For more than a century, New Orleans has owned and operated a unique riverfront asset: the Public Belt Railroad, which includes 25 miles of track that connect the six major rail lines serving the port and nearby industry facilities.
Now, Mayor Mitch Landrieu is pushing the agency’s board to consider selling the railroad, which would provide a cash infusion for the city. But the idea — being floated for the second time in five years — has gotten a tepid reception from trade groups and local maritime leaders. Relinquishing control of the railroad, they worry, could push prices higher for some users or lead to preferential treatment for others.
Six of the seven Class I freight railroads that operate in the U.S. connect at New Orleans and depend on the Public Belt to move cargo through the local port. That’s the most such railroads of any seaport in the country.
The potential sale is “the biggest single issue in the maritime and port world in New Orleans,” said Gary LaGrange, president and CEO of the Port of New Orleans.
To boost revenue, LaGrange and others warn, a new owner could decide to run trains faster and run them more often, which would challenge the city’s aging infrastructure and create headaches for riverfront residents and the tourism industry. Skeptics also worry about unfairness.
“The worst-case scenario you could have is a high bid from one of those six railroads that is accepted and then they would be able to provide preferential treatment of their cars and get quicker service,” said Eric Smith, an associate director of the Tulane Energy Institute.
The speculation surrounding the Public Belt ignited nearly two years ago, when Thomas Coleman, the former CEO of International-Matex Tank Terminals, announced he was interested in buying it. Coleman is the father of Dathel Georges, who, along with her husband, John Georges, owns The Advocate.
Nearly two years later, it’s unclear whether Coleman remains interested. His attorney, James T. Rogers III, did not respond to a message seeking comment. Coleman has not publicly discussed a possible purchase price.
But in a 2015 letter sent on Coleman’s behalf, Rogers made his case to the Public Belt’s board. He said a sale would give the agency access to money for capital improvements and would provide the city’s coffers an “immediate and significant cash infusion to invest back into basic city services.”
He added that selling the public asset to a private concern would put the railroad on the property tax rolls.
Few fans outside City Hall
Responding to Coleman’s proposal at the time, Landrieu noted that the Public Belt already had “fielded numerous inquiries from six different entities, including Class I and Class II railroads,” but that a committee reviewing the idea was unmoved.
At a community meeting Thursday in Algiers, Landrieu — who is a voting member of the Public Belt’s board — said he’s still interested in the idea.
Describing the city’s dire financial straits when he took office and inherited a $100 million deficit, Landrieu said, “I started to think: What if we had a massive asset that really was not a part of essentially what the city of New Orleans was doing, that we could sell it and make a good value?”
So far, the idea seems to have gained few fans beyond City Hall. In a crowded Public Belt board meeting last month, more than a dozen business leaders and rail workers spoke against a sale, arguing that it would be short-sighted and create uncertainty.
At the meeting, the Public Belt’s 10-member board reluctantly voted to move ahead with a 60-day study to consider various options, including selling the railroad as well as keeping the status quo.
Several board members, including President Pro Tempore Lynes “Poco” Sloss, David Schulingkamp and Kyle Wedberg, spoke out against a sale.
“My general feeling is that the Belt is doing a good job,” Sloss said. “I understand that the city is looking for funds. I think the Belt is doing a good job the way it is, so my bias would be toward keeping it, but I want to finish the process.”
Selling the railroad would require approval from the board as well as the City Council — hurdles that at the moment look like they would be difficult to clear.
Symbol of corruption
For most New Orleanians, the Public Belt wasn’t a household name until it became a symbol of corruption a few years ago amid reports of lavish spending by the agency’s then-general manager, Jim Bridger.
A 2010 state Legislative Auditor’s Office report revealed exorbitant spending by Bridger, including illegal bonuses and charitable gifts, pricey meals billed to the agency and loans of the railroad’s painstakingly restored antique Pullman cars to friends wishing to host boozy parties.
Landrieu, who had just taken office, forced Bridger’s resignation as well as those of all the agency’s board members. Bridger eventually pleaded guilty to misappropriation of public funds and was sentenced to probation.
The mayor appointed an interim board that considered selling the railroad. But that six-member committee, chaired by then-Tulane University President Scott Cowen, decided to hold off. Sloss, Schulingkamp and Wedberg also were on that committee.
“The (New Orleans Public Belt) has a responsibility to partner and work well with the Class I railroads, but the core mission of the NOPB and the generation of dollars into the local economy is best served when the port and those customers directly connected to the NOPB are best served,” the committee’s 2011 report said. “We feel strongly that local management is best suited to accomplish this balance while best serving the local citizen and business interests.”
Ryan Berni, a top Landrieu aide who attends board meetings as the mayor’s representative, said the 2011 review was inconclusive and rushed amid the agency’s turmoil.
“In our view, that study was kind of shelved and never really fully presented,” he said, adding that the city has “a fiduciary responsibility to go through with the exercise.”
Slim profit margins
Berni brushed aside the broad skepticism toward a sale that’s been expressed by some board members and local maritime officials.
“Any time you go through this kind of process, there are going to be people who have a stake in the status quo,” he said.
Earlier this year, the consulting firm KPMG estimated the railroad’s value at between $61 million and $196 million. The agency also owns the Huey P. Long Bridge over the Mississippi River in Jefferson Parish, which was not included in the firm’s valuation.
The Public Belt runs on slim margins. It made about $1.8 million in operating income — essentially profits — in 2015, down from $2.2 million in 2014 and nearly $2.6 million in 2013. Through the first three months of this year, the agency’s operating income was $213,796, down about 64 percent from the same stretch last year.
It’s unclear if the rail operators that were interested in buying or running the railroad during the committee’s review five years ago are still interested.
One of the earlier proposals came from a consortium of five of the six Class I railroads that would operate the line together, perhaps easing fears about potential favoritism.
“We’re monitoring what the board’s doing and their discussions, but we haven’t been approached by them directly to discuss it,” said Jeff DeGraff, a spokesman for Union Pacific Railroad, which supported the consortium. “We’re very pleased with the way the Public Belt is set up right now. We work well with our partner railroads. It’s effective.”