Thursday, July 14, 2016

New Orleans Public Belt Railroad - Destination Unknown

Right around the turn of the 20th century, at the height of the Gilded Age, when the rise of railroads were creating monopolies and wealth the likes of which this country had never seen...New Orleans found itself in a dilemma.  

The City’s greatest asset, The Port of New Orleans, was completely dependent upon rail service to carry goods back and forth across the country.

The ownership of rail services in the city limits had fractured to the point where freight merchants were being charged multiple times to get their goods to and from the Port.  The railroad lines in the City were gouging the merchants and city officials recognized this could endanger the business viability of the Port.  

In an effort to address the problem, The City of New Orleans Municipal Affairs Committee conceived the idea of a city-owned belt railroad system to bypass the fractious local lines, thereby ensuring price regulation and preventing gouging by multiple “gatekeepers”.  

On August 7, 1900, City of New Orleans Ordinance 2683 was enacted under Mayor Paul Capdevielle, creating the “New Orleans Public Belt Railroad” to be publicly funded and built by 1915.  The organizational structure stated that NOPB would be governed by a Board of Commissioners comprising sixteen “tax paying citizens”.

Established in 1900, the New Orleans Public Belt Railroad currently maintains
25 miles of main track and 97 miles of yard track

Construction began in 1905 and by 1908 the NOPB was up and running with one locomotive.  By 1921 the Louisiana legislature set forth a master plan for the NOPB that was eventually enacted into law by 1976.  

In 1916, the state legislature also passed a constitutional amendment that granted the City, through the Public Belt, the right to build a bridge providing rail passage across the Mississippi River.  After many starts and stops due to lack of funding during the Great Depression, the Huey P. Long bridge was fully funded in 1932 by an agreement between the City/NOPB, the State of Louisiana and a private investor, the Southern Pacific Railroad.  The first train crossed the bridge in 1935.

The NOPB ran smoothly over the past century...with multiple expansions that coincided with the general growth of industry in the Port.  

Going off the rails

In 2010, FOX 8 investigative reporter Lee Zurik uncovered rampant self-dealing within the NOPB Governance centering around then General Manager, Jim Bridger.  

Bridger was using the NOPB and its assets, luxury rail cars, as his own personal slush fund to wine and dine his friends, even taking expensive vacations on the NOPB dime.  Bridger eventually pleaded guilty to violating state ethics laws and was forced to pay out close to $20,000 in fines and restitution.  
It was a serious black eye for the Public Belt which had just spent a lot of money in 2007, under Bridger’s tenure, renovating their Tchoupitoulas Street Headquarters while the rest of the City was still picking up the pieces from the Federal Flood of 2005.  

More than one corrupt head rolled in New Orleans government in the wake of Hurricane Katrina and while Bridger’s wasn’t the most high profile Post-K scandal, it left a stain on the NOPB as a public institution.

Immediately after the scandal unfolded, recently elected Mayor Mitch Landrieu was quick to condemn Bridger and eventually called for the resignation of all fifteen commissioners.

That happened in short order and within a month Landrieu had reinvented the Commission with only nine Commissioners instead of the required sixteen as mandated in CNO Ordinance 2683 from 1900.  The Mayor then had a bill pushed through the 2011 state legislative session, retroactively ratifying his decision to decrease the commissioners from sixteen to nine.

In the very first meeting after his overhaul of the Commission, with his new handpicked commissioners in place, Landrieu began suggesting the Public Belt’s corporate governance was “outdated” and that the entity should be sold, leased or at the very least managed by a private entity. 

Alluding to the Bridger scandal, the Mayor told the Times-Picayune, “We need to convince the people of New Orleans that this asset is being used for their benefit.”

The Public Belt's Mission

Truth be told, the majority of New Orleanians have no idea what the Public Belt does, much less whether or not it serves the public interest.  While it is a publicly owned entity, it was not designed to “serve the public”. 

It was designed to serve The Port of New Orleans, solely.  

It was not created to be a profit-driven market-responsive enity.  To the contrary, it was designed to be a publicly-owned market regulator that ensures the future success of the City’s main cash cow, the Port.

In that capacity, the Public Belt has become a market "bubble" that private companies who rely on it have built their businesses around, assuming it would stay static.

Landrieu puts the wheels in motion

Last Fall, at the behest of the Mayor, the NOPB Commission issued an RFP (Request for Proposal) to conduct an assessment of the entity along with a valuation for possible sale. 

National accounting firm, KPMG, which has a New Orleans office, won the bid and is expected to complete its official survey by late August/early September.  While the official report is still a work in progress, this is a Powerpoint Presentation detailing a financial analysis of the NOPB delivered to the Commission this year by KPMG:

KPMG PPT Presentation 2016

The initial estimate places the valuation of the NOPB somewhere between $61 million to $196 million.

Committee hits the brakes  

Last month, June 23rd, the NOPB Commission held a public meeting to discuss the ongoing KPMG assessment and potential sale, or lease, of the entity. Numerous stakeholders who rely on the Public Belt showed up at the meeting and voiced their opposition to the potential sale or lease, hence privatization, of the entity. 

One of those voicing their concern was David Kearney, President of The Kearney Companies, a warehouse and logistics operation company on the Public Belt line and the second largest customer of the NOPB in respect to volume and revenue.  Kearney is worried about the effect the mere speculation of a potential sale is having on future business development along the Public Belt, by his company and others.

Jack Jensen, President of the largest customer of the NOPB, TCI Companies, a plastics packaging provider, not only voiced his opposition to the potential sale but called for a halt to the KPMG assessment. 

David Schulingkamp, President Pro Tempore of the NOPB Board of Commissioners, asked Jensen exactly how the ongoing assessment and speculation of sale was disrupting TCI and other stakeholder's businesses.

The main concern seems to be the market disruption that privatizing, or even partially privatizing, the NOPB would create.  As Jensen noted, it could give rise to a possible monopoly in the services industry surrounding the Port.  A future private owner of the NOPB could build their own warehouses along the line and undercut existing businesses like Kearney’s and Jensen’s, giving it an unfair advantage in the market.

A Buyer?

One potential buyer who has made his interest known is New Orleans businessman Thomas Coleman, former CEO of International Matex Tank Terminals, a liquid storage facility established by his father, James Coleman, Sr. in 1939.  The company was sold by Thomas two years ago for $1 billion dollars in cash.  Coleman also happens to be the father-in-law of John Georges, who owns The Advocate. 

Ryan Berni, The Mayor's representative on the NOPB, suggested another possible buyer: The Port of New Orleans itself.  However, at the NOPB June meeting the rumor was put to rest by 
Michael W. Kearney, Vice-President of the the Board of Commissioners for the Port of New Orleans and former President of the aforementioned Kearny Companies.

More self dealing?

Shortly after the Commission heard public comment - which was overwhelmingly, in fact totally, opposed to the sale or lease of the NOPB - the commissioners had an intense discussion on whether or not they should move forward with the KPMG study.  

In that conversation, David Schulingkamp, President Pro Tempore of the Commission, noted that KPMG had a vested interest in the sale of the NOPB and stood to potentially make up to $6 million if the Commission decided to sell.  He stated that he had asked KPMG to waive the possibility of receiving the $6 million if the NOPB sale occurred but a KPMG company representative declined that request.  

Commissioner Ruthie Frierson also replied to Bonura stating "To me, it is a conflict."

Not for sale

Taking into account the concern among the private stakeholders in the room, Commissioner Kyle Wedberg then made a motion to go ahead and move forward with the KPMG evaluation but demanded the finished product within sixty days of the meeting date (June 23, 2016) in order to allay the uncertainty the stakeholders are facing with future business decisions they claim are dependent upon the status quo of the dealings ranging in the 100's of millions of dollars.

More importantly, Wedberg moved to completely strike the motion for sale from the evaluation. 

Ryan Berni then stated that the City would move forward with the full evaluation, including the option for sale, in spite of any decision the Commission made to have it removed.  I asked him about this after the meeting and he said the Mayor had “an obligation to the public” to assess the property’s value and consider a sale, irrespective of the Commission’s decision to exclude that option.

To date the NOPB has spent $267,000 on the KPMG study.  To move forward with the assessment another $50,000 is required. Ryan Berni told the Commission that the City is prepared to foot that bill independently of the NOPB Commission if necessary. 

The motion to eliminate the option for sale from the assessment was subsequently approved by a vote of the Commission.

....maybe it is for sale?

Mayor Landrieu seems intent on moving forward with the valuation for sale of the NOPB in spite of the Commission's decision. 

On Thursday, July 7th, I attended a City Budget Meeting for District C at the Alice Harte Charter School on the West Bank.  I asked the Mayor about his original impetus to sell the Public Belt and, now that the Commission had voted to strike the option to sell, would he honor the Commission's decision.  This was his response. 

I’m going to stop here. It’s interesting the Mayor threw out Warren Buffet’s name.  I’m not sure if he’s suggesting Buffett is interested in purchasing the NOPB or if he was simply using him as an example of a private railroad investor.  

Much more to come, including what a NOPB sale might look like and if it's even feasible...stay tuned.

Correction:  In the original post I said Commissioner Ruthie Frierson noted that KPMG stood to potentially make up to $6 million on the sale of the Public Belt.  It was actually David Schulingkamp who pointed that out after a question was posed to the Commission by Chris Bonura, Director of Business Development for the Port of New Orleans.  Frierson was the first person to respond to Bonura's question and stated it appeared to be a conflict, Schulingkamp then brought up that KPMG stood to make $6 million from the potential sale.  I have corrected this in the post and I here is the actual conversation (note: the audio is very low and difficult to hear which is why I did not include it in the original story).

Committee discussion on KPMG from Jason Berry on Vimeo.


Jake Adams said...

"The Truth shall set you free"
This is phrase that we have all heard many time. The phrase originated at a point in history when the Jews were under the rule of the Roman Government. Even though Rome gave the Jewish people an exceptional amount of autonomy, they were keenly aware of the Roman presence around them in the form of soldiers, governors, and empirically appointed kings. The message of intimidation was clearly understood by the people.
It is disturbing to say the least when we listen to the audio of Mayor Mitch Landrieu speak at the City Budget Meeting. Particularly at the 3:50 mark. Classic example of INTIMIDATION, and further points out the Mayors disrespect for democracy or the democratic process when he tells a self-governing democratic board "they think they can do whatever they want to do".
Sadly, this is about as unamerican as it gets. It tells the commissioners and citizen of the United States, "you have no voice" Hopefully, the commissioners have the will have speak out against the Intimidation to resign or change their vote to satisfy Mitch Landrieus hidden agenda to dismantle the NOPB for his own personal and political agenda.
Thank you for this article. Hopefully, this is only beginning of a tidal wave of truth that will cause the "wrong" to do what is right for the City, State, and Coutry and allow the NOPB continue to do what it was created to do over 100 years ago.
Jake Adams
Tan, Rested & Ready!

Anonymous said...

Wow, Mitch actually trotted out his old speech about balancing the budget during his first term? This is his code for, "Get out of my way, this is going to happen whether you like it or not. Whether it's good for the citizens of New Orleans, or not. So, bend over, everyone!"

Anonymous said...

If the truth will set you free, why tell this big whopper:

"Rome gave the Jewish people an exceptional amount of autonomy"

In fact, nowhere did Rome give ANY local autonomy in any of the lands they conquered. I defy you to cite a serious history that says otherwise. Why does this matter? Because the myth of autonomy is a precursor to the bigger lie - that the Jews killed Christ. Now THAT's a lie that has led to persecution and death.

Anonymous said...

Welcome back! Another great piece. Thank you for all that you do for the community and to keep politicians honest. It's a hard job.

Beth James said...

Nopb should remain a public entity.

Anonymous said...

This shows once again how our appointed mayor's have failed the city of New Orleans, in his two terms he could not fix the problems with new orleans basically what they city owes the firer fighter's in back pay. Everytime a mayor gets out of office there is nothing but news on corruption that they were involved in, so why should we believe this mayor is any better, he is not interested in the well being of the citizens of new orleans rather how to cover his tail before he leaves office. Seems the city always has money to host a festival in the city. Does anyone realize how long the Public Belt has been in operation, the reason why it was created or how the railroad system works in general, most of us was not even born yet when the public belt was created, how many other company's in the city do we have that old still in operation. Why do we keep the old french quarter why not make it all new, we dont because its a part of new orleans just as the public belt railroad is and this one man wants to destroy it for a quick payoff that all of us know with this city will disappear and we will still be in the same state of affairs. The city keeps old falling down buildings because they are historic, do they make the city money? do they make the city look like trash? If the mayor is concerned for the citizens of new orleans what about what could happen to all the men and women that work of the railroad and all the vendors that they deal with, not to mention the customers who are also citizens of new orleans who employ citizens of new orleans and pays their portion of taxs to the city there is a lot more to this then anyone knows the mayor is not telling the whole story only whats makes him look good in the public eye. We all know any money the city would get we would here about in investigations on how it was spent or who's pocket it went into.

Anonymous said...


Anonymous said...

Seems like he's the only one who thinks this is a good idea. The customers who have invested so much in the city and who pay taxes to the city are asking him not to sell. The money they invest and the taxes they pay are ways the city benefits from the railroad. They are willing to invest millions more if the railroad remains the same, which will create more jobs as well. It's a slap in the face to these people because it's like they don't even have a voice in the matter. And why have a Board if they don't even have a voice? The citizens need to know the whole story and not just what the mayor wants them to hear.

Jason Brad Berry said...

I'm trying to get the whole story. Stay tuned.

Anonymous said...

If we havent learned that the term Public Private Partnership is just a ruse to give control of city assets and monies to a select few to control monies...and not be held accountable by the citizens,,,we only need to remember the MAYFIELDING if the NOPL system! (NORD-NOLA4LIFE-AUDUBON COMMISSION and all the others that have been set up under the Landrieu Administration..............and WEEP!

Anonymous said...

If you listen to the mayor's interview it surely sounds to me of a person with an attitude and sounding angry as well, trying to make nothing but excuses for why the city is like it is. He also says that the storms did not cause our problems, well we all know what has, the incompetent mayor's of this city. You have to wonder, if the city is out of money why do they still have and allow for all the take home vehicles. The money the city must be paying out for gas, insurance, the cost of and up keep for each vehicle and now he says they gonna hire a new manager to over see the vehicles so now that's more money for the city to put out, seems very easy solution stop the take home vehicles. Lets look at the park built by charters/esp ave by the water front yes its a good thing to have but once again if the city has no money why do it now and how can the mayor pay for the up keep each month, the park generates no income for the city. What about when it was time for the tolls on the Mississippi River Bridge to end all we heard from the mayor's office is this will be bad the lights will go out the bridge will fall into disrepair well lets see the lights are all on the bridge is getting repainted what a big lie to all the citizens of new orleans, but in fact what we did learn is how the money was all being misspent what a surprise. The mayor says he's looking out for the citizens of new orleans well where i live my neighborhood's main road for 10 years has been untouched by the city the grass was so bad it covered half the road which made it one lane, pot holes everywheres, way to go Mitch is this how he really cares about the citizens of new orleans what a lier bet his neighborhood is perfect though. The mayor reminds me of an addict, let me sell everything I can to get money no matter what or who it hurts just as long as he will be ok. I think its about time for the citizens of New Orleans to look and see what benefits/accomplishments has Mitch Landreu done for the city of New Orleans = 0. What has this mayor done that we all can say yes he did a great job saved that fixed this, no we cant. Its always easy to point fingers and makes excuses for being incompetent, but this guy will have others paying the price for it. How can he justify trying to hurt all the people involved with the Public Belt Railroad and I am talking about from Customers, their employee's, the men and women of the public belt just to make himself look good right before he gets out of office. Does anyone remember or know about way back Walt Disney wanted to build his park here but what stopped it from happening, the politian’s of louisiana. I think Mitch Landreu needs to be put in the spot light on this matter and asked very pointed questions lets just see how much he realizes about this, lets have the citizens ask why are you trying to destroy this company. How is it you have been in office this long and there's no improvement in the city.

Anonymous said...

Thanks for the good article. While you are delving into the NOPB, you should expose the waste and fraud within this organization, which has already cost the taxpayers millions of dollars. As in the Bridger era, this has been made possible by an impotent, clueless and self-serving group of commissioners failing to oversee an ethically challenged management.Very disturbing that this is happening again. Lessons not learned. Seek and you shall find.

Anonymous said...

In reguards to the comment about the problems at the new orleans public belt railroad costing the tax payers millions this would be coming from a person that has no idea what they are talking about. Just to set the record straight the public belt railroad DOES NOT recieve any money from the city of new orleans for anything at all and on the same note the public belt railroad does not pay the city for anything they survive on their own money that is generated thru the customers they serve in new orleans. Please know what you are talking about before you speak!

Clay said...

Considering some of the history of this site, I'm just going to leave this here:
"EXPOSEDAT" prompts sheriff raids.