By D. Brian Burghart

Trains have no place in downtown Reno. It's a runaway issue that's been barreling down the tracks, gaining speed and momentum like a steam-engine locomotive with too much pressure and no release. And it's gonna blow.

People who work or drive through downtown have long been familiar with the problem, but because of a proposed merger between Southern Pacific and Union Pacific, the media have shouldered their picks and mauls to begin tearing at the tracks that were built through the Truckee Meadows in 1868, back when Reno was grateful to have the artery.

With the merger, the old allegiance between the railroad and the city, symbolically nailed together with a golden spike at Promontory Point, appears to be coming apart. Some Nevada politicians even talk of halting the merger.

Don't count on it.

Even with all the media coverage, citizen group meetings, ad hoc committees, whistle-blowing and political fist-shaking, the tracks were laid to last and so far they haven't moved an inch—up, down or sideways.

Bitching, moaning and weeping are not going to move those tracks. The only thing that's going to move them is cash as cold and hard as the steel the trains move on.

Nobody, as yet, knows how to move them, or where that money is going to come from. Those facts may knock the whole plan off track.

“Everybody has been notoriously silent on the money and funding issues,” says Paul Lamboli, the attorney in Washington, D.C. whom Reno has hired to deal with the merger. Lamboli served for six years as a member of the Interstate Commerce Commission.

“Everybody has been notoriously silent on the money and funding issues,” says Paul Lamboli, the attorney in Washington, DC whom Reno has hired to deal with the merger.

Money isn't the only thing the players concerned have been mum on. The press and bureaucrats have been saying that the number of trains passing through Reno may nearly triple because of the merger, but that estimate doesn't take into account trackage rights agreements between Union Pacific/Southern Pacific and Burlington Northern/Sante Fe lines. Tripling the number of trains post-merger may be a conservative estimate.

Sen. Richard Bryan, while optimistic that something can be done to alleviate the problems caused by the railroad, recognizes that it's going to boil down to the bucks.

“Money is the cloud on the horizon, because all of these things are incredibly expensive,” he says.

Sen. Harry Reid said he “thinks” he suggested that UP pay for the whole thing at a March 5 meeting of UP, federal and city officials, but, “We're going to work that out in 30 days [April 4] when we find out what the costs are going to be and what engineering has to be done.”

Down The Line
On Nov. 30, 1995, the Union Pacific Corporation filed an application with the Interstate Commerce Commission to merge with Southern Pacific Corp.

That's when bureaucrats started doing the locomotion. Within days, Reno had hired Nolte and Associates and Keinfelder Associates to study the merger. Its fact-finding report, which was finished in February, contained nothing about financing.

The UP/SP (The post-merger company will be called Union Pacific Railroad, or UP) merger application is huge, occupying about three feet of floor space in Reno Redevelopment Agency project manager Dori Owen's office at City Hall. Owen has been the conductor on this crew, getting the word out and coordinating with the media, which went full throttle after the document's arrival, overloading the public with facts and figures demonstrating what everybody already knew: Waiting for the train is a drag.

Currently, there are 14 trains that cross Virginia Street on an average day. Those trains have an average speed of 10 mph and an average length of 5,000 feet. There is an average delay time of 80-110 minutes per day for motorists and pedestrians.

With the merger, the average train will increase to 8,000 feet in length, and nearly triple the frequency of delays for motorists, pedestrians and, perhaps most importantly, emergency vehicles. Fire trucks and police can be sidetracked for crucial minutes in case of disasters, say, for instance, a Silver Legacy gas leak or the occasional casino fire.

Last year, the Regional Emergency Medical Services Authority (REMSA) received 28,956 calls in 1995, and of these, 835 patients were transported Code 3 (lights and sirens). Rather than risk being caught by the train, REMSA operates units on both sides of the track.

“We locate ambulances in a roving situation on both sides of the tracks to avoid trains and to meet our highest call volumes,” says Jim Gubbels, director of contract services for REMSA. He said the number of ambulances delayed by trains was not available.

There are other drawbacks: cars stalled at the crossings are polluting the air; the noise pollution generated by the train whistles. Then there's the various hazardous material disaster scenarios conjured up by the local daily, such as a toxic spill in the Truckee, or the rupture of a propane tank car in which “Up to 10,000 people could be killed instantly and 30,000 people could be injured in the immediate area of the explosion,” and six city blocks would be leveled, consequently solving the problem of tracks downtown.

These are some of the impacts Reno is suffering from today, let alone down the line, when rail traffic is expected to increase nearly three-fold. If political pressure from Washington, DC, and from business concerns (the merger will create a Western duopoly between the UP and the BN/SF) doesn't quash the merger, these conditions will only worsen.

That Was Then
The topic of trains has been discussed in Reno many times. The closest the city has come to getting on the right track with its train troubles was in 1980, until voters derailed a $40.55 million bond issue.

The most comprehensive report done to date is the SEA (Sprout Engineering and Associates until 1969) study commissioned in 1978 and completed shortly after the failure of the bond issue. The report examined 10 possible solutions, including towering or raising the railroad, constructing automobile overpasses or underpasses and relocating the tracks.

Of the 10 alternatives, the one that was recently favored by Mayor Jeff Griffin, relocation to the Interstate 80 corridor, was turned down by the SEA study “because of the severe impacts that would be produced at any new location as well as the exorbitant costs of purchasing a new right-of-way.”

The relocation alternative was rejected again at the March 5 merger meeting in Washington, DC, for the same reason: too damned expensive. Cost estimates ranged from $500 million to $1 billion. So, 15 years and an additional $70,000 after the SEA study, engineers are still on the same track. The choices have now been narrowed to fully raising or lowering the tracks or constructing a system of overpasses and underpasses with partial track depression. But even though these alternatives will cost less than relocation, financing them could still prove to be difficult.

This Is Then
In 1980, the estimated cost of lowering the tracks was $53 million. No one knows exactly what it would cost now, although UP engineers are currently working with the city to come up with new estimates by April 4.

The original SEA study listed more than a half-dozen alternatives for financing railroad construction. Increasing land values, a public hostile to raising taxes, and tightened local, state and federal budgets have virtually negated these options. The question remains the same now as it was then: Who's going to pay for it?

Revenue bonds—in which financing would be paid by the railroad on the basis of increased income available from the lease of railroad-owned land within the right of way—were vetoed by the railroad, whose representatives felt that the land value increases projected for the right-of-way were speculative. So far, it appears unlikely that UP will be any more inclined to base the value of their property on today's speculative rates.

The aforementioned $40.55 million general obligation bond was voted down by 63 percent of the electorate in 1980. If there were a bond issue put on the November ballot this year (it's already too late to go on the primary ballot), the figure, due to more expensive construction costs and inflation, would be considerably higher. The city has until July 15 to put this issue on the ballot, but so far, the possibility has not been raised publicly—perhaps in recognition that the public's keenness toward new taxes and bond issues is at an all-time low.

License tees were ruled out as a primary source of funding in the 1980 study. Richard Arden, president of SEA,. could not recall exactly what these fees would have been, but said they weren't a significant source of revenue. Likewise, the study ruled out special assessments as a primary source because the proposed railroad modifications would be a benefit to the entire community, not just the railroad, according to Arden. To form a special assessment district, the city has to be able to prove one party gets most of the benefits.

Tax increment financing could have been a possibility, but the money that was earmarked to lower the tracks was spent on downtown sidewalks and pedestrian crossings, Arden says.

In 1980, the Nevada Department of Transportation was willing to contribute $2.5 million. Officials at the NDOT now say the question of how much the department will contribute is premature. “I don't have the slightest idea,” says Jim Mallery, planning manager at NDOT, “but the project is in the hundreds of millions of dollars today.”

“I've talked to Drew Lewis, the grand high pooh-bah for the railroad, and the railroad has sounded very supportive and positive, but we haven't seen any specifics,” Bryan said.

Federal funding, such as the Surface Transportation Assistance Act of 1978, which helped pay for the lowering of Elko's railroad, is now scarce. The Intermodal Surface Transportation Efficiency Act (ISTEA), passed in 1991. could provide similar funds, but at this point, Congress is keeping a tight grip on the purse strings.

“The congressional delegation wasn't offering any great promise of available resources under ISTEA for infrastructure chances that relate to this merger,” Lamboli said.

“It would not be a realistic premise to say that the federal government will do for Reno what it did for Elko in the 1970s,” says Bryan. “We are in a different time and federal revenues are much tighter. We are cutting back on federal programs in an effort to balance the federal budget in the next seven years. The federal government is not awash in a sea of cash.”

And that leaves the UP holding the throttle by default.

So what about making the railroad pay? Union Pacific has traditionally paid 13 percent for joint ventures like crossing improvements, according to Gary Schuster, vice president for corporate relations and a spokesman for the Union Pacific corporation.

“Union Pacific has 30,000 grade crossings, with the merger with Southern that will increase 20,000. That's 50,000 crossings. Anything we do for Reno, we will have to do for everyone,” Schuster said.

In plain English that means Reno shouldn't count on UP to rebuild the downtown train corridor.

Train In Vain
The tracks downtown have become a runaway political issue. Everyone seems lo agree that tripling the rail traffic through Reno is a bad idea. At least it appears that way. It still remains to he seen if any real solutions are behind the rhetoric.

The main political engineers involved in the merger have been U.S. Senators Richard Bryan and Harry Reid and Mayor Jeff Griffin.

“What we need to know first is what the city of Reno establishes as its priorities for mitigation,” Bryan said. “They've got engineering consultants, they've got people working with the mayor and the City Council. What we need to ask is 'What would you like us to do?' ”

“I've talked to Drew Lewis, the grand high pooh-bah for the railroad, and the railroad has sounded very supportive and positive, but we haven't seen any specifics,” he said.

Sen. Reid says the UP should carry the freight when it comes to paying for modifications of the tracks.

“I have no other options for funding,” Reid said. “I think the railroad is obligated to pay for it; I think they're going to come forward with it.”

 

“I have no other options for funding,” Reid said. “I think the railroad is obligated to pay for it; I think they're going to come forward with it.” “Oh, Christ,” says Coe Swobe, when told of Reid's plan, “he's been smoking opium.”

"Oh, Christ,” says Coe Swobe, when told of Reid's plan, “he's been smoking opium.”

Swobe was chairman of the ad hoc committee to move the tracks in 1980 and is a former Nevada legislator.

Griffin was in Washington, DC, for the National League of Cities Conference and did not return calls.

Will UP come up with the cash? One thing seems clear: With the merger, the company will be riding the gravy train, according to the Nolte and Associates fact-finding report that found that the merged system should yield an increase of approximately $750 million per year.

Reid's strategy has been to threaten to stop the deal if the railroad is not forthcoming with the bucks to help Reno. “There's no guarantee we can block the merger,” he admits.

Sparks, the Rail City, has been mostly silent on the topic of the merger, but Mayor Bruce Breslow said, “We have some concerns, especially about volatile materials and ammunitions coming through Sparks.”

Breslow said the city has been working with the railroad to alleviate some of those concerns. He also mentioned that John Ascuaga has had a standing offer with Reno to help build a new Amtrak station in Sparks (in the vicinity of Ascuaga's Nugget) that would partially alleviate some of downtown Reno's problems.

Sparks stands to gain financially because UP plans to expand the Sparks switching yard.

Mergermania
Apparently, the criticism of corporate mergers in the '80s has had little effect. With Wall Street's blessing, the trend has skyrocketed in the '90s, with virtually every merger receiving a reward in the form of higher stock prices. Of course, this comes at the expense of the employees of the firms involved, a number of whom can expect to be laid off in the name of efficiency.

Streamlining, they call it, and there's no reason to believe UP will be the exception to this rule.

For years, UP and SP have operated side-by-side in competition in the West. The nature of this competition has resulted in track patterns through Nevada that have UP running routes parallel to SP's. The merger would allow the unified railroads to operate more straight-line routes, decreasing the current total number of trains and increasing the amount of traffic through Reno.

With fewer total trains to operate, UP will be able to cut back on the number of operating crews, saving the money those crews would have been paid, as well expenses like fuel and wear and tear on equipment. That means crew layoffs, about 6.3 percent of the 54,000 employees of the UP, or 3,400 people. In Nevada, that's 59 people, 38 in northern Nevada.

“For the past 17 years, the Southern Pacific Railroad has only had three years of operating in the black,” says UP flack Wayne Horiuchi. “The other 14 years, they were operating in a negative cash flow.” He said the SP is in the red to the tune of $500,000 a year.

According to Horiuchi, if the merger fails, Reno's downtown train trouble could be solved. “You'd still have the SP traffic continue if the merger doesn't happen,” he said. “If the merger was to fail. I would suspect that traffic would dwindle over the years.”

The flipside is that the tracks through downtown could go up for sale. “I believe there would be some kind of approval to buy up tracks, but you could have a gazillion suitors trying to buy up railroad,” he said. Besides UP, Conrail, or even Burlington Northern Santa Fe could be interested in the tracks.

If the pieces bought were small enough, the government scrutiny that comes with a huge merger might not exist.

Naturally, failure doesn't seem to currently fit in UP's corporate vocabulary.

“We're not looking at if the merger fails; we're only looking at successfully putting the merger together,” Horiuchi said. “I think the merger is absolutely going to happen.”

End Of The Line
Horiuchi's assessment of success for the merger may be sanguine. However, if the merger does fail, another possibility would have to be examined: Could Union Pacific and Southern Pacific cooperate and use each other's tracks to mutual benefit without the merger?

“We [already] have a track rental agreement,” Horiuchi said. “We're already leasing some of their track in the Northern Nevada area.” In other words, UP could run trains through Reno, tripling traffic without the merger.

Counselor Lamboli agrees with the assessment that the merger, if it stands, would be anything but the end of the line for tracks downtown. It is possible to enter into voluntary coordination agreements and trackage rights agreements, he says.

“An agreement that has been entered into between the BN/SF and the two merging railroads is exactly that kind of situation. It is a rental situation. In order to cure the anti-competitive impacts, they have entered into a trackage rights agreement, and that means the BN/SF will have access to the merged system—likewise the UP will have access to the BN/SF system.

“The BN/SF will have to explain its environmental impact on operations. It has yet to do so, but it will have an obligation to do so between now and March 29,” Lamboli said. “The problem we have is, we don't know what the hell they are going to say.”

Lamboli thinks the merger has been put on the fast track for a reason. If Reno wants a lasting solution to its railroad problem, it'd better ball the jack and figure out where the money is coming from.

“Thirty days following March 5 is beyond the March 29 deadline we have for filing our comments,” Lamboli said. “We're going to have to do things on dual tracks. We're going to have to engage in very serious negotiations with the railroad in order to find resolutions, and at the same time we are going to have to prepare comments that raise all the issues, identify them and identify solutions. If not now, when?”

The final decision on the merger is scheduled for Aug. 12.