New Orleans could stand to make as much as $55 million upfront and another $76 million over a 40-year term under one of five proposals submitted by companies interested in leasing the Public Belt Railroad.
In fact, all five firms that have expressed interest in taking over the city-owned railroad crossed an initial hurdle this week in the city's nearly two-year effort to reach a long-term deal that could net tens of millions of dollars for the city.
The Public Belt includes 26 miles of track that connect six major rail lines serving the port and industrial facilities.
The companies that responded to the city's request for qualifications include Illinois-based Anacostia Rail Holdings; New York-based MidRail; Colorado-based OmniTrax; and Watco Companies, a Kansas-based transportation firm. Another response came from a joint team of Connecticut-based Genesee & Wyoming and Oaktree Capital Management, a California global asset management firm.
Details about each proposal were unveiled Wednesday, when a selection committee reviewing the responses advanced all five to the next stage in the process, requesting that the companies now submit binding offers.
The Advocate reviewed the responses through a public records request.
The city sought deals that would generate at least $60 million for the city over 40 years, and each proposal exceeded that benchmark.
Anacostia proposed a $22 million upfront payment and $83 million in total lease payments; G&W, $20 million upfront and $113 million over the life of the lease; MidRail, $55 million upfront and $76 million in total lease payments; OmniTRAX, $30 million upfront and $78 million over the lease; and Watco, $24 million upfront and $69 million over the lease.
"It totally validates that there is a lot of interest from major players to invest in this asset and to give the taxpayers a greater return on their investment," said Ryan Berni, a top aide to Mayor Mitch Landrieu. Berni attends Public Belt board meetings as the mayor's representative.
The responses were due last month, nearly two years after speculation over the fate of the railroad began when Thomas Coleman, the former CEO of International-Matex Tank Terminals, expressed an interest in buying it. (Coleman is the father of Dathel Georges, who owns The Advocate along with her husband, John Georges.)
Landrieu previously urged the Public Belt's board to consider selling, but that idea drew vocal opposition from local trade groups and maritime leaders, who fear that losing control of the railroad would push prices higher for some users or lead to preferential treatment for others.
Perhaps to help alleviate those concerns, the five proposals largely sought to strike a cooperative tone with the Port of New Orleans and local businesses.
For example, Anacostia's proposal says that the rail operator, the port and the city need to work toward "a common vision" that "promotes the ultimate competitiveness of the port, its customers and the other customers served by the railroad."
The city has since removed a sale from the discussion and pressed ahead with pursuing a public-private partnership. Any agreement is expected to call for the operator to assume "the long-term business risks through the operational, capital improvements, maintenance and carrier responsibilities of the NOPB core rail operating assets."
The proposals were scored on several criteria, including feasibility, alignment with the city's objectives and an operator's past experience operating a railroad.
Last year, the consulting firm KPMG pegged the railroad's value at between $61 million and $196 million, not including the Huey P. Long Bridge over the Mississippi River in Jefferson Parish, which the agency also owns. The bridge would be included in the potential lease.
All five proposals scored within about 50 points of one another out of a maximum of 500. MidRail received the highest marks, followed by Genesee & Wyoming, Anacostia, OmniTRAX and Watco.
The selection committee included two top Landrieu aides, including Jeff Hebert, the city's chief administrative officer, and Sewerage & Water Board Executive Director Cedric Grant, as well as Shawn Wilson, secretary of the state Department of Transportation and Development; Tommy Clark, commissioner of the Office of Multimodal Commerce; and Brett Bourgeois, executive director of the New Orleans Board of Trade.
Each company identified ideas for bolstering the railroad's efficiency and increasing its profitability, as well as for seeking out new business or adding services that could pad the agency's bottom line. Most said they would keep rates flat for existing port customers, at least for the first few years.
Genesee & Wyoming, which owns and operates 122 railroads worldwide, anticipates making as much as $4 million in annual capital improvements.
MidRail does not operate any freight lines at present but is working to acquire and develop some, according to its proposal. The company said its management team has lengthy industry experience. It said it anticipates spending roughly $2 million a year on maintenance and capital expenses.
Several committee members welcomed the potential new investment.
The Public Belt has "been so under-invested that just bringing them to the 20th century would be nice, and the actual prospect of bringing them to the 21st century would be great," Grant said.
Anacostia said it "is motivated to establish a beachhead in the Gulf Coast container trade, which we anticipate will expand not only because of the Panama Canal, but also as the result of the shift of manufacturing to South and Southeast Asia from North Asia."
OmniTRAX, which provides management services to 21 short-line rail roads in North America, said it would work alongside rail customers, as well as the port, to help attract and grow business.
MidRail, which said it has $1 billion in capital to invest, would expect to spend nearly $38 million on the Public Belt in the near term in part to increase the system's fluidity. It said it "strongly believes that, with the right management and access to capital to enhance the current rail infrastructure, the lease of the NOPB can be a tremendous boon for the city of New Orleans and for its citizens."