Janesville78.1°

Railroad could put county on track for job growth

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JAMES P. LEUTE
April 4, 2010
— High-speed commuter transportation is getting a lot of attention in Wisconsin, but its workhorse sibling—freight rail—could be the vehicle that drives long-term job growth.

That’s the opinion of industry insiders and observers who say Rock County is well positioned to lead a resurgence.


“Rock County has the benefit of being served by both Class 1 and regional railroads,” said Ben Guido, a rail design and engineering consultant with Via Rail Logistics, a Milwaukee-area site development company that links railroads and the industries that use them.


“I think Rock County can position itself to take advantage of market trends and costs.”


James Otterstein, Rock County’s economic development manager, said a number of county businesses rely heavily on rail service.


The local roster includes companies such as Seneca Corp. and Janesville Sand & Gravel in Janesville; United Ethanol and Cargill in Milton; and a variety of ag and lumber businesses.


Prospective businesses also are interested in Rock County’s rail capabilities, Otterstein said.


“One-third to one-half of the inquiries we get each year have a rail component, either that it is a requirement for a company to locate here or that it could be at some point,” Otterstein said.


“Preservation of that rail corridor is important for existing and future businesses. It’s an important priority in all of our land use decisions.”


Guido said freight rail transportation is continually evolving.


Fuel cost increases a few years ago boosted the importance of shipping by rail.


“When fuel prices are low or falling, trucking long distances is viable and competitive,” Guido said. “But when they’re up, the efficiencies of freight rail are hard to beat.


“It changes the playing field.”


Guido and his colleagues believe fuel prices will remain high enough that freight rail will continue to be a competitive alternative to over-the-road trucking.


“Shipping costs go to the ultimate cost of a product, and as rail is becoming more efficient, we’re seeing manufacturers and distributors change locations to take advantage of that,” he said.


A perfect example, he said, is Penn Color, a manufacturer that is building a $1.7 million plant in Milton and could hire up to 30 people within four years.


Company officials have said the Milton plant will give Penn Color shipping and logistics savings. Penn Color has been serving its Midwest markets from a plant in Pennsylvania.


“We’re seeing many companies coming to Wisconsin to be closer to their end users, and Rock County is a good location for that,” Guido said.


Three railroad companies serve Rock County. The Union Pacific and Wisconsin & Southern are the most visible, but the county is also served by the Dakota, Minnesota and Eastern Railroad, a subsidiary of Canadian Pacific that runs a line from Davis Jct., Ill., to Janesville


Union Pacific Railroad

Union Pacific serves the county through a sprawling yard on Janesville’s south side.


Three days a week, UP runs a roundtrip train between Chicago and Janesville. Five days a week, UP provides service between Janesville and Crystal Lake, Ill. It does the same between Janesville and Evansville.


Two other UP trains stay in Janesville to serve local customers every day of the week.


The UP’s activity in the Janesville area is down, primarily because it lost its biggest customers—General Motors and Allied Systems—when the automaker ended production in Janesville.


The railroad couldn’t provide specific shipment numbers for Rock County, but it did see a 39 percent drop in rail cars originated in Wisconsin in 2009. It also had a 44 percent decrease in cars terminated in Wisconsin.


“Naturally, shipment numbers have fallen off in the Janesville area for Union Pacific with the closing of the GM plant,” said Mark Davis, a spokesman for the Omaha-based UP. “When the plant closed, it represented about 35 percent of the total railcar volume we handled in Janesville.”


Davis said losing GM’s business reduced the average size of UP trains between Janesville and Chicago from 70 cars to 40.


While loads are down, Davis said, UP still moves grain, chemicals, lumber and fertilizer into and out of Rock County. Its main customers include Landmark Services Co-op, an agriculture and energy consortium with several area locations; Seneca Foods, a Janesville food processor; Scot Forge, a Clinton manufacturer of custom forgings; and Evonik Goldschmidt, a Janesville chemical manufacturer.


“We are seeing some improvement in some of our commodity groups over last year’s car loading numbers,” he said. “UP will continue to serve our customers in the Janesville area and is always in search of new business in the area.”


Davis said the freight rail industry will play a key part in the nation’s economic recovery because its competitive rates allow companies to grow and support jobs.


“Rail is America’s transportation solution,” Davis said. “It is the safest mode of transportation to move bulk goods and the most fuel and cost efficient.”


Railroads provide solid jobs and support the development of new ones at customers along the line, he said, adding that railroads are environmentally responsible and help alleviate highway congestion.


Wisconsin & Southern Railroad

With the drop-off in UP activities, WSOR is hoping to pick up the slack.


The Milwaukee-based company has met with UP officials several times about gaining track rights on the UP’s lines in Rock County, said Bill Gardner, WSOR’s president.


“The UP’s biggest local customer is gone, and I think they’re waiting on a long shot that GM is going to come back with a next generation car and update a plant that’s as old as the hills,” Gardner said.


Gardner said WSOR would like to take over the UP operation in Rock County, but he’s not holding his breath.


“Bill has been aggressive in trying to branch out to UP,” Guido said. “The rail system is always evolving, and it could change.


“I hope he doesn’t give up. It’s important not to let the lines become abandoned.”


Another industry observer, however, speculated that UP relinquishing its Janesville operation would be tantamount to the U.S. Navy giving up the Eastern Seaboard.


Wisconsin & Southern is Wisconsin’s second largest railroad with more than 600 miles of track that are owned cooperatively by the state and 18 southern Wisconsin counties.


It’s a major player in Rock County, where last year alone it had 200 employees who handled more than 9,000 rail cars.


“Our business is growing every year,” Gardner said during a recent stop at WSOR’s Janesville yard near Five Points. “Everybody slowed down last year, but we added customers, 17 news ones in the third and fourth quarters alone.


“Right now, we’ve got an existing customer that needs a second location and is looking at the Janesville-to-Monroe line. He’s talking about hiring 50 to 70 people and adding 4,000 carloads.”


WSOR’s largest Rock County customers are in the ethanol, grain and aggregates sectors. Last year, the railroad shipped 25 million gallons of ethanol, 11 million bushels of grain and 172,000 tons of aggregate.


But it did so over track that Gardner said is far below industry standards. Just 12 percent of WSOR’s rail system is capable of handling the industry-standard rail cars that weigh 286,000 pounds. Much of it travels over an ancient infrastructure that restricts speeds to 10 mph.


That’s why Gardner and WSOR have launched a reinvestment plan they say will improve the system’s infrastructure and create jobs, both in the rail sector and at those companies that would use an improved rail system.


The plan hinges on the availability of federal stimulus funds for infrastructure improvements.


“I will run a job fair in Janesville and hire 125 people,” Gardner said. “That won’t solve the Janesville problem, but it will help.


“Our jobs will create others. We will need 65,000 ties, which means a lot of business for the timber industry. We will need 55,000 tons of ballast from two different quarries. Ultimately, it will mean more customers on the lines, which means more jobs.”


Assembly Speaker Mike Sheridan of Janesville said he supports regional infrastructure improvements. He’s met with Gardner several times to hear the pitch for rail improvements.


“I am doing everything I can to help Wisconsin and Southern officials navigate the system to compete for recovery dollars for improvements to our freight rail infrastructure,” Sheridan said. “I believe WSOR’s projects hold the potential for significant job creation and an overall strengthening of Wisconsin’s economy.”


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Bill Gardner admits he was late to the game when $500 million in federal stimulus money came to Wisconsin and quickly went to road projects.


Then he watched as another $810 million came to Wisconsin with an earmark for high-speed rail service.


Gardner and Wisconsin & Southern Railroad haven’t stayed on the sidelines. They’ve been lobbying anyone who will listen that a portion of the most recent stimulus package destined for Wisconsin should be spent on railroad infrastructure.


WSOR is promoting a $90 million plan to create jobs, promote economic development and invest in a publicly owned infrastructure in Wisconsin that hauls close to 50,000 carloads annually.


“The Wisconsin Department of Transportation asked us to put together shovel-ready projects that could be launched in 60 days or less,” Gardner said. “We’ve done that.”


WSOR wants to upgrade 90 miles of track to increase track speeds from 10 mph to at least 25 mph.


Gardner said the improvements would include new wood ties and continuous welded rail, new granite rock ballast and bridge reconstruction to meet today’s rail industry standards.


The three-year plan is divided into three sections. The first is a 45-mile stretch from Whitewater to Madison. The second is a 24-mile section between Milwaukee and Slinger. The third is a 21-mile run between Brodhead and Avalon.


Gardner said the proposal would result in 125 new rail jobs and the purchase of $54 million worth of materials—ties, rail and ballast—from Wisconsin and regional companies.


Better rails mean Gardner’s trains can increase their speeds and be more fuel-efficient.


“Going 25 mph can save me 500,000 gallons of fuel a year,” he said. “We burn a lot more fuel at 10 mph.”


WSOR operates on more than 600 miles of state-owned track. Just 12 percent of it is compatible with industry standards that allow for cars with a capacity of 286,000 pounds at 25 mph.


“Despite the infrastructure challenges we face, WSOR’s business base is growing and traffic forecasts remain aggressive,” Gardner said. “In order for the WSOR and the state of Wisconsin to remain competitive in today’s and tomorrow’s rail industry, we must invest in our rail system to achieve 286k standards system-wide.”


Gardner said one rail car hauls the equivalent of four trucks. Rail improvements cost about $700,000 per mile, far less than similar improvements to a mile of interstate highway, he said.


“Rail improvements last 40 or 50 years,” he said. “We see the orange barrels on the highway much more frequently than that.”


Ben Guido, a rail design and engineering consultant with Via Rail Logistics in the Milwaukee area, said infrastructure upgrades are critical.


Railroads have pumped billions of dollars into upgrades in recent years, he said, noting that Union Pacific Railroad spent $3.2 billion in 2008 and $2.5 billion in 2009 and has budgeted the same amount for this year.


In 2009, the UP invested $20 million in its Wisconsin infrastructure, said Mark Davis, a spokesman for the railroad.


“Five to seven years ago, the Class 1 railroads like UP struggled to maintain infrastructure, but ever since I think they’ve done a good job and been able to stay ahead of the demand,” Guido said. “Look at the huge money UP has spent, and that’s in a down economy.”


Guido applauds Gardner’s efforts in Wisconsin


“I hope he is successful,” he said. “The state has a tremendous opportunity to support its rail infrastructure and preserve access to communities that might not be able to have rail.”


“Rock County and the state are lucky to have a partner like WSOR.”



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