branch

Shell game afoot with Kellar carrier?

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As reported here on Tuesday, the carrier Peoria hired to operate the Kellar Branch and western spur, Central Illinois Railroad Co. (CIRY) which is owned by DOT Rail, looks to be acquired by a mysterious company called Central Illinois Railroad Holdings, LLC.

I tried unsuccessfully to find out any information on this “Holdings” company. The document doesn’t disclose who the directors are in the company, and there’s no information on the internet about them. Making things more questionable, their address is for a third-floor suite in a building in Willow Springs, Illinois, that the West Suburban Chamber of Commerce still shows as for lease. All indications are that this LLC was created solely to acquire DOT Rail’s assets, which begs the questions “why?” and “who are the players here?”

That’s exactly what Pioneer Railcorp would like to know. In a filing yesterday with the Surface Transportation Board (STB), Pioneer seeks to at least delay the approval of this transaction until further information is disclosed. Pioneer has an interest because there is litigation pending in state court between Pioneer and CIRY, and this could be an attempt by DOT Rail to shield their assets in the event the court rules in Pioneer’s favor.

Pioneer brings up several other oddities about this transaction. For instance, the petition was submitted on CIRY letterhead, not “Central Illinois Railroad Holdings, LLC” letterhead. Yet the “Holdings” company is the petitioner. Also, the attorney who filed on behalf of “Holdings” is Melinda Sammons, the CFO of CIRY! As Pioneer succinctly put it, “This places Ms. Sammons in the position of being both the attorney for the buyer and as also having a fiduciary duty to the seller.”

I can’t help but wonder what the City of Peoria thinks of this transaction. They have an interest, too, of course. Even Pioneer points this out:

As previously noted, the Board is fully aware of the ongoing litigation surrounding CIRY, PIRY [Pioneer], and the Kellar Branch. Would Holdings’ acquisition of CIRY change that litigation? Does Holdings plan to continue pursuit of CIRY’s discontinuance once it acquires control? Would Holdings use its newfound control and ownership to actually operate the Kellar Branch? What about the Western Connection and the interchange with UP, will those continue to operate as they do today? There is absolutely no information contained in the record of this proceeding to help the Board and the public understand the answers to these questions. Yet, Holdings’ control of CIRY could completely impact or subvert the Board’s decision making process in those other proceedings.

Is the city even aware of this? It doesn’t appear they’ve filed any objection to it yet. You’d think they’d want to know who this new carrier is going to be and perhaps get some assurance from them that their contract with the city will still be honored.

This transaction gets curiouser and curiouser.

UPDATE: Central Illinois Railroad Holdings, LLC, has withdrawn their petition before the STB (today, 8/3/06). Melinda Sammons states, “It is my understanding from my discussions with Mr. [Marc] Lerner [Branch Chief in Office of Proceedings] that this filing is not required.” So, it looks like this will go through without any oversight at all, leaving us all to wonder what will happen next.

Kellar Branch

Lease loophole could save Kellar Branch

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The City of Peoria entered into a lease agreement with the Peoria Park District in 2002 that would allow them, if and when the Surface Transportation Board approves the discontinuance of service, to turn the Kellar Branch into a hiking/biking trail. I didn’t even realize that there was a lease agreement until recently.

The good news is that it’s still possible to retain rail service under this contract. Section 4.2 specifically states:

4.2 Possible Reactivation of Rail Service. The Park District acknowledges that its lease of the PPD Project Site is subject to possible future reconstruction and reactivation of the right-of-way for rail service. In the event that subsequent to the commencement date, the City determines that it will apply to the Surface Transportation Board (or any successor government agency) for authority to reconstruct and reactivate rail service on all or a portion of the right of way described on Exhibit 1 attached hereto, the City agrees to provide the Park District with written notice of its intention to make such an application to the Surface Transportation Board at least 180 days prior to date of filing of such an application with the Surface Transportation Board. In the event that the Surface Transportation Board would then authorize the reconstruction and reactivation of rail service on all or a portion of the right of way described on Exhibit 1 attached hereto, the City agrees to pay to the Park District the then current fair market value of the PPD Improvements which would be destroyed, removed or taken out of service due to the reactivation of rail service.

Since the park district has not done any improvements yet, this is the perfect time to reactivate rail service and renegotiate for a side-by-side rail/trail compromise. Why should the city lease this right of way to the park district for a paltry $1 per year for 99 years when it could sell it to Pioneer Industrial Railway for over $500,000 or negotiate a profitable long-term lease for rail service — especially since Pioneer’s offer to help build a side-by-side trail is still on the table?

Compare this lease agreement with Pioneer’s offer and tell me if the city is being fiscally responsible if they don’t reverse this course of action. This isn’t an either-or proposition, it’s a both-and solution. If they take Pioneer’s offer (and remember, Guy Brenkman is no longer in the picture, so there’s no personal axe to grind anymore), they get rail service, competitive access to Pioneer Park and Growth Cell 2, and the park district’s beloved bike trail. What do they have to lose?

Kellar Branch

DOT Rail going out of business?

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According to a filing with the Surface Transportation Board, DOT Rail Services (Granville, Ill.) is selling “substantially all of [its] assets,” including Central Illinois Railroad Co. (CIRY), to Central Illinois Railroad Holdings, LLC (Willow Springs, Ill.) for approximately $3 million in cash.

CIRY is the carrier the city chose to replace Pioneer Industrial Railway on the Kellar Branch. Details of the transaction, as well as what impact (if any) this will have on the Kellar Branch saga, are unknown at this time.

Kellar Branch

Pioneer offers immediate relief for Carver Lumber

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Pioneer Industrial Railway (PIRY) filed a petition with the Surface Transportation Board (STB) today to provide alternative rail service to Carver Lumber over the Kellar Branch.  Pioneer argues that, since the city and Central Illinois Railroad (CIRY) are providing inadequate and overpriced service via the western connection and refuse to route cars over the Kellar Branch any longer, the STB should allow Pioneer that service instead.  The STB has the authority to make such a determination if it so chooses.

This is a little technical, but in this particular filing, Pioneer is not asking to restore service permanently on the Kellar Branch (that falls under a different petition that is still pending).  What they are asking is to provide service over the Kellar Branch in the interim — that is, until the STB rules on whether service over the Kellar Branch should be permanently discontinued.

The city contends that the Kellar Branch is in such a state of disrepair that it would take over two million dollars to fix it.  Pioneer disputes that claim and offers to repair the trackage out of its own pocket if allowed to provide immediate service to Carver by the STB.

The STB could decide on this petition any time, since it’s not contingent on the outcome of the city’s request to discontinue service over the Kellar Branch.  Their answer to this request from Pioneer might be an indication of which way they’re leaning on that larger issue.  Stay tuned.

City of Peoria, Kellar Branch

Carver asks city to reimburse $41,000 in shipping costs

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As I mentioned last Friday, Carver Lumber has filed its report to the Surface Transportation Board regarding the service it has been receiving via the newly-built western spur. You can read their letter here (84KB PDF file).

They give a lot of details, but the basic facts are these:

  • Deliveries that used to take 1-2 days via the Kellar Branch hauled by Pioneer Industrial Railway (PIRY) are now taking 4-8 days via the western spur hauled by CIRY — a 400% increase in delivery time.
  • The cost of delivering rail cars via the western spur is double what it cost for PIRY to deliver the same cars via the Kellar Branch.

Slower delivery, higher costs. But here’s the kicker (emphasis mine):

As I believe the STB knows, service to Carver via the Kellar Branch was interrupted due a CIRY [Central Illinois Railroad Co.] runaway/derailment/collision during their first delivery attempt to Carver forcing us to transload material for a period of nearly 5 months […] resulting in costs to date of $41,605.10 which neither the City or CIRY have been willing to reimburse. We are currently seeking the aid of independent legal counsel in an effort to collect these costs. […] [W]e believe the City of Peoria is obligated to provide Carver Lumber with sufficient rail service, and that the disruption in rail service experienced by Carver Lumber should be compensable.

The city, which has $60,000 to spare for decorative garbage cans, millions for a museum, and no limit to TIF districts for local developers, is unwilling to reimburse $41,000 to Carver Lumber — a local business for over 60 years — for increased shipping costs that were the direct result of the city’s own negligence and unwillingness to enforce its contract with CIRY. And the city wonders why it’s perceived as not being business-friendly.

Carver further states they have “tried to work with both the City of Peoria (CIRY) and the Union Pacific to address the issue of guarantying minimum levels of service and rate stability to no avail.” That’s a far cry from Public Works Director Steve Van Winkle’s November 10, 2004, letter to Carver Lumber that stated (emphasis mine):

This letter is, in part, to tell you that the City has no intention of discontinuing service over the Kellar Line until the western connection is fully operational. These two projects are currently timed to coincide well. In the event that either is delayed, the City assures you that it will make an adjustment in the timeframe so that there is no interruption of your rail service. We will not discontinue service over the Kellar Line until the western connection is fully operational.

As for the ability of the City to intercede on your behalf should issues of service andlor cost arise in the future, we call to your attention that we have contracted with DOT [parent company of CIRY] for service from the West. Article 14 of that contract specifically provides that DOT shall pick up and deliver cars within 24 hours after being notified by the UP that the cars have been placed on the Peoria Pioneer Spur. The City stands ready and willing to enforce all aspects of its contract with DOT and with the Union Pacific Railroad. The City has the ability, under its agreement with DOT, for all legal remedies up to and including termination which would allow the City to replace their service with another company.

CIRY never did make a successful delivery over the Kellar Branch, thus service was discontinued before the western spur was completed, resulting in the $41,000 in extra shipping costs.  Furthermore, their deliveries have been taking 4-8 days instead of the 24-hour turnaround promised by the city and specified in CIRY’s contract. Yet not only does the city not enforce their contract, which CIRY has demonstrably breached in most egregious manner, it won’t even reimburse Carver for the results of that breach of contract!

Carver concludes their report by asking that the Kellar Branch be reinstated and that Pioneer Railcorp be allowed to provide service over it, due to CIRY’s “demonstrated inability, and stated unwillingness, to provide service over the Kellar Branch.”