NC tax credit could save CSX millions on Selma cargo hub

CSX has announced a massive project in Johnston County.
CSX has announced a massive project in Johnston County. ANDREW KENNEY -

A state report on an unpopular project to build a truck-train freight hub in Johnston County sheds light on why CSX wants to build it there, and why – even after the governor criticized the proposal – the state Department of Transportation is still considering whether to help pay for it.

CSX wants 450 acres on Interstate 95 near Selma for its $272 million intermodal cargo terminal, and it wants DOT to cover $100 million of the project cost. Gov. Pat McCrory last week joined Johnston County officials who criticized the plan after initially praising it. They cited alarms from landowners over the railroad’s apparent readiness to take their land – wielding its legal power of eminent domain – even if they don’t want to sell it.

An October 2015 consultant’s evaluation, ordered by the DOT Rail Division, concludes that the CSX hub would reduce shipping costs for businesses from Raleigh to the state ports, by shifting millions of tons of freight from trucks to less expensive rail transport in up to 505,000 cargo containers each year.

It also points to a generous state tax credit that could cut CSX construction costs by millions of dollars – on top of the proposed DOT contribution.

While truck traffic would be reduced, the accelerated rail service would give North Carolina manufacturers access to new markets in other parts of the United States, and it would create hundreds of warehouse and distribution jobs in the Johnston County area, the DOT consultant’s report said.

“Increased employment and associated economic benefits would be a result of terminal construction, terminal operations, and local logistics and manufacturing development,” said the 91-page report by WSP Parsons Brinckerhoff, a Canada-based engineering firm.

CSX officials proposed the Selma project to DOT in 2014 and asked the state to help pay for it, Paul Worley, DOT rail director, said Tuesday. DOT commissioned WSP Parsons Brinckerhoff to evaluate the confidential proposal dubbed “Project Scorpion.”

The Selma site for the cargo project, which CSX now calls the Carolina Connector or CCX, takes advantage of its strategic location between the railroad’s primary north-south tracks and Interstate 95, the East Coast’s primary north-south highway. It would draw from truck traffic on nearby I-40 and U.S. 70, and its rail connections would provide easy access to Charlotte and the state ports.

Along with the benefits of a site near the growing Raleigh market, CSX could enjoy two big financial incentives from the state.

Big tax credit

After McCrory and the General Assembly revamped DOT’s approach to construction spending in 2013, freight railroads became eligible for major capital funding that previously had been doled out only for highway projects. The four-county Upper Coastal Plain Rural Planning Organization, based in Nash County, has endorsed CSX’s proposal for $100 million under DOT’s Strategic Transportation Investments program.

And CSX hopes to save millions more by tapping a 50 percent state tax credit reserved for railroads that spend at least $30 million to build intermodal freight terminals – where cargo is moved from one mode of transportation to another. Railroads can slash their franchise or income tax payments by an amount equal to half the money they spend on construction, the WSP Parsons Brinckerhoff report said.

The intermodal tax credit was worth a reported $8 million to $9 million for Norfolk Southern Railroad when it built its intermodal hub at Charlotte Douglas International Airport. DOT did not indicate Tuesday how much it might be worth for the much larger CSX project. The railroad also is seeking a federal clean air grant, because less truck traffic means less air pollution.

Johnston County officials, McCrory and Transportation Secretary Nick Tennyson lauded the CCX project when CSX announced it on Jan. 14, but they withdrew their support after landowners complained about unpleasant confrontations with CSX representatives. McCrory’s office declared last week that the Selma site “does not appear to be a viable option.”

State and local leaders said last week that they wanted to help CSX find another site, and CSX said it wanted to work with Johnston County landowners and officials. But officials said this week that they have had no talks with the railroad.

Worley said the consultant’s report will help DOT evaluate the CSX project, to decide what transportation and economic benefits the state might get for its proposed $100 million investment. McCrory and DOT have touted a new approach to basing project spending decisions on objective analysis, free from political influence.

While the rejection by McCrory and Johnston County officials has undermined CSX’s prospects for building its cargo hub near Selma, Worley said the DOT evaluation – expected in March – will still be valid if the railroad finds a comparable site somewhere else in the state.

“I think the leaders have spoken when it comes to the location. We’ll have the project, and the project will be scored” on its eligibility for state funds, he said.

“We want to help find the best location so we can get this. It’s a good thing to do. The concept of it is very sound,” Worley said.

Rep. Leo Daughtry, a Johnston County Republican who is not seeking re-election this year, said “it would be a travesty” if CSX dropped its plan to build the freight terminal. When Daughtry issued a statement supporting the project last week, he noted that his law partner represents CSX. He said Tuesday that he does not speak for the railroad.

“Somehow maybe the railroad was too aggressive in trying to buy the land,” Daughtry said. “But you can’t just put cold water on a project just because you don’t think the railroad was courteous enough when they went out there to see the landowners.”

CSX declined to answer questions Tuesday about whether it was considering other sites in North Carolina or other states. McCrory’s spokesman did not respond to a request for comment.

Bruce Siceloff: 919-829-4527, @Road_Worrier