M&NJ's NRUC Boxcars
M&NJ's NRUC Boxcars
The M&NJ and its predecessor companies have never purchased new freight equipment in its 133 year history. This doesn't mean that the M&NJ never had new freight cars, it did. The story of how the M&NJ acquired hundreds of brand new boxcars in 1978 is interesting and a bit complicated at times. A more detailed account of this will appear in a future M&NJ RHS newsletter.
In the late 1960's the AAR (Association of American Railroads) was feeling the impending crunch of a general purpose boxcar (XM) shortage and moved into action to spur investment in railroad boxcars. In September 1970, they created and the ICC approved, something called Incentive Per Diem (IPD). This additional fee was charged on all XM cars during the 6 highest traffic months of a year, September - February and was added to the mileage and normal per diem (per day) fees. These IPD fees could only apply to newly built or rebuilt boxcars, not old clinkers from the 40's and 50's. There were limitations on the number of IPD cars a railroad could make available for interchange, but if a railroad didn't have any boxcars during a set of base years they were not limited to the number of IPD cars they could put into interchange.
The way the IPD rules were written invited investment from non traditional financial sources and several new companies sprang up to harness the advantages in the IPD rules for tax relief. One of these companies was National Railway Utilization Corp. (NRUC). which was directed by a number of investment bankers and insurance company officers. The scheme that NRUC created was to provide people in the high end tax brackets with a tax shelter while providing needed capital for purchasing new boxcars. The typical individual investor would purchase several $33,500 to $33,800 XM boxcars through NRUC, but would only put down a 10%-30% downpayment. A mortgage would be taken out on balance of the bill. The individual investor would now get an investment tax credit of 10%, about $3,350, as a dollar for dollar deduction. Not bad, but it gets better. They also receive a 50% deduction on interest payments from the mortgage and can write the whole thing off in 12 years for depreciation. This is on top of all the mileage, per diem and incentive per diem fees the cars generated.
The entire thing rested on getting a real railroad to allow its name to be stenciled on the cars so they would fall under the IPD rules, this is where the M&NJ came in. They were a real railroad and because they didn't have any boxcars during the base period (1964-1968) they were unlimited as to the numbers of IPD cars they could sponsor in interchange. NRUC approached the M&NJ in December of 1977 offering them 7% of the lease fees if the M&NJ would let them stencil the M&NJ's name on the boxcars. M&NJ owner Pete Rasmussen jumped at the opportunity to make a profit from absolutely no investment as the M&NJ was under no financial obligation for the cars what so ever.
The first batch of cars were built by Berwick Forge and Fabricating in December 1977 and were delivered in January 1978. An additional batch of Berwick cars arrived in February. In September and October an additional batch of cars came from the Evans Railcar Division of Evans Products. In sum these hundreds of cars represented 16.85 million dollar investment. All the cars were 50 foot outside braced cars painted blue with white stenciling and were immediately set loose on the railroads of North America. To earn the maximum amount of money for the M&NJ these cars had to be kept moving, ping-ponging from one railroad to another. A few did see "home" rails during the hey day of the IPD craze, M&NJ customer Polytherm (now known as Genpak) shipped out loads of expanded foam plates and trays to customers all over the nation. Even with hundreds of these IPD boxcars under his control, Pete Rasmussen still noted being short of empties during 1978 and early 1979 as those rolling money tree's moved all over the rails.
Several things changed this cash cow to road kill; the recession of the late 70's early 1980's, truck deregulation and increased investment in boxcars by major railroads. The national recession was the greatest blow to the IPD boom as the loads for the cars dried up and they began returning to the M&NJ. Even the M&NJ's own boxcar customer, Polytherm, switched to truck deliveries of its finished products. The out of service portion of the M&NJ was cleared of almost 20 years of underbrush and trees as more and more faded blue boxcars returned to remind Orange County residents of the economic doldrums the nation was suffering.
The poor working stiffs that Pete Rasmussen and the M&NJ typify seem to have made out fairly well in this scheme, whereas the over taxed yuppie and the investment capitalists got burned when the IPD boom collapsed. When asked to sum up the whole affair, Pete was happy to be involved at all and even wished he'd been in on it from NRUC's creation in 1973. The possibility of a million dollar profit with no financial risk is hard to get bitter about. As it was, the M&NJ enjoyed almost 2 years of IPD boom money and it only cost them gas for the chain saws and some diesel fuel.
Most individual NRUC investors backed out of their mortgages and the cars were foreclosed on. NRUC was forced from its Philadelphia headquarters to avoid bankruptcy and the blue M&NJ cars suffered through the weekly Sunday ritual that cycled the cars that had just been returned to the extreme southern end of the storage line while the cars that had been there the longest remained on the northern end of the storage line. Slowly NRUC arranged the sale or lease of all the IPD cars and by June 1990, they had all left the M&NJ. Some were used by the Bay Colony RR to haul trash, others went to shortlines NRUC owned like the Pickens RR and the St. Lawrence RR. The reappearance of a faded blue St. Lawrence 50 foot boxcar as a spacer for last winters delivery of the O&R transformer reminded many of the days when these cars could show up on any piece of standard gauge track in North America.
