$42M proposal prompts lawsuit drop

Infrastructure 

Blacklands Railroad has officially dropped their lawsuit against the Northeast Texas Rural Rail Transportation District (NETEX) in the hopes pursuing a $42 million private investment deal from Sabine RailWerks presented to the group during their Thursday meeting.

OLD LAWSUIT, SAME CONFLICTS?

After beginning with a brief executive session from 1:33 to 1:49 p.m., the group’s attorney announced that, as of Wednesday evening, Blacklands dismissed their lawsuit without prejudice.

“The last meeting we had here, I read a statement from Blacklands that we’d like to move forward,” Wayne Defebaugh, owner/operator of Blacklands told the board. “In that vein, we did dismiss the lawsuit.”

Some representatives seemed upset by the development. Franklin County representative Brian Lee stated that “half the board didn’t know anything about the dismissal.”

“I’ve got to tell you, I’m pretty confused right now because I don’t know what your wishes are,” Lee said. “I hear something different every time. … What is your current temperature?”

“I appreciate that question, because I’ve never been able to explain it,” Defebaugh said. “Blacklands has been here 20 years. … I’m not here to get away or take off, because I think there’s a lot of opportunity here.”

However, Defebaugh said, in mid-2017 when NETEX began to pursue the Franklin County Container Terminal (FCCT), he disagreed strongly with the board’s actions, which ultimately led him to bring his lawsuit against them.

“This board was going down a path we didn’t think was going to be any good for us or the railroad,” Defebaugh said.

Defebaugh said the FCCT project would “not happen anytime soon” and that by focusing on the project, the board lost site of improving its current infrastructure.

Chairman Sam Young also had questions about the FCCT project, saying projects like it had been instituted in Chicago.

“We can’t continue at this rate,” Defebaugh said. “There has to be money injected into the rail, in infrastructure. We’re willing to make that happen, and we want to make that happen.” However, Defebaugh

However, Defebaugh noted, Blacklands “wanted to improve the relationship with the board” and thought that the dismissal of the lawsuit was a way to achieve that goal.

“My vision is to grow this railroad, and I think there’s opportunity for carloads. Carloads are where it’s at,” Defebaugh said. “You can’t keep this alive for the next 20 or 30 years without carloads, and we think we can make that happen.”

Defebaugh stressed his belief that member counties as well as customers needed to voice their opinions about how best to operate the rail line in the future.

Lee posed to Defebaugh: “I don’t know that this board has taken a change in direction.”

“Maybe not, but I believe that Blacklands has a direction to take the board,” Defebaugh said. “I guess if the board doesn’t change, that’s something we have to consider.”

THE $42 MILLION DEAL

Representing Sabine RailWerks, John Crew introduced himself as “the unlucky guy who leased the unused portion of your rail line in hopes of making a toll road” in 2014. The failed project through a company called PublicWerks is what introduced Crew to the group, he said.

“We try to bring private equity to public projects that might support these things,” Crew said. “It comes down to it, y’all are a governmental entity with no source of revenue.”

The current state of the NETEX rail line is “in terrible shape,” Crew said.

“You’ve got a good little railroad, but you need to put some work in it,” he said Texas Department of Transportation (TxDOT) engineers and independent consultants found.

Crew submitted to the board a schematic of a Sabine RailWerks proposal for rehabilitation of NETEX tracks to FRA Class II standard, installation of a rail yard at the former Monticello power plant in Mount Pleasant and installation of a rail yard near Greenville.

In all, Crew said this would be funded entirely by private equity and would funnel approximately $42 million worth of investment into the line between Mount Pleasant and Greenville.

“That means 25 miles an hour,” Crew said. “If we can increase the speeds to 25 miles an hour, you’d probably double your capacity. All of a sudden now, we’ve got things to sell people.”

Crew said he wanted to strategically target Greenville and Monticello as locations to place rail yards, saying the former Monticello location could “go to work tomorrow” and could integrate the 7.9-mile segment of track Blacklands leases from Union Pacific in Mount Pleasant.

Crew thought the project showed promise for federal investment as well.

“You’re rural, you’ve got some opportunity zones, and so they’re out there trying to do infrastructure, and because of that part of what we think we have could be Washington-based too,” Crew said. “We think there could be governmental money.”

The reason Crew thinks the Blacklands/NETEX line is ripe for development, he said, is because there is a “black hole” between the state line and Dallas where a need for delivery of commodities exists, yet is not being met. “Wayne [Defebaugh]

“Wayne [Defebaugh] has done a whole lot with very little,” Crew said. “The demographics in Texas, we’ve got people coming in your corridor. It’s starting to perk up a little bit, and we think we can play into that.”

“This region can benefit by supplying the Metroplex, not everything going into the Metroplex,” Crew said.

However, Crew cautioned the board: “It should be run as a business. … It can’t be a doozy governmental deal.

“You’d [NETEX] have to agree to a lease that’s going to tie you down to where there’s not a bunch of arguments or hurt feelings,” Crew stressed.

Current NETEX Hopkins County representative Neal Barker was formerly employed with Crew’s company, but is “fully divested,” from PublicWerks, he told the News-Telegram. Divested means to reduce one’s assets for financial, ethical or political reasons, according to Black’s Law dictionary. Neal Barker is currently employed by Fidelity Express, which is not affiliated with NETEX, Blacklands or Crew.

“It helps to think about positive things for a change. That’s good, and we look forward to hearing more about that,” Lee said.

“This is what we’ve been waiting for for years,” Hopkins County judge Robert Newsom told the News-Telegram. “Getting service back up to 25 miles per hour for Hopkins County and all other counties will be a serious economic advantage. We hope the board will seriously consider this proposal by Sabine RailWerks as they move forward.”

OTHER BUSINESS

The board voted unanimously to authorize the repainting of a trestle within the city of Mount Vernon, provided they are given the proper insurance authorization from the city.

The board voted 4-2 to re-attempt the election of their executive board members, with Chairman Sam Young not voting during any appointments. Although it does not specify in the group’s bylaws they may re-elect their officers, the group’s lawyer noted he believes they may do so at any time.

Franklin county representative Brian Lee was unanimously voted in as the new chairman of the board. Hunt county representative Greg Sims, who was not present at the meeting, was voted in as vice president by a margin of 5-2.

Delta County representative Dr. Jason Lee Davis, who is currently on a 90-day probationary status from his Delta County commissioner’s court, nominated himself as secretary for the executive board. He was elected by a margin of 4-3.

Hopkins County representative Neal Barker remained treasurer by a unanimous vote.

Neal Barker delivered his monthly treasurer’s report, stating that the group had received all but January’s invoices from Executive Director Phil Davila. Neal Barker stated that if the group intended to pay all current invoices, Davila would exceed his current yearly line item by a cost of $279.90. The group had budgeted $70,000 per year for Davila’s salary, according to budget documents.

Both Lee and Collin County representative Cheryl Williams expressed their desire to pay the outstanding balance owed to Davila, and the group unanimously voted to pay the remaining balance save the $279.90, which would need a budget amendment to disburse.

Lee questioned whether the group should have a discussion about continuing Davila’s employment, specifying he did not have time in his schedule to perform Davila’s job. The group’s lawyer advised them they could not take any action even if they did have a discussion, as there was no agenda item that provided for such.

The discussion about Davila’s employment was tabled until the group’s March meeting, and Lee announced that the group was “taking a break from Phil Davila."