RALEIGH — A little-discussed provision of the House budget would encourage the state to explore offers from anybody interested in buying the taxpayer-owned N.C. Railroad – and there is talk this week of overtures from a prospective buyer.
“There have been reports that a private equity firm may have expressed interest in the company to state government,” Scott Saylor, the railroad president, said Wednesday in a prepared statement. “Neither NCRR nor its board has been involved in any such discussions.”
Saylor, responding to a News & Observer query, declined to offer details.
House Republican budget writers said they were not really looking to sell the railroad – and not aware of a possible buyer.
“The reason for that budget provision, which was requested by the governor’s office, is they’ve never been able to put a handle on how much the assets of the N.C. Railroad are worth,” said Rep. Phil Shepard of Onslow County, co-chairman of the transportation appropriations subcommittee. “It did not mean we were interested in selling the N.C. Railroad. But it’s a provision we could use to try to find out more definitively what it was worth.”
Shepard and representatives of House Speaker Thom Tillis and Sen. Phil Berger, the Republican Senate leader, all said they had not heard of any prospective buyers for the N.C. Railroad. Representatives of the Department of Transportation and Gov. Pat McCrory did not immediately respond to requests for comment.
Both House and Senate versions of the budget would extract new revenues from the state-owned private railroad, starting with a $19.2 million dividend to be paid this year into the state Highway Fund. Both budgets also call for the sale of railroad real estate parcels identified as surplus property.
But only the House raises the prospect of selling the railroad itself. The provision inviting DOT and the state budget office to entertain offers will be discussed, alongside bigger issues, when the two chambers attempt to resolve their differences and agree on a budget.
‘No easy way to appraise’
The N.C. Railroad is a 317-mile rail line that curves from Charlotte through the Piedmont and the Triangle to Morehead City. Its income comes mostly from a $14 million annual lease of its tracks to Norfolk Southern Railroad. The state owned three quarters of the company until 1998, when it spent $71 million to acquire the remaining shares. A legislative staff report in 2012 estimated that the railroad’s capital value had increased by $196 million since then.
But what is the whole thing really worth?
“You don’t know the market value of anything until you get the actual offer,” said Rep. Frank Iler of Onslow County, co-chairman of the House Transportation Committee. “There’s no easy way to appraise a railroad.”
If the Senate agrees, DOT and the state budget office will be authorized to review any offers to purchase railroad stock, and to make recommendations to the legislature about whether the state should sell it. Railroad officials will be instructed to provide all information needed for the review.
Iler was interested to hear talk about a possible buyer.
“That’s the first I’ve heard of it,” he said. “I’d like to hear more.”
Benefits of state ownership
Saylor noted that the 2012 legislative staff report called the railroad a valuable state asset for economic development, and it recommended against selling it to private buyers. Iler and Shepard said they agreed about the benefits to the state of owning the rail corridor, which also carries passenger trains between the Triangle and Charlotte.
“I think it does have a value to the state for economic growth,” Shepard said. “But I won’t rule out any other alternatives. With the economy the way it is, things are changing all the time. It doesn’t mean there aren’t better ways to do things in the future.”
Iler said legislators want to know what the railroad is worth, but they would not be quick to let it go.
“I don’t think we’re looking to sell it to anybody who makes the first offer,” Iler said. “We’re trying to get the value of it. Then, other decisions can be made.”
Siceloff: 919-829-4527 or blogs.newsobserver.com/crosstown or twitter.com/Road_Worrier