Just before Christmas, Capital Metro and Watco Companies Austin Western Railroad LLC (AWRR) finalized a new agreement for freight service along the Giddings to Llano rail line owned by Capital Metro. The Giddings to Llano line is a total of 163 miles long and includes the 32 mile MetroRail Red Line.
The Capital Metro board approved the agreement on Dec. 21, and Freight Rail Manager Charlie DeWeese, CEO Linda S. Watson and Watco Companies Senior Vice President of Business Development Allan Roach spent the remainder of the afternoon finalizing the details so they could ink the deal. Both parties had a considerable incentive to finalize the agreement before the end of 2010 so that AWRR can file for federal 45G tax credits as part of the new tax deal worked out between Congress and President Obama. By agreement, Capital Metro could receive an estimated $600,000 of the total tax credits AWRR qualifies to receive. Happy Holidays, indeed.
Aside from the potential tax credits, the agreement itself is a great deal for both parties, and it was all smiles when Allan Roach and Linda Watson signed the contract. The five-year deal is good for Capital Metro because it ensures that the freight operation makes money for Capital Metro, and that during the life of the contract, all direct expenses and a significant contribution to capital and allocated overhead costs are covered by the freight operation and AWRR. In essence, we are leasing our freight line to AWRR, and they are assuming the risks of securing freight business, buying fuel, etc.
The deal is good for AWRR because they have an opportunity to make money also, by growing the freight business. The agreement gives them more latitude to apply their own business model and bring in considerable expertise from throughout the country to increase business. As Allan mentioned, “This new agreement further encourages AWRR to provide maximum value to AWRR, Capital Metro and the city of Austin and surrounding area.”
The agreement is also a great deal for Central Texas, as the AWRR takes about 100,000 big rig trucks off the highways in our area each year. That means safer and less congested highways. With an anticipated increase in freight business over the life of this five-year deal, even more trucks will be removed from our roads.
Finally, there’s one other reason we can all celebrate the good partnership we’ve developed with Watco Companies, Herzog, and the freight shippers in the area: together we’ve created and implemented a plan that has allowed for freight rail operations and MetroRail service to successfully coexist on the same tracks. The AWRR has moved the same amount of freight in half the time, and they’ll have to get even more efficient as MetroRail service expands in the future. The whole country is interested in the model we implemented because shared tracks is a much more affordable option than building a separate commuter rail line.
Here’s to five more years of success!