Today
on the M&NJ
by Peter Brill
Saccardi & Schiff, Inc. issued a section of the City of Middletown
Comprehensive Plan in August. It was entitled “Task 1, Existing
Conditions Technical Memorandum”. Comments concerning the M&NJ appear
below.
There are numerous at grade crossings along the
Middletown and New Jersey (MNJ) and
Conrail (SIC) Railroad that pose safety and traffic issues for the city.
While the City has pursued improvements at these intersections, there
has been little response by the railroads. However, as a result of an
agreement between the City, MNJ and Chartwell International, Inc, there may
be the opportunity to implement some improvements. MNJ seeks to increase
the volume of activity on the railroad through the commercial delivery of
raw materials, and Chartwell, Inc., owner of land along the tracks, seeks to
utilize its parcel to provide a location for a transload facility where
garbage waste would be trucked and loaded onto rail cars without any
sorting. Safety improvements can be made at at-grade railroad crossings by
adding signal controls to uncontrolled intersections. Monies for such
improvements may now be available due to a potential for greater
profitability by the railroad. Monies could also be available for such
improvement from the NYS Transportation Improvement Program (TIP) for this
area.
The potential increased usage of tracks means increased truck
operations to the site, most likely from Dolson Avenue. The volume and
types of materials carted could present traffic and quality of life issues
along this corridor. Also a bridge accessing the Chartwell site would need
to be improved to handle the additional traffic. The issue of increased
truck traffic, some with quality of life implications could potentially be
further exacerbated should the Masada waste to Ethanol plant come to
fruition, further increasing trucking operations along the Dolson Avenue
corridor. Negative spin-offs could be felt by existing commercial uses in
the corridor and by residents seeking to access other parts of the city from
the south.
The repercussions of Chartwell’s initial plan to establish a solid waste
transfer on the M&NJ continue to echo in the halls of Congress. The office
of New York Senator Charles E. Schumer issued a press release on October 30th
stating he had on that day “pushed for a federal provision that will protect
the Towns of Croton and
Middletown
from having solid-waste transfer stations constructed in their residential
neighborhoods without local regulation.” Schumer “urged the Joint
Senate-House Conference committee to retain a provision that would prevent
the STB (federal Surface Transportation Board) from approving these
controversial projects, placing regulation of solid-waste facilities back
into the hands of state and local authorities who can protect local
communities.” It was acknowledged that Middletown had been able to work out
an agreement with Chartwell but “the Schumer-backed provision would have
provided the City with the authority to regulate construction of the
facility.”
On November 8th, the NS local coming to the M&NJ derailed two
covered hoppers of plastic pellets on the Wisner Avenue crossing in
Middletown. The cars remained upright but off the rails and dug into the
crossing asphalt. The scrapping of the M&NJ from below Slate Hill to
Unionville continued into December.
Chartwell’s report for the quarter ending September 30, 2007 revealed a
continuing deficit financial performance as shown in the following table.
Period
Ending 9/30/07 6/30/07 3/31/07
12/31/06
Total
Revenue 2,221,000 2,478,000 1,656,000 1,623,000
Cost
of Revenue 2,289,000 2,382,000 1,420,000 1,554,000
Gross
Profit (68,000) 96,000 236,000
69,000
Operating Income/Loss (982,000) (930,000) (1,096,000) (833,000)
Net
Income (1,195,000) (1,017,000) (1,232,000)
(966,000)
The agreement between Chartwell and G&A Holdings, LLC, covering the sale of
the capital stock of Chartwell’s subsidiaries, Hudson Logistics and Hudson
Logistics Loading, to G&A “expired and became null and void on October 29,
2007 in accordance with its terms.” Chartwell soon found another potential
buyer and on December 27 it and its subsidiaries, Hudson Logistics and
Hudson Logistics Loading, “agreed to sell a significant portion of their
assets and assign material leases and contracts to the Buyer related to
their rail transload operation in
Passaic,
New Jersey.”
The buyer was identified as Perry New Jersey I LLC of Atlanta, GA and John
K. Porter, Jr. was listed as a member of this company. The price was set at
$1,700,000 and the transaction was expected to close on or before January
31, 2008.
Chartwell’s filing of its fourth quarter 2007 report with the SEC on
February 12 quickly resulted in an article in the Times-Herald Record
headlined “Chartwell’s financial future might be train wreck”. The article
presented few details and we will instead refer to the full filing with the
SEC available at Edgar Online. In the six-month period between June 30th
and December 31st, 2007,
Chartwell’s cash dwindled from $704,000 to just $63,000 while total current
assets, which includes cash, dropped from $2,073,000 to $754,000. In the
same period, current liabilities rose from $2,190,000 to $2,804,000. In
other words, current assets and current liabilities were roughly equal on
June 30th but by December 31st, current liabilities
were about four times current assets. The filing stated that as of December
31st “we had a working capital deficiency of $2,050,000.” Total
assets shrunk over the six month period from $15,983,000 to $13,124,000 with
a major factor being recognition of $918,000 in asset value impairment in
the fourth quarter as “our management identified certain railroad equipment
assets that were not being used in current operations and evaluated the
market value of these assets.” We wonder if this $918,000 write-down is
related to the scrapping out of the right-of-way below Slate Hill? After
its purchase of Cranberry Creek and its M&NJ subsidiary, Chartwell had
marked up the value of the M&NJ’s assets as it believed them to be
undervalued. Consequently land was valued at $726,000, property and
equipment at $1,524,000 and the total, including other minor items, was set
at $2,230,000 which was in line with what Chartwell had paid for the
company. Chartwell also cited an increase in their accounts receivable bad
debt allowance of $246,000. Chartwell’s total liabilities grew in the
second half of 2007 from $8,268,000 to $8,814,000 with the resulting ratio
of assets to liabilities dropping from roughly 2 to 1 to just about 1.5 to
1.
For the three months ending December 31st, 2007 Chartwell’s operating performance was as follows:
3 Mos. End 3 Mos. End 6 Mos.
End 6 Mos. End Life-To-Date
Period
Ending 12/31/07 12 /31/06 12/31/07
12/31/06 3/03/05-12/31/07
Total
Revenue 139,000 1,623,000 2,361,000
3,172,000 9,718,000
Cost
of Revenue 447,000 1,554,000 2,736,000
3,022,000 9,560,000
Gross
Profit (Loss) (308,000) 69,000 (375,000)
150,000 158,000
General/Administrative 1,823,000 906,000 2,738,000
1,709,000 10,010,000
Operating Income/Loss(2,131,000) (837,000) (3,113,000)
(1,559,000) (9,852,000)
Other
Income/Expense (237,000) (133,000) (449,000)
(192,000) (1,981,000)
NET
LOSS (2,368,000) (970,000) (3,562,000)
(1,751,000) (11,833,000)
The quarter’s meager revenues of $139,000 consisted of just $100,000 from
the transload at Passaic and $39,000 from the M&NJ versus $1,420,000 and
$21,000 in the 4th quarter of 2006 when Chartwell also received
$182,000 in fees for solid waste disposal for a client. The transload was
closed for the first half of the quarter for repairs and re-opened in
November with increased prices. Volume through the facility never
recovered. Chartwell tried to raise prices to cover increased costs but
instead lost business and couldn’t reduce its own fixed costs to adjust to
the lower level of business. Interestingly, Chartwell continues to assign
no costs to the M&NJ as they state “There was no cost of revenue associated
with our rail transportation income.”
The quarterly report also contained many other important items. Chartwell
(I will use “Chartwell in this paragraph to mean Chartwell and its
subsidiaries) had bought the “C & D” facility in the Dundee Yard of the New
York & Greenwood Lake Railroad in
Passaic,
NJ, for $1,475,000 on
August 29, 2006. An
attempt to sell the facility in October of 2007 fell through but a new buyer
emerged a couple months later and Chartwell concluded an agreement on
December 20th to sell the facility for $1,700,000. This
agreement has since been amended on December 28th, January 10th
and again January 24th, the date the transaction actually closed,
apparently to increase the “holdback amount” from $100,000 to $803,594, this
amount to be withheld from Chartwell for 90 days until all related
transactions are satisfactorily completed. These other related transactions
were completed in short order. A settlement agreement and mutual release
between Chartwell and the NY&GL was effected on January 24th as
Chartwell paid the railroad $144,000. In addition Chartwell paid the City
of Passaic
$109,593.64 in fees relating to the operation of the transfer. Chartwell
had also been sued on October 18, 2007 by A&L Salvage LLC for $410,672
allegedly owed for fees for solid waste disposal services. A&L amended the
complaint on January 18th for an amount of $751,025 for itself
and $312,691 for Apex Environmental LLC. The suit was settled on February 6th,
as Chartwell agreed to pay a total of $490,000, $345,959 to A&L and $144,040
to Apex. Meanwhile, Chartwell carries on its books as a current liability,
the sum of $88,200 for alleged railcar storage charges assessed by US Rail
in the period October 2005 through March 2006 but which Chartwell claims it
never contracted for and which is the subject of a court action.
So Chartwell will receive a total of $1,700,000 for the sale of the
transload at Passaic, assuming they receive 100% of the “holdback amount”,
but they have payments of $144,000 to the NY&GL, $109,594 to the City of
Passaic, $490,000 to A&L and Apex, $790,000 of principal payments including
$500,000 due February 15th and $354,000 in accrued interest
expense all due in 2008. These payments alone total $1,887,594. Chartwell
acknowledges it could run out of cash by June 30 of this year and needs to
raise money through debt or equity financing or by the disposal of more
assets. The fleet of flat cars stored on the M&NJ is security for a
$3,000,000 note due to a foreign investor on April 30, 2012. That pretty
much leaves the coal properties in Ohio and the M&NJ itself about which it
was stated “Additionally, we intend to make infrastructure improvements to
the M&NJ to facilitate the expansion of our rail transportation operations.
We have been approved for grants from the New York State Department of
Transportation and we are currently requesting additional grants.” In
regards to the C & D transload business Chartwell had this to say “Upon
closing of this transaction (meaning the sale of the Passaic facility on
January 24th) we will reevaluate the viability of owning or
leasing a transload facility in New Jersey.”
Several people have indicated that a Norfolk Southern track gang dropped
ties at various sites along the Crawford Industrial, the branch to the M&NJ,
but did not insert them. They apparently dumped piles of ballast at
Campbell Hall that were never used either. The gang was apparently called
off to more pressing business but is expected back this
spring.
NJ Transit implemented a policy in 2007 to stop the idling of diesel
locomotives in temperatures above 40 degrees. On November 27, the Times
Herald Record stated that the policy had been expanded to include
temperatures down to 0 degrees at yards including Port Jervis, Spring
Valley, Suffern, Raritan, Port Morris and Bay Head. Modifications to
engines and yards permit the new policy. New starters, block heaters and
batteries have been installed in over 100 engines while external power
stations have been installed in yards. Benefits of the new program include
reduced fuel consumption, emissions and noise.
In a letter dated December 12th to its members, the New Jersey
Midland Railroad Historical Society revealed an “immediate need for
volunteers who are willing to become officers and trustees.” The Society is
also seeking an editor. The letter stated the editor and a majority of the
officers had served a decade or more and some have wanted to step down for
years but replacements could not be found. The letter concluded thusly:
“If people do not volunteer, the Board will work to complete this membership
cycle (Volume 8) and look for viable homes for the Society’s assets so we
can wind down the Society’s existence.” They may be contacted at njmidland@verizon.net
Also on December 12, the Times Herald Record reported that
Pencor-Masada-Oxynol had cancelled its suit against Middletown claiming a
violation of its constitutional rights in its arbitration with the city and
seeking damages. The issues between the City and the proposed builder of
the ethanol plant still remain in arbitration.
The former Erie train station at Tuxedo, last used by the village police
department, has sat vacant for three years. However there is good news as
the station is scheduled to reopen in a year with one third dedicated to use
as a train station and the balance of the building serving as a community
center. The Times Herald Record stated the renovation was budgeted
at a cost of $1 million with the Metropolitan Transportation Authority
paying a large amount of the bill and various government grants expected to
cover the remainder.
The Times Herald Record reported on December 19 that
New York
State
had awarded a $500,000 grant from its Environmental Protection Fund to
Walkway Over the Hudson. The money will aid the group’s efforts to convert
the abandoned Poughkeepsie Railroad bridge into a public park and seems to
be part of an expanding effort by various interests to move this
long-delayed project forward to completion.
There has been no further news on the proposed US Rail transload in Paterson
but on December 20th, the Surface Transportation Board denied a
petition from U S Rail and Sills Road Realty seeking reconsideration of the
cease and desist order issued previously by the STB in conjunction with
their construction of a rail transload in Yaphank or
Brookhaven,
NY. Interestingly, the carrier in
Long Island,
the New York & Atlantic Railroad, submitted a statement wherein they
supported “Sills’ construction of a private facility to receive carloads of
stone and aggregate.” However, NY&AR strongly opposed “the introduction of
another rail carrier to operate the facility or to invoke federal
preemption.” NY&AR stressed it was “ready, willing and able to provide rail
service to the proposed facility, including performing intra-plant switching
within the facility.”
On January 9th, a public meeting was held in
Poughkeepsie
on the restoration of the Poughkeepsie Railroad Bridge. 485 people
attended. Plans, options and projected costs were presented by an
engineering group. The anticipated restoration is less than half the cost
to demolish the bridge. Governor Spitzer mentioned the project that day in
his State of the State Address. The bridge will become a New York State
Park. The schedule calls for its opening in 2009 in conjunction with the
400th anniversary celebration of Henry Hudson’s voyage up the
Hudson River. The renovated bridge with a concrete deck (no tracks) should
be open for hiking and biking by September, 2009.
We have recently learned that the M&NJ Railway itself has a
website. You can access it at
http://www.mnjrail.com/ It is a lot more up-to-date than the Chartwell
website as it was last updated on December 20, 2007.
Sources include Dan Myers, Jim Dent, Harold Rasmussen, Bruce Malone, Doug
Barberio, the Times Herald Record, City of Middletown
Comprehensive Plan, STB Finance Docket No. 35036, Bernard Rudberg, Edgar
Online and
http://schumer.senate.gov./SchumerWebsite/pressroom/record_print.cfm?id=286386
