Railcar Deal Missing Key Component: The Tracks
By LINDSAY PETERSON
The Tampa Tribune
Florida plans to spend $45 million to buy commuter railcars from a company whose investors ousted its president recently amid production problems at its manufacturing plant.
The company, Colorado Railcar Manufacturing of Fort Lupton, Colo., is a year late completing an order for South Florida's Tri-Rail commuter system. Nevertheless, Florida officials say they plan to order 10 more vehicles to start up the state's commuter rail project in the Orlando area - with an option to get 14 more later.
The Orlando commuter system doesn't exist yet. The project stumbled this spring when state lawmakers rejected a key component of the state's agreement to buy railroad tracks from CSX Transportation. But state Department of Transportation officials said they are working on getting the deal through next year and plan to go ahead with the railcar purchase.
Colorado Railcar was the only bidder for the contract advertised in February. That's because the state wrote the solicitation narrowly, and no other company qualified.
One of Colorado Railcar's most ardent supporters is U.S. Rep. John Mica, R-Winter Park. Mica is also a major proponent of the Orlando area commuter system.
DOT officials said they plan to award the $45 million contract to Colorado Railcar in October, though they will evaluate the company's financial standing and production capacity first.
The railcar bid request was not written for the purpose of giving the contract to Colorado Railcar, said DOT spokesman Dick Kane. The company happens to produce the kind of trains the Orlando system is being designed to use - trains that can use short platforms but carry thousands of passengers a day on tracks shared by freight trains.
With a conventional commuter train, a locomotive pulls the passenger cars. They are popular because they meet federal requirements for passenger trains on active freight lines. They must be able to withstand a collision with a freight train.
Colorado Railcar builds what is known as a diesel multiple unit, or DMU. It combines a diesel engine and passenger seating in one car, so its trains are shorter and get better mileage. But unlike other DMUs, the Colorado Railcars are sturdy enough to meet federal crash requirements.
The way the state is planning the Orlando system, its trains will share tracks with CSX freight trains for several hours a day.
Mica began promoting Colorado Railcar six years ago. It had just announced production of its new, crash-resistant DMU but hadn't sold one. A longtime member of the House Transportation and Infrastructure Committee, Mica took credit for getting a $4 million congressional earmark in 2003 that helped the company sell that first vehicle - to South Florida's Tri-Rail.
An earmark is a provision in a bill that directs money to be spent on a specific project. The 2003 bill with the railcar earmark didn't name Colorado Railcar, but it required that the money be used for DMUs that were manufactured in the United States and could run on tracks with freight trains. At the time, only Colorado Railcar met the criteria.
Congress approved a second earmark in 2004 for $5 million, after Colorado Railcar hired the lobbying and law firm Greenberg, Traurig. The Florida Department of Transportation pitched in $11 million in state tax money so it could buy six cars.
Now, the state plans to pay Colorado Railcar $4.5 million apiece for the 10 vehicles.
Mica said that although he supported Colorado Railcar, he did not talk to DOT officials about giving the company the state contract.
'Efficiency Difficulties'
Tom Rader founded Colorado Railcar and was removed as its president this year. Since 2003, Rader and his company have reported spending nearly $300,000 on lobbyists and federal campaign contributions. Rader gave Mica's political campaigns a total of $3,000 for 2004 and 2005.
Mica angrily denied that lobbying or campaign contributions had anything to do with his position. "My relationship with the company has been nothing but above the board," he said. The company spent its own money developing a new kind of fuel-efficient railcar and deserves government help, Mica said.
The new Colorado Railcar president, Larry Salci, took over for Rader in April. Colorado Railcar's primary lenders had retained him a month earlier to analyze the company's finances and operations.
"They said they had a company with efficiency difficulties," Salci said.
He said he is focused on producing railcars and knows nothing about the company's political activities under Rader.
Salci has 30 years' experience with railcar manufacturing and is "very bullish" on Colorado Railcar's vehicles, he said.
But production has been a challenge for the company. In addition to Florida's TriRail, an Oregon transit agency, TriMet, has had problems with Colorado Railcar's delivery schedules.
TriMet learned last year that the company would be late delivering the first of four cars TriMet had ordered. The first car arrived in mid-June, about six months late, but not until the agency sent someone to the Fort Lupton plant to monitor the production process full time. The other cars are due later this summer.
The company was trying to recapitalize and having trouble with supplies, said Thomas Helig, TriMet manager.
Rader had problems in Florida 10 years ago while involved with a venture called the Florida Fun Train. It carried tourists and local partiers between South Florida and Orlando in railcars that had been turned into lounges, a video arcade, even a tiki bar with a disco.
The trains were beautiful, said one of the enterprise's presidents, Ray Monteleone. But production problems at the company, then called Rader Railcar II, led to the Fun Train's failure two years after it began, Monteleone said.
Rader's "imagination and vision was right on," he said. "But he had a hard time with delivery."
Salci's role at Colorado Railcar is to recapitalize the company and bring "discipline" to the manufacturing process, he said. He wouldn't go into detail about the company's problems, nor would he name the investors who hired him.
"This is a privately held company. I'm not at liberty to say that," he said.
Rader is now focused on running one of his other companies, called Grandluxe Rail Journeys, which operates luxury rail tours. He did not return phone calls.
Since Colorado Railcar announced production of its new vehicle in 2002, only three transit agencies - in Florida, Oregon and Alaska - have purchased any.
They're expensive, said Paul Dyson, president of the Passenger Rail Association of California and Nevada. They cost about twice as much as the locomotive-passenger car combination.
And although they use less fuel than the locomotive train, they use more fuel than other DMUs. That's because Colorado Railcar had to beef up its vehicles to meet the federal crash standards.
"If I were a Florida taxpayer, I'd be asking the state if they've looked at every alternative," Dyson said.
DOT's Kane said the state decided early on that it wanted to use DMUs, finding them to be superior to locomotive-hauled passenger trains. And the state had to use a heavier, crash-resistant DMU because of the deal with CSX. It doesn't give the state the option of scheduling passenger and freight trains at different times, as some commuter systems have done so they can use lightweight DMUs.
Economy and safety concerns dictated the state's choice, Kane said. But the bid request it issued this year contained the same requirements of the congressional earmark that Mica helped obtain for the company in 2003.
Choosing Colorado Railcar
Mica began promoting a passenger rail system in Orlando in the late 1990s and set up a demonstration of a lightweight DMU made by Siemens Transportation Systems. At the time, Orlando area transit officials were planning to build a light-rail system, but the plan failed.
By 2002, Mica was pushing a new plan to use existing CSX freight tracks - and Colorado Railcar vehicles.
The railcars weren't in service, but Mica had met Rader and was intrigued by his efforts to build a new kind of railcar. He can't recall where he met Rader.
A September 2002 news release on Mica's Web site announced that he "had secured $8 million for ... a national demonstration of a new commuter rail technology." It said he planned to show off an example of that technology, a Colorado Railcar DMU, in Orlando the next month.
The amount was down to $4 million by the time the transportation bill with the earmark passed in early 2003.
In August 2003, after Congress approved the railcar earmark, the law firm Greenberg, Traurig registered to lobby for Colorado Railcar.
One of the Colorado Railcar lobbyists was Duane Gibson, former chief aid to U.S. Rep. Don Young, R-Alaska, who was chairman of the House Transportation Committee from 2001 to 2007. Gibson continued to represent the company after he left the law firm.
Mica said he was never approached by any lobbyist about the company. If anything, Mica said, he approached Gibson after Gibson left the transportation committee.
"I spoke to Duane about Colorado Railcar," Mica said. "I can't remember if they were looking for someone to represent them or what." He also can't remember precisely when it was, but he said he is sure Gibson was not at Greenberg, Traurig at the time.
In late 2003, the federal government picked the South Florida Regional Transportation Authority to carry out the demonstration project described in the congressional earmark. The authority then picked Colorado Railcar to provide the vehicles.
Despite being credited for setting up the Colorado Railcar project in South Florida, Mica now says his role was only to encourage the House Appropriations Committee to pursue the DMU technology. He said he did not ask for money for any individual company. Nevertheless, he was happy that Colorado Railcar was eventually selected, he said.
"I was encouraging that Colorado Railcar be demonstrated anywhere in the United States," Mica said.
In 2006, when Florida Gov. Jeb Bush, CSX officials and Mica announced the plans to buy 61 miles of CSX tracks for the Orlando area commuter system, the group rode a Colorado Railcar DMU into Orlando.
DOT officials say several companies were interested in the $45 million state contract advertised in February, though in the end only Colorado Railcar submitted a bid.
One of the potential bidders was a Korean company, Rotem, that designs crash-worthy DMUs and has a U.S. plant. It was planning to build cars for the Raleigh, N.C., commuter system until federal funding for that project fell through. Its cars, however, have only one level, and Florida officials said they need bilevel cars for the Orlando system.
Another company, Siemens, was also interested and proposed scheduling freight and commuter trains at different times so the state could use the company's lighter DMU. But the state said no, said Siemens' Frank Guzzo.
"There could have been other ways to approach the project. We had offered an alternative," Guzzo said. But the state "was fixated on this one approach."
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