WINNIPEG – The romance of railways often sucks the unprepared into buying a short-line railroad, says an American expert on the subject.
But, he adds, the economics of owning a short line can then chew the misguided up and spit them out.
Andrew Jennings, who has worked with short lines since the 1960s and has seen some great successes and equally big flops, told the Canadian Transportation Research Forum that saving the family farm or a rural community should not be the main reason for buying a short-line railway.
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“Rarely does a short line that was created to preserve service on a line threatened with abandonment become one of the more profitable short lines, even though many have achieved their goal of preserving service,” he wrote in the paper he presented to the conference.
Emotional attachments to a rail line can cloud business judgment, which needs to be sharp when considering a short line, Jennings said.
“You have to look at the future,” including markets and costs, he said. “You can’t look at what the CP and the CN did in the past.”
Key factors in a short line’s success include:
- Sufficient traffic.
- Finding new industries to serve with the line.
- Working closely with the communities and industries using the line.
- Building a good relationship with connecting rail lines.
Short lines have small staffs, Jennings said, which means the general manager has to understand infrastructure, mechanics, contracting, public relations, government relations and business development.
“You’ve got to be very careful about who you select,” he said. “You want to have someone who’s willing to commit himself as general manager to the community.”
Small staff required
For example, one 35-kilometre line in Pennsylvania moves 15 rail cars a day and employs a general manager and two other full-time employees.
Jenning’s ideal grain short line would be about 160 kilometres long, collect from six modernized elevators and serve a processing plant located about 15 kilometres from the main line connection.
That way, the line could have some control over its destiny and still do business with the main line railway.
Grain can be a risky commodity for a short line, Jennings said, because of volume shifts between seasons and years. Grain short lines need enough capital to be able to ride out slow periods and bad years.
A Canadian grain short line would also have to be market-savvy since grain production and use is expected to change during upcoming years.
Jennings said short line operators must have enough capital for infrastructure improvements and plan for things like floods.
“Debt is the curse of short lines,” he warned.
