"Hangin's Too Good For Lohse!" -- V&T Re-con meeting summary for December, 2008

12/08/08

Hi folks on the Reno Railfans and Comstock Historical Society mailing lists:

As usual if you don't want these emails just say so and I'll take you off the list. I've already put more time than I wanted to in this, so please forgive mispeelings and bad punctuation. Merry Christmas, Happy Holidays and all that!

-- Steve Stough of Gold Hill Historical Society Has Been Posting Meeting Summaries Too, Check it Out!

I am going to finish these notes, send them to you, and then I make no promises about writing these in the future. Steve Stough of the Gold Hill Historical Society has been doing a good job posting V&T re-con news on this page: http://www.goldhillnv.org/GHHS_News_and_Events.htm He is a pilot and has taken photos from a plane that you must check out! His meeting summary is a little drier and more restrained than mine, but this is getting old for me and takes away from other activities like work. Don't count me out, but don't count on me either!

As noted below, today's meeting was held in Virginia City in the Storey County Courthouse. Before the meeting a quick mock trial was held...

NEWSFLASH -- Jury Foreman Hadfield Finds Lohse Guilty, Judge Ron Allen Passes Death Sentence on Gadfly Lohse

On the same day President Bush ('s portrait) was hung, a local criminal case was winding down to its grim conclusion...

You're (not so) humble handcuffed author Jim Lohse arrived in the courthouse and was led to the penalty box. Judge Ron Allen asked the Jury Foreman for his verdict. Foreman Bob Hadfield read the verdict: GUILTY of insubordination, a capital crime in Commission-land!

Judge Allen, after a moment's consideration, pronounced the sentence: DEATH to Lohse! Lohse agreed with the sentence, reminding Judge Allen that he was beyond rehabilitation. (yes this really happened, restoring my faith in humanity and proving that political opponents can still have a sense of humor.) The date for my hanging in effigy has not been set.

MEETING HIGHLIGHTS, not covered in order... sometimes things I explain presume you already know about an ongoing issue. If you have questions let me know.

-- Meetings Now Rotate As Called For By State Law

Today's meeting of the Commission for the Reconstruction of the Virginia & Truckee Railway was interesting in many ways. First, it was held in Virginia City's 1876 Courthouse, a building almost as old as the original Virginia & Truckee Railroad. After an extended period ignoring state law, the Commission is now going to rotate their meetings among the five counties represented: Carson City (which is a county), Storey, Lyon, Washoe and Douglas counties.

The next meeting is planned to be in Dayton, and to the best of my recollection it will be on January 12. There was also a discussion of holding the meetings every two months, but for now the Commission decided there is pressing business in January so they will meet in another month. The January meeting should be held in Dayton, which is in Lyon County.

-- Mayor Marv's Last Meeting (for now...)

This was also the last meeting for Mayor Marv Teixeira of Carson City and Supervisor James Baushke of Douglas County. Both of them decided not to run for re-election and therefore cannot be appointed from the Board of Supervisors of their counties. We expect newly elected Mayor Crowell of Carson City to be the new rep, and Baushke's replacement is unknown to me. At the end of the meeting Mayor Marv spoke and thanked everyone involved for their committment and passion, even the detractors ... except me, I suppose. He noted that people who are critical and "post websites and do goofy things don't count." Awwww, how sweet, he remembered me!

And Mayor Marv probably won't be gone long. A Bill proposed for the 2009 Nevada Legislature by Senator Mark Amodei proposed to add two or three new Commission members. If that flies, the new members will add more weight to Carson City interests. It's expected that by then ex-Mayor Marv will get one seat. Former Carson City Supervisor, Former V&T Commissioner and current Northern Nevada Railway Foundation President Janice Ayres is expected to get the second seat. If there's a third seat all bets are out on who gets that.

How will the Commission function better by adding people who know little to nothing about railroads? How will the Commission improve by adding more political appointees who don't answer to the voters? I don't know, if you have a good answer please let me know.

-- Sierra Railroad Proposal Flounders, Will Return Next Meeting

I will get into a detailed discussion of what happened with Sierra Railroad at the end of this summary. It raises more questions than it answers. In short Sierra Railroad created a Nevada Corporation, Sierra Nevada Railroad Corporation. It has no known assets. It's not clear whether the Nevada Company will be able to draw on Sierra's California resources as previously promised. The agreement with Sierra Railroad of California has been good enough for almost two years, the Commission will not have Sierra operate the railroad for years, but somehow now was the time to strike on transferring agreements.

Based on this the Commissioners were asked to transfer a Memo of Understanding and a locomotive lease to the new company, with no supporting documentation of the assets or capabilities of the new company. A note on the Memo of Understanding -- it was a previously unknown document. After the best research of me and others, many of us who have read the minutes and attended the meetings, we knew the Commission was looking into this MOU but didn't know it existed. More on the MOU and the #18 lease later.

-- Will Carson City Fall Short on Tax Revenues, Affecting Their Ability to Pay Off V&T Bonds?

Near the beginning of the meeting, Mayor Marv started out by saying, "Since this is my last meeting I want to see how much BLEEP I can stir." He went on to note that Carson City sales tax revenues have fallen 7% and 11% in the last two years. Carson City sold $15 million in bonds in 2005 to provide money for the reconstruction effort, and now uses 1/8 percent of sales tax revenue to pay off the bonds. Recently Carson City tried to add another 1/8 percent tax to bond another $10 million, but they lost the non-binding vote 61%-39%. Unlike in the past, it seems this time Carson City will respect the will of the voters, although Carson politicians have full power to add the new tax despite the no vote.

To get to the point, Mayor Marv said that tax revenues may fall so much that the current 1/8 percent will not be enough to pay off the bonds. He said the Commission should reserve about $100,000 to make up any shortfall, so the Carson City General Fund wouldn't have to pay it. He didn't spell it out, but my understanding is the Commission would give money back to Carson City to cover the bond payments. This is pretty strange considering the Commission just tried to get $10 million from Carson, and now may have to pay Carson City back. That was not brought up during the election, to my knowledge.

-- Among Bills Paid Are Lawyers Fees For Two-Year-Old Trademark Dispute

During the part of the meeting where they go over bills that have been paid, it came out that Project Attorney Mike Rowe was paying another attorney to defend a trademark lawsuit with the Virginia & Truckee Railroad. At least one Commissioner asked why the dispute was dragging on so long, and asked what the dispute was all about. He was told that Joe Curtis of Virginia City had transferred his Federal Trademark on Virginia & Truckee Railway to the Commission, but that the Gray's Virginia & Truckee Railroad objected to that use, hence the lawsuit. Always making more billable hours for the lawyers, Attorney Mike Rowe said he would have the trademark attorney prepare a written report for the Commission.

What's behind the scenes of this lawsuit? Here's my understanding, don't trust me, do your own research. Go to the Patent and Trademark Office website and try this search page: http://tess2.uspto.gov/bin/gate.exe?f=searchss&state=hft5jj.1.1 Now enter these two terms: virginia truckee Do the search...

You get a page showing three entries, two for the Trademarks held by the Gray's Virginia & Truckee Railroad. Their Trademarks explicity cover souveniers AND actual train rides. Now look at the Virginia & Truckee Railway entry, the one created by Joe Curtis and now owned by the Commission. It only covers souveniers, it doesn't cover train rides. The question is, would using the Railway name for train rides step on he Gray's existing Trademark?

This is just another manifestation of the Commission throwing the Gray's Virginia & Truckee Railroad overboard for another operator, the Sierra Railroad. The Commission wants to be able to step on the Gray's long-held trademark, and threaten them with eminent domain at the same time. It's more of the same from your local government! Moving on...

-- Phase 2A, 2B and 2C Construction Update

For project maps showing these phases see renorailfans.com. Phase 2A and 2B are done, with cost overruns within the 10% limit at $700,000 on a $7 million budget. That's about a million dollars per mile of track, which is cheaper than a California freeway soundwall! The overruns were mostly due to a landslide last winter at the Carson City side of Tunnel 2 in American Flat.

For Phase 2C, Roy Halliburton of Q&D Construction was on hand to provide an update. Apparently Washoe County-based Q&D is progressing very well on the phase of track through Mound House over a bridge on Highway 50. The bridge abutments will be poured starting later this week, and the bridge should be placed by the end of January. The bridge itself needs the lead painted hydroblasted and the bridge will be repainted. The entire Phase 2C construction might be done by May or June of 2009.

The part of the track that runs through the Road and Highway Builders gravel pit will be started soon as well, where the track will connect with the end of Phase 2B near the end of Industrial Parkway in Mound House.

For the unfunded Phase 3 that will run through the Carson River Canyon, engineering work will be completed and property acquisition will start given sufficient funds.

-- Brother Can You Spare 200 Million Dimes?

Since the Commission lost the tax vote in Carson City they have a new idea for funding. Maybe they read the Letter to the Editor I sent in to the Nevada Appeal. It was meant as a joke, and they printed it:

*** from the December 4, 2008 Nevada Appeal

Creative financing ideas for V&T Railway

Here?s two fund-raising ideas for the V&T Railway recon folks. First, they could follow Goldman-Sachs? lead, convert into a bank holding company and apply for TARP funds from Hank Paulson or Geithner once he comes in.

Failing that, perhaps they could all apply for unemployment, or better yet call themselves a WPA-style program and get federal job creation funding from Obama directly!
Good luck guys.

JIM LOHSE
Reno

******

It turns out that with all the talk of Obama's incoming administration providing economic stimulus to public construction projects, Mayor Marv, Bob Hadfield, Ken Dorr and incoming Mayor Bob Crowell all met in Carson City to prepare an application for these funds to further the construction process. Mayor Marv explained that "this is the type of project they are looking for," a project with a track record that is beyond the planning stages and ready for construction. He dubiously repeated the claim that the re-con
project is a public-private partnership, which it isn't. Mayor Marv said if the application moves along it there will be "more scrutiny on projects as they bubble toward the top."

-- Auditor Talk and a Sneaky Gold Hill Land Update

Rather than agendize a discussion of buying land in Gold Hill, Project Attorney Mike Rowe simply gave an update that (apparently) the appraisal is still not in yet. The Commission is still trying to buy the land near the Gold Hill depot, though it's not obviously needed for the project. Under Federal Regs they can only buy land that is needed. Since the Commission breaks other rules about land acquisitions, why should this stop them? On reading Steve Stough's notes, he seems to think the appraisal is in and the deal will close.

While Ken Dorr previously said the Commission needs the land to access the track, he made it sound like a maintenance issue. Chairman Bob Hadfield previously said the land is for a parking lot. It pretty easy to believe this is part of the Commission's gambit to isolate the Gray's Virginia & Truckee Railroad. In short, here's how things would shake out: You would arrive in far-east Carson City by car and park at the Drako Way depot. Then a bus would take you to western Mound House to board a train. You would ride the train to Gold Hill where a bus would take you to Virginia City.

But wait, any decent size bus can't make it up the grade and around the tight curve on the way from Gold Hill to Virginia City. Perhaps you're bus would go back down 342 from Gold Hill, turn left and take you up the 341 truck route to Virginia City. Perhaps you'd be satisfied skipping Virginia City and just be content to tour the ghost town known as Gold Hill.

Perhaps they will build a PF Chang's and a Taco Bell in the Crown Point Ravine and you will again not want to continue on to Virginia City. (oh, my tounge is stuck in my cheek!) Throw in a Hickory Farms and Gold Hill will become the new Virginia City! (don't get me wrong, I love Gold Hill, I just don't like the tension between the Commission and the Gray's where the Commission beats the Grays with the eminent domain stick on one hand and asks them for favors on the other hand.)

INTERMISSION ... POPCORN AND DRINKS ARE AVAILABLE IN THE LOBBY ... THINK "DUEL IN THE SUN" AND COME BACK IN TEN MINUTES

-- New Operating Agreement With the Gray's Postponed, Plans for Depot Upgrades Postponed Too

I am not privy to the ugly details, thank God, but the Commission has been trying to talk Tom Gray into operating a train down to Highway 50 once that track is done this spring or summer. It was on the agenda to discuss this and discuss upgrading the Drako Way property into a working depot. Both these items were put off until a future meeting.

As noted the Commission continues to hold out the threat of taking the Gray's Virginia & Truckee Railroad by eminent domain (though they don't have the money to do so). At the same time they want to start operations now since they have little prospect of getting new funding unless "deus ex machina" Obama is lowered down on a boom like a theatrical god and hands the Commission 200 Million Dimes.

As I alluded to above, the Commission wants to start operations by running a bus from far-east Carson City to Mound House. Think like a tourist for a minute. Do you agree with me that it's a significant barrier to need to ride a bus to catch a train vs. parking at a depot and catching a train? Does Durango & Silverton make you park in "the remote lot" and bus you to their trains? Heck no! I believe this bus-train combo plan is a horrible idea.

I do however believe in making lemons out of lemonade. If they are going to try this half-baked plan, they should run the bus to the Nevada State Railroad Museum as well as stop at the downtown Carson City Nugget to pick up passengers. If they wanted a fully baked plan they'd build a depot in Mound House NORTH of Highway 50 and put in a parking lot there. But NO the Commission has repeatedly voiced its desire to punish EEEVVVVVIIILLLLL Lyon County and will never base an operation in Lyon County.

-- Sierra Railroad Didn't Mean to Stir the Pot But They Did

OK, here's the real meat of today's meeting. Sierra Railroad has created a new Nevada corporation, Sierra Nevada Railroad Corporation. As noted above, it has no known assets. The list of officers has not yet been submitted to the State of Nevada. Chris Hart and Robert Pinoli from Sierra Railroad were asking at today's meeting for various agreements and contracts with the Commission to be transferred to the new Nevada corporation.

-- Sierra Railroad Backgrounder

First a little background. A couple years ago the Re-con Commission decided that after ten years the Gray's were suddenly not up to the task of running the reconstructed railroad when it's done. They went through a dog-and-pony show where various railroad operators submitted vague qualifications documents that were long on claims and short on details.

Sierra Railroad of California was picked due to the depth of their experience and operations of three tourist railroads in California. Sierra's main claim to fame was they would bring rolling stock, maintenance of way equipment and a deep employee base to the table. They noted that their assets in California meant that at a moment's notice various equipment and talent could be dispatched to Nevada as needed to provide a complete solution to the reconstructed railroad.

Keep this in mind, Sierra has all kinds of maintenance of way equipment and other assets that were the primary reason they were chosen to operate the future railroad. At a meeting a year or two ago, the Commission decided to draft a Memorandum of Understanding (MOU) with Sierra appointing them the Chosen Ones! At times when some Commissioners and members of the public questioned this choice, Mayor Marv and Chairman Bob Hadfield have strenuously defended this choice, like in this video at http://www.youtube.com/watch?v=z51oxE8ndY4

This MOU was effectively a secret document until today, because people who follow this VERY closely didn't realize it existed. It was noted in a previous meeting that Project Attorney Rowe was supposed to work up an MOU with Sierra, but it never came back to the Commission for approval. I finally got a look at it today.

Now rumors have been swirling for some time now that Sierra Railroad is up for sale to Patriot Rail, like in this Nevada Appeal article: http://www.nevadaappeal.com/article/20080909/NEWS/809089957 Today after the meeting I asked Chris Hart and Robert Pinoli of Sierra Railroad if there was an update on the potential sale. Pinoli responded, "who are you?" as if that matters. After I identified myself Pinoli and Hart both reminded me that they were under a confidentiality agreement not to comment on the ongoing sale. When asked directly they did not deny a sale is in process, so I think it's a safe bet to say Sierra is either up for sale or being sold as we speak. Now for a legal disclaimer section:

*** MY ATTORNEY HAS ADVISED ME THIS LINE SHOULD CONTAIN THREE ASTERISKS

DISCLAIMER!!!!! FOR THE REST OF THIS EMAIL I AM SPECULATING ON THIN INFORMATION! IF SIERRA WERE ABLE TO ANSWER A SIMPLE QUESTION, "ARE YOU SELLING OUT?" NONE OF THIS WOULD BE NECESSARY. DO YOUR OWN RESEARCH, DRAW YOUR OWN CONCLUSIONS, DON'T SUE ME, BE HAPPY ;>)

*** MY ATTORNEY HAS ADVISED ME THE LINE ABOVE SHOULD BE BLANK, if it's not blank I take it all back!

Ok with the legal disclaimers and jokes out of the way, please realize I am not necessarily describing reality but instead am giving you a scary glimpse into my thought process. You have been warned...

When it came time for the Commission to transfer the MOU to Sierra Nevada Railroad Corporation, they voted 5-4 to do so with Ron Allen, John Tyson, Larry McPhereson and John Flanagan voting no. Good for you guys, here's why:

During discussions of transferring the MOU Dwight Millard asked many excellent questions about the relationship between Sierra of California and the new Sierra Nevada RR Corp. He pointed out that Sierra Nevada RR Corp has no assets and no clear linkage to the existing Sierra of CA. Robert Pinoli of Sierra stated that the same officers headed both companies, with the distinction that Pinoli and Hart were leading the new Nevada corp.

At one point Pinoli stated that no sale of Sierra has taken place. He didn't say no sale will take place, just that none HAS taken place. No one pinned him down on the future of Sierra. Mayor Marv entered the discussion by saying that the MOU was not a contract, didn't involve money, and it basically had no effect no matter which company held it. By the 5-4 vote the Commission transferred the previously secret document that the Commission never voted on in the first place. (It's pretty scary inside my head, and it gets worse, read on...)

Now it came time to re-assign the #18 lease to the newly created asset-less Sierra Nevada RR Corp. Here people like John Tyson and Ron Allen did a FANTASTIC job of explaining why the contract shouldn't be transferred until Sierra could provide more data on the new company. They put this off until a future meeting. Before I move on, let me mention that Jim Clark, the Train Man, who recently resigned from the Northern Nevada Railway Foundation, got up to speak on the issue.

Jim Clark made an impassioned speech asking why the #18 locomotive simply couldn't come back to Nevada to live among the Nevada taxpayers who paid for it. The audience broke out in applause, and an angry Bob Hadfield shouted "No Clapping!!!" (He meant save it for Mayor Marv's resignation speech.)

Now in my scary thought process the Commission should be concerned about a bigger point. Depsite Bonnie Weber naively claiming Sierra's move was simply for tax reasons, look at this speculative scenario: Assume the Commission transfers agreements to the new Sierra Nevada Railroad Corporation on the assumption that it will have the full faith and credit of CA's Sierra Railroad behind it.

Now assume that Sierra of CA sells out to Patriot Rail. Assume they only sell their freight ops and Sierra Entertainment retains the passenger tourist ops in CA.

Assume for fun that a heck of a lot of talent, rolling stock and MOW equipment would leave Sierra and go to Patriot. That would mean after the Commission spent all that time and money hanging their fortunes on Sierra Railroad, most of the qualifications would disappear and the Commission would not have such a strong operator lined up to run the rails.

In my opinion for some reason Sierra wants to remove the Commission agreements from the sale to Patriot so if a sale goes through Sierra will continue to control them, not Patriot. Since Patriot is primarily focused on freight and only maintans one small tourst operation, the Copper King Express in Montana, the rumored purchasers of Sierra probably have zero interest in the V&T's future.

I apologize for the continual legal disclaimers but Pinoli and Hart struck me as guys who will sue at a moment's notice and I need to be clear that these are just my opinions and don't constitute libel and any other "tortworthy offense," because you are expected to do your own research and come to your own conclusions.

I did ask Pinoli and Hart if they could provide a guarantee against this scenario and again they cited a confidentiality agreement. They did not rule out the above scenario. In My Humble Opinion, if a deal with Patriot closes all bets are off.

As Jimi Hendrix said, "you just can't believe everything you see and hear, can you? Now if you'll excuse me I must be on my way."

That's all folks!