LRA Spotlight: Riverport Railroad

By MICHAEL MILLER | For The Prairie Advocate News

SAVANNA – When people think of the Savanna Depot Park/LRA, the first thing they generally think of is the railroad, specifically, Riverport Railroad. And for good reason.

Riverport is the largest property owner at the Depot, owning about 2000 acres and around 65 to 70 miles of right of way, according to General Counsel Ole Pace. A Class 3 Terminal and Switching Railroad, Riverport is federally chartered and served by Class One Burlington/Northern.

Riverport receives rail cars for storage, serves the oil industry, stores rail cars for all kinds of customers and has provided loaded car storage for just in time deliveries. The company has five locomotives. RESCAR, its tenant and client, is a national car cleaning, refurbishing and repair company that currently employes 25 people, with projections of perhaps double that number in the coming years.

Riverport has been at the Depot since the late 1990’s, with around 9 million dollars invested at this location. In addition to their other ventures, Riverport has a utility pole facility, with 30 and 120 foot poles, and also loads machinery for John Deere. They also utilize wrapped lumber and are a “premiere transloading facility” for the Burlington Northern.

Riverport operates a foreign trade zone, as well, with no tariffs being imposed upon materials shipped until they leave the Depot. Approximately 14 people are currently employed by Riverport, seven in the engine house, five office staff, and two at the foreign trade zone. Pace estimates that Riverport generates about $300,000.00 into the local economy.

Regarding the controversy surrounding Riverport’s recent agreement to purchase the water/sewer systems from the LRA for one dollar, Pace reflects on the practicality, if not outright necessity, of the move, from Riverport’s perspective. Unlike many other businesses, Riverport cannot simply relocate elsewhere.

“We’re here, “ Pace says, adding that the company has already spent 9 million dollars in rail and right of way expenses. “This is a capitalistic enterprise, not a public utility. We’re not doing this for fun.” Pace says that Riverport is interested in further developing its 2000 acres and in order to do so, a water/sewer system is essential.

Pace adds that the Depot possesses several advantages. Firstly, it’s above the 500 year flood plain, eliminating concerns about water damage or impediments to operations. Secondly, it is rail served and can provide that service to potential customers. And finally, there’s no “n.i.m.b.y.” or “not in my backyard” issue: eagles, Pace says, really don’t care and won’t complain if rail operations are instituted in the area.

Though the Depot Park does also have its share of disadvantages, such as the lack of natural gas, its location on a two lane instead of a four lane highway, and the status of a ‘Superfund’ site which is being transferred by the Department of the Army, Pace notes that the area remains a spot of great economic potential.

In order to realize this potential, Pace says, you need to provide facilities for any prospective manufacturing or industrial operations.

Water/Sewer Perspective

With the LRA’s status as a “sunset” entity, the prospect loomed of a water/sewer system that had no one supporting or guaranteeing it. Carroll County, where 90 percent of the system resides, wanted no part of the continued responsibility for it, having neither the resources nor the inclination to provide this. Other options such as simply letting the system lay fallow, or auctioning it off, weren’t particularly appealing to Riverport, which needed confirmation of a functioning system in order to realize its business goals.

As the largest property owner at the Depot, Riverport, Pace says, “had the most to lose and the most to gain” from the situation, and once it realized the County was serious about its unwillingness to take on responsibility for it when the LRA dissolved, it stepped forward and offered to agree to purchase the systems.

Asked about the idea of forming a property owners’ association, Pace says that the time to have done that was long before now and that it’s very difficult to compel people to do this after the fact. He feels this is a very untenable alternative to the LRA.

Pace says that once you take the responsibility for providing service to people other than yourself, you basically have two options, both of which were available to Riverport. You could become a public utility, or you could form a users’ association, which would require you to service everyone who was being served at the time of the transfer.

Riverport, Pace says, has no desire to be “in the water/sewer system business”. He says that at some point Riverport will transfer responsibility to the appropriate entity, though he cannot say for certain what that entity might ultimately be. He says it would most likely be a not for profit partnership of some sort.

While Riverport is here for the duration, Pace notes that every other user of the systems currently have their property for sale. The transfer could conceivably take five to eight years, Pace says, and in the mean time, the LRA is funded largely by the money received when Riverport buys property. If in this time more owners come into the area, a users’ association may make sense then, but Pace says the key is knowing who will be there, knowing what the facts are, who is there at the time, the costs, etc.

One thing that doesn’t make sense, Pace says, is for Riverport to keep the systems as their own and to provide service to third parties because then they’ve become a public utility, as the overhead and administrative costs of such an arrangement would be “substantial.” The LRA talked about setting up a special tax district, which Pace says also didn’t make sense due to the small number of users.

The County, Pace notes, has been expressing their desire for something to be done with the systems for quite some time, and also their desire to not be responsible for the system, in public meetings. The effect of the County’s withdrawal from the LRA and the systems would have been completely detrimental to development in many ways. The potential for litigation and the lack of available funds both contribute to this difficulty.

Given these issues, Riverport decided to guarantee the systems to ensure continued service, and felt that they could easily absorb the sixty to seventy thousand dollar annual operating deficit represented by the systems.

Riverport, through it’s agreement to purchase, has guaranteed the water/sewer systems for two years, and the LRA will have control of them until January 1st of 2017.

More spotlights in future editions, and more takes on the water/sewer issue.