Tuesday, March 09, 2010

Keokuk, Iowa, mulls $500,000 offer for railroad bridge

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At least three parties have expressed interest in purchasing the city of Keokuk's swing-span railroad bridge, which connects the southern Iowa town to Hamilton, Ill., the Burlington Hawkeye reports. After years of searching for a company willing to buy the bridge, city officials find the abrupt attention to the structure to be a refreshing change of events.

The recent interest in the bridge includes a $500,000 offer from Chicago businessman Craig Burroughs on behalf of Anchorage, Alaska-based Pacific Rim Railway Co.

"That is the first offer we've had where we don't have to pay somebody to take it," Keokuk Public Works Director Gerald Moughler said with a quick laugh.

Before Burroughs' offer, the next best proposition the city had came from Keokuk Junction Railway Co., which said it would assume control of the bridge if the city gave it to short-line railroad. A controlling majority of Keokuk Junction Railway stock is owned by Peoria, Ill.-based Pioneer Rail Corp.

Burroughs discussed his offer with the city council at its regular meeting in early March.

On Monday, Mayor Tom Marion received two more calls about purchasing the bridge. The first call came from Pioneer Rail, which wants to discuss revising its offer. The second call came from a Florida businessman with 31 years in the rail industry, Marion said.

Burroughs has been working with city officials and local industry leaders for seven months to hash out a deal for the bridge, he said during an interview. Purchasing the bridge would be the first step in Pacific Rim setting up operations in Keokuk.

"Our objectives are to build a large vertically integrated corporation with roots in Keokuk that will enable us to make a difference in the railroad business, get involved in high-speed railroading and building railway equipment and supplies," Burroughs said. "We'd like to start up a company that builds and repairs rail cars, refurbishes locomotives, builds railroad tracks. In other words, do as many of the activities related to railroad operations as possible to cut out the middleman and make it more efficient. The bridge is just a starting point. It gets us started in Keokuk, and it gives us a viable tenant in the Keokuk Junction. We have already held some discussions with the people at Pioneer Rail Corp., which owns the Keokuk Junction, and we plan on working cooperatively with them."

Keokuk Junction, the only business that uses the bridge, is displeased at the prospect of the city selling the structure to another company.

"We're not happy about it," said Dan LaKemper, general counsel for Pioneer. "We think selling the bridge to a third party such as this would be a bad thing for the city, a bad thing for the shippers, the local industry and obviously the railroad."

LaKemper argues Pacific Rim wants to purchase the bridge to make money off Keokuk Junction Railway and said increased bridge fees would lead to higher shipping rates and less competitive industries in Keokuk.

"There is nothing that is going to be added in terms of value," LaKemper said. "He is just going to put up a toll booth on the bridge."

Currently Keokuk Junction pays the city $20.79 per car that crosses the bridge. Keokuk Junction, which owns the tracks on either side of the bridge, has two customers in Keokuk, Roquette America Inc. and Griffin Wheel, which are two of the city's largest employers.

At the council meeting, Burroughs said he wants to close on the bridge deal within 30 days, pending approval of the Surface Transportation Board. But city council members likely would not make a decision on whether to sell the bridge that quickly. Officials first want to study Burroughs' offer and ensure it's not too good to be true, Marion said.

Burroughs has offered to pay the $500,000 on a 10-year note with 4 percent interest with a balloon payment at the end of that time to pay off the remainder, Marion said. As a show of good faith, Burroughs has deposited $50,000 in an account at First Community Bank in Keokuk.

Also, the city has a $3.2-million fund for use in case the bridge ever needs to be demolished.

Burroughs has proposed putting those funds into an escrow account with an Iowa bank. Neither the city nor Pacific Rim would be able to touch the $3.2 million for 10 years, but the interest from the account would be used for bridge upkeep. At the end of the 10 years the $3.2 million would revert to the city.

Born and raised in the northeastern Iowa town of Greene, Burroughs said he received his first taste of the railroad business fresh out of high school working for the now defunct Chicago, Rock Island and Pacific Railroad. In 1971, he started his first shortline railroad company, East Camden & Highland Railroad Co. based in Camden, Ark. Burroughs said he has served as president of six short-line rail companies and been involved in or consulted for the purchase or creation of another 18 rail companies.

Burroughs also is chairman and CEO of Northern Inter-Continental Enterprises, an Anchorage, Alaska-based company with the goal of establishing a high-capacity electrified railroad across Alaska and Siberia connected via a tunnel built under the Bering Strait. Burroughs' plans for the $87 billion project are laid out at the Web site www.railwaytotomorrow.com.

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