MEETING NOTES FROM THE NEVADA COMMISSION FOR THE RECONSTRUCTION OF THE VIRGINIA AND TRUCKEE RAILWAY

WARNING: These unofficial minutes may contain implicit or explicit editorializing! Read at your own risk!

JUNE 2, 2008

WARNING: These are not official meeting minutes! These are prepared by Jim Lohse of Reno Railfans.

Summary: By the agenda this should have been a very cut and dried meeting. It was nothing of the sort!

I promise I will never do this again but this was such an inflection point for behind the scenes stuff that my total report runs on to several pages. Again, never again!

IMHO this Commission meeting represented a turning point in terms of public accountability and responsiveness. I'm not sure members of the public (like Bruce and Lou) have ever showed up at these meetings and asked such penetrating questions about total project finance. It took the Commission members a bit by surprise, but they regained their composure.

WHY THE PUBLIC IS COMING OUT OF THE WOODWORK”

Remember that in a previous episode the Commissioners voted to approve a proposal by Commissioner and Carson City Mayor Marv Teixeira. “Da Mayor” proposed the Commission accept $10 million from Carson City via a 1/8 percent increase in sales taxes in exchange for 5% of gross revenues for 99 years. The sales tax increase goes to a non-binding vote in the 2008 general election later this year.

While some in Carson are howling about $10 million more after Carson City already has a 1/8 sales tax bump to fund the V&T project with $15 million, and the Convention authority has paid millions more out of room taxes, until now all the benefits have been indirect in terms of increases business for Carson as a result of increased tourism. The projected ridership is 140,000 people per year. At an average ticket cost of $40 (cheaper for kids and seniors, more expensive for dinner trains, etc.) this proposal could easily put $250,000 per year back into a restricted Carson City fund that will not be mixed in with general funds.

NEVADA RESIDENTS LOVE NEW TAXES ... NOT!

This has opened a Pandora's Box (actually, jar). Northern Nevada's population is not known for loving taxes, and people are coming out of the woodwork to ask pointed questions about the financial feasibility of the project. They want to know that if they are to pay $10 million more that the project will meet budgets and be completed reasonably within the commission's promises. To be fair, costs have increased legitimately, but the originally $20 million project (in 1995) ballooned to $36 million by 2005, and now may reach $60 million or more before it's done.

NO V&T TAX GROUP NOT IN ATTENDANCE

Editor's note, IMHO, etc, there's a group in Carson City organizing to stop the new tax, they're called the “No V&T Tax” group. It's a two-edged sword of a name, the newspaper announced “No V&T Tax Meeting Tonight.” I attended this meeting, these people have fine organization and philosophy, but for people worried about spending $20 per year on taxes to support the railroad they were quick to donate $20 to help defray the $75 cost of the room for the meeting. IMHO, they should be much more worried about the Fire/Safety property tax increase because it makes an end run around the Nevada Legislature's cap on property taxes, according to an analyst I spoke with.

To quote a Commissioner, the projects total costs are a moving target.

Now for some painstaking excruciating detail. If you read all this, you're a wonk. I won't do it again:

Item 4 Public Comment

LOU

Lou Dibateri(sp?) -- Carson City resident Lou spoke about a letter he had sent to the Commission asking about total project financing, the situation with the Gray's Virginia and Truckee. He noted that the letter was included in the record and asked if the Commission had any questions.

Chairman Hadfield noted that the Commission wanted to answer all the public's questions and stated that a meeting had been scheduled with Project Engineer Dorr and staff to answer “perfectly logical questions, ones that we hadn't had asked before and therefore, as we conduct our business and go merrily down the track, and once we have those (answers) we would be happy to meet with you...”

JIM CLARK

Speaking for the Northern Nevada Railway Foundation, Jim Clark made some comments about communication saying that as a boardmember of the Northern Nevada Railway Foundation there are issues that come up at Commission meetings that the Foundation discusses later, and “we never find the results of what was supposed to be, we'll call it homework.”

Clark continued: Now I'll give you some items ... all I want you to know is that those of us who care a lot really want to know what's going on.” He brought up the Portola cars and was told that would come up in the attorney's report later. (I learned the Portola cars were bought solely because of a restricted donation from a Carson City Realtor's group, though the donation may have been intended for one car, not a few cars.)

Clark then mentioned the question of the Ron Allen proposal to purchase Sacramento flatcars that never came back as promised, (Allen was going to bring photos of the cars to the next meeting.) Clark also asked about the newly reinstated operating committee, the group/committee to select an operator and suggested that a group of railroad and financial experts be selected, and pointed out that the McCloud #18 locomotive hours were being run down, at which point he hit nearly four minutes and Chairman Hadfield stopped him.

Mrs. Saylor commented that she was up in McCloud territory where the Commission's locomotive was purchased. She related that she asked the people up there (including the McCloud owner) if they knew Commissioners Ron Allen or John Tyson, who she said were up there to inspect the locomotive before the Commission borrowed and spent $500,000 for it. She mentioned that her husband Steven Saylor was putting together the Railroad Reflections show. She was relating that the people up there didn't seem to know Mr. Allen or Mr. Tyson. (This was a little strange for public comment, IMHO) Chairman Hadfield asked, “I'm sorry, what's your point.” She said she was wondering if Tyson and Allen has gone up to see the locomotive before buying it. Hadfield didn't seem to want to have any of this, and said, “I just frankly wondering why you didn't ask them before the meeting.” Hadfield suggested she take it up with Tyson and Allen after the meeting. She went on to say that the McCloud owner stated the #25 would have been a better locomotive for the V&T. Hadfield said, “we've had that brought to our attention by Mr. Clark several times.” Mrs. Saylor responded, “I didn't know that.”

Bruce Kittes, Carson City stated that he had submitted a list of ten questions and looked forward to getting answers. Chairman Hadfield said he would set a meeting with Mr. Lou and Mr. Bruce. (Ed note – I saw the questions, they dealt with governance, financing, options if the board runs out of money, and questions about dealing with the Grays Virginia and Truckee Railroad.)

No more public comments, Washoe County Commissioner Bonnie Weber arrives.

Item 5 – Consent Agenda

There was no consent agenda to vote on.

Item 6 – Action to ratify payment of bills submitted.

The Treasurer Ron Allen read a list of bills to be paid. Commissioner Bonnie Weber of Washoe County stated that she was uncomfortable paying these bills without knowing if the Commission had the money. She stated that she would go ahead and ratify the bills but hoped that a monthly report could be made available so she and the public would better know the Commission's financial status before being asked to vote to pay bills.

One Commissioner (Mayor Marv? I forget) offered to take Item 7, the Treasurer's Report, out of order so Commissioner Weber would know there was enough money to pay the bills. Weber demurred, the commission voted yes, and (that pesky) audience member Jim Lohse asked if Item 6 was open for public comment.

Item 6 was opened for public comment and Mr. Lohse stated that he concurred with Commissioner Weber's desire for better public reporting, noting that in his home county of Washoe (Reno area) there was very little press coverage and none of the type that discussed finances. Chairman Hadfield responded that Washoe has contributed only $300,000 of a $32 million project, and Mr. Lohse clarified that his point was about providing project info in the Reno paper for Washoe County residents. Chairman Hadfield responded that Washoe County would be the “very serious important benefactor.”

For more public comment on Item 6 Mr. Lou D. of Carson City asked about the bills that were read off by Mayor Marv. He asked if those bills were part of the original estimate/plan. PE Ken Dorr responded that as part of the contract with Granite Construction, there are changer orders along the way “plus or minus” and that the specific contract would finish within 5% of the original bid.

Chairman Hadfield joined in to explain that over time they had an idea of total costs but the project is split in phases and each phase is bid out separately. He pointed to the Overman Pit project and the Tunnel Two project as places that were more expensive than originally anticipated. “I think what they (public) would like is a thorough accounting both by project and by phase,” said the Chairman. “What was the original estimate and what was the actual cost” of each phase. Lou D. said in his working experience, “there's always things you don't know.” He understood costs go up and wanted to see the rises.

Chair Hadfield said, “It seems that construction inflation is almost as bad as food inflation.”

Chair Hadfield also talked about how the Commission sometimes pays costs up front only to be reimbursed later by federal grants.

Item 7 – Treasurer's Report

As of April 30, 2008, cash on hand was 6,718,224.74. Income for ten-month period was $414,000+. License plates $33,918, Storey County sales tax, $187,975, “on roughly ten months it's about $42,000 a month. “We have two grants out there actually, 800,000 grant from EDA, now going to start processing for reimbursements on ... they are going to start reimbursing us on that.”

Under Phase 2A/2B, Allen talked about a grant from Senator Reid for $10 million that was cut back to $8.5 million post-Katrina, and said $3.9 million has been received, and for Phase 2C there was $4.9 million coming “and that takes up the full $10 million.”

Allen went on to summarize reimbursements: 2005 rec'd $855,473 reimbursements, 2006 $1.7 million, 2007 $2.7 million. “it's just the way the feds work ... so anyway that is my report, if anyone has any questions.” Allen: “Hopefully by the July meeting I'll be able to outline that all for you.”

Bruce K. got up to say that Allen was discussing cashflow, said “those of us in Carson City who are being asked to vote on an issue for another $10 million, we want to know about the project, from the start to the finish. How much can we plan, what's the adjustments, how much is it going to cost to finish. We're interested in the project financing, no so much your cashflow.” Going on, Bruce said, “I've looked at your financial statements, it's about a business, your assets and liabilities, that's interesting; we're interested in the project costs from start to finish.”

Allen replies, “actually I can't address that, I'm the treasurer, I'm not the engineer. That's up to Mr. Dorr.” He referred Bruce to Ken Dorr.

Bruce replied, “That's the project manager, that's the numbers we're interested in, the project. What if there is no more $10 million dollars, there is no more money? We heard you say you can get across the freeway, we want to know what we're going to get for the $37 million.”

Mayor Teixeira piped up and said, “Bruce, I thought I addressed that with you when we met for over an hour?” Bruce replied, “I've learned a lot more since the meeting.” Tex jokingly said, “I hope you might be able to share that with me, you might know more than I do.” (Mayor Teixeira has been around since the inception of the project, he and Ron Allen know the history the best.

Washoe Commissioner Bonnie Weber spoke about how much she appreciated Ron Allen's hard work as Treasurer and repeated her desire to have cashflow reports available. Someone (I think Allen or Millard) asked Ken Dorr if he was working on those reports. Ken Dorr responded, “Yes and no, I don't have access to all the Commissions financial records. I can tell you how much is being spent on engineering, construction management and construction.” Allen said “that's what he's asking.” Dorr replied, “but we also have right-of-way components and some administrative components.” Two people spoke at once, then someone asked, “I might ask the chairman, who would have all that?”

Chairman Hadfield pointed to the auditor. “I think the answer to that ... when we met with the independent auditor ... not this year ... we were going to put everything in process because we could start at the beginning. When we realized what a daunting task it was to go back on some of these costs, as an example, when you review some of the bills you have you notice there's a lot of charges that are made that are broken down very specific, that may or may not be able to be conveniently charged to one part or another. Phone calls, to Mr. Rowe for example, talking to members of the commission, myself included. But ... we decided the best thing we can do is get in the major components then we could get that proactively because we could check inflation, everybody would know so that the reporting would be done that we'd be tracking it differently. But that's the thought.”

Chairman Hadfield went on to surmise about hourly billing possibilities where maybe you'd know how much time in right-of-ways was spent on each piece of property. He talked about how it's not so simple that it breaks down cleanly to administration costs vs. construction costs vs. right of way costs, and then said, “It turns out it's not that simple in terms of providing any guidelines ahead of time ... we didn't have a chart of accounts where we broke everything down in detail from the very beginning.”

Millard(? I'm not sure who) said, “you're trying to reconstruct, I'm more interested in where we are today going forward. Is that something that you and the accountants are doing?” Ron Allen replied, “That is correct and with Ken's assistance, he has the figures for the construction and all that end of it, I have the figures for the administration part, between the two of us we can put that together. But neither one of us can do it separately.”

For a few minutes there was discussion between Mr. Dorr, Chairman Hadfield and Kevin Ray about the status of various reimbursement checks where the three were not on the same page.

Then (that pesky guy) Jim Lohse got up to say that he thought the meeting was going to be cut-and-dried, that he was going to post a report of the meeting on the Internet, and he wanted to explain what he was hearing and ask the Chairman if he thought it was a fair characterization. Lohse stated that what he was hearing was that we don't really know what the project is going to cost.

Chairman Hadfield replied that no, that was not a fair characterization. Hadfield asked Lohse if he had experience in project management. Lohse said in construction, yes, in management, no. Thus ensued a long explanation by Hadfield that we would never know the specific cost down to dollars and cents due to changing world economy. Hadfield said that at various points in time they make their best guess but that things change in good or bad 'climates.'

ED NOTE: That's about it for the financial discussion, remember politics is like making sausage. It's messy to watch but tastes good when it's done. While the discussions above may seem contentious, they moved the Commission closer to the financial transparency that the public is looking for.

ITEM 8 PHASE 2-4 ENGINEERING REPORT

Ken Dorr, Project Engineer, stated that if the meeting hadn't gone so long already he was going to give a 45-minute presentation. As it was, he chose to give an abbreviated version. Dorr had Kevin Ray hand out a few copies of photographs of the construction work in progress, and gave everyone a map showing how much right of way could be completed.

(Click on this link to see the 2.6Mb Jpg map)

The right of way map showed the line crossing Highway 50 and curving around to reach the end of Highlands drive. This last stretch of the line before entering the Carson River canyon deviates from the original V&T right-of-way through Mound House, which ran through the current housing built on Highland Way.

Mr. Dorr then discussed the right-of-way aquistion issues for going through the Carson River canyon. At one point he stated that if the new $10 million is obtained from Carson City then the project will be able to get all the way through the Carson River Canyon.

ED NOTE: That would still leave a little more track to get to the planned depot location, plus dealing with the Gray's on buying out the Virginia and Truckee Railroad, at a minimum.

Commissioner (and KOLO 8 News personality) John Tyson asked if a grade crossing would be paid for by the commission or the state directly. I think the answer was that the commission has to pay for the grade crossing.

Regarding the Southwest Gas utility line relocation referenced in the May 15 budget meeting, Mayor Marv Teixeira asked, “Southwest gas, are we OK?” PE Ken Dorr replied that “Southwest gas has received preliminary approval for their relocation plan. There's still an issue of who's going to pay for it.” As noted in the May 15 meeting, the state/NDOT decided that SW Gas has to pay for it, but the issue could still wind up in court if Southwest Gas doesn't accept the NV Attorney General decision that they have to pay for it. Chairman Hadfield characterized it as a $300,000 issue, while in the May 15 meeting it was discussed as a $1 million issue.

Commission Millard asked about a Phase 3 item that would cost $100,000, “If it's $100,000 why don't we do that now.” Mayor Marv Teixeira quipped that “we don't have $100,000.” (ED NOTE that the project still has millions in the bank but it's all committed, thus the “we don't have it” comment.

Ken Dorr stated that his company, Marhart Consulting was under contract to do preliminary design work on the Carson River Canyon part of the route. The three owners to be dealt with in that area are Bentley, Serpa and Bertinoli. (ED NOTE: Serpa also owns land in the way of the route to the depot once out of the Canyon.)

ITEM 9 – ATTORNEY'S REPORT

You may remember in the March meeting (official minutes from March here) that Commissioner (and Treasurer) Ron Allen (rather stridently IMHO) brought up the issue of the passenger cars owned by the Commission being stored in Portola by the Feather River Railroad Society / Portola Museum. Allen had learned that the cars were not being stored within a fenced area as called for by the agreement. While Ron proposed different 'nuclear options' other Commissioners seemed to want to find a reasonable solution. At the time it was agreed that the project attorney Mike Rowe would write a letter about the matter.

Attorney Rowe came back to report that he received a letter from Rod McClure, FRRS President, stating that the Commission had not paid the rent for some time. Mr. McClure also noted that the agreement required the Commission to board up and secure the cars.

Kevin Ray noted that the FRRS wasn't paid because the FRRS had never invoiced the Commission, but it came out that the contract simply called for rent payments and didn't speak of invoicing. Commissioner Ron Allen stated that if the FRRS didn't send invoices then the Commission wouldn't pay them. The Commission decided to start paying the rent as required by the contract.

ITEM 10 – VIRGINIA AND TRUCKEE RAILROAD REPORT – TOM GRAY

Tom Gray reported that the Virginia and Truckee Railroad tourist line was now in full-time operation for 2008 and that many school groups had taken tours. He also noted that the Nevada Department of Transportation has taken a tour.

ITEM 11 – NORTHERN NEVADA RAILWAY FOUNDATION REPORT – JANICE AYRES

Ms. Ayres stated that “the only thing that's going to bring money into Carson City is this railroad. She and Chairman Hadfield spoke of the idea that perhaps people against the project would change their minds if they saw the project. Some discussion occurred of how to get the public to see the project.

ITEM 13 – CHAIRMAN'S REPORT

I have no notes here.

ITEM 14 – Commissioner John Tyson formally apologized to Joe Curtis for his comments about “legalized extorion.”

Commissioner Ron Allen used his position as a Commissioner during a segment of the meeting where the public cannot comment to bring up a complaint held by his Nevada non-profit corporation, the Virginia and Truckee Historic Railroad Society. He said that Jim Lohse had created a group with a similar name as a play on his group's name. Out of order, Mr. Lohse commented from the audience, “that's not true!” Commissioner Allen continued to explain that he didn't think the railroad space was big enough for two groups with similar names. Lohse, again totally out of order, commented, “I have no chance to respond!” Ron Allen went on bringing his (IMHO one-sided) private dispute up as commission business, and Lohse, again totally out of order, shouted at Chairman Hadfield, “Is this on the agenda?” State Commissioner Ron Allen finished bringing his private business up while sitting as a Commissioner, and finished his complaint.

That's all folks! (ED NOTE for more information on the group founded by Jim Lohse whose name is reserved with the Nevada Secretary of State, please see http://livingsteam.com/virginiatruckee.html.)