BANKRUPTCY Railroad will keep going despite company's woes

The bankruptcy imperils nearly half a million dollars of port authority money.
By NORMAN LEIGH
VINDICATOR SALEM BUREAU
SALEM -- A single-line railroad that stretches through Columbiana and Mahoning counties will continue operating, for now, despite the bankruptcy declaration filed by the company that runs the line.
Tracy Drake, director of the Columbiana County Port Authority, which owns the nearly 37-mile-long railroad, made that assertion Friday, after confirming that the Central Columbiana & amp; Pennsylvania Railroad Company had filed for bankruptcy Monday in federal court in Arkansas.
Struggling to go on
Drake said the Central Columbiana was struggling to keep the rail line operating, despite its being used by about 10 businesses that are served by nearly 5,000 railroad cars annually.
The Central Columbiana, a subsidiary of Arkansas Shortline Co., Russellville, Ark., operates the railroad for the port authority as part of a 20-year lease that requires the rail company to pay the port authority $9,000 monthly and to help keep the line operational.
A Central Columbiana spokesman was unavailable Friday.
As the company undergoes bankruptcy proceedings, the port authority will be high on the railroad's list of creditors because it is owed nearly $500,000 from the company.
"We've been subsidizing them," Drake said. "We've been paying for a lot of their operational requirements that they should be paying for."
About $50,000 of the debt is from the company's having recently missed two lease payments and the port authority's having provided cash to get the line operating again after two derailments this spring, Drake said.
In addition, the Central Columbiana has borrowed nearly $450,000 from the port authority to subsidize the company's operation of the rail line, Drake said.
He noted that the line, which formerly was the Youngstown & amp; Southern Railroad, restarted about three years ago after being mothballed for years.
The railroad had deteriorated and needed a lot of work to become operational again. The port authority has secured hundreds of thousands of dollars in grants to restore the line, but the Central Columbiana was expected to put up money too, Drake said.
Borrowed money
The company was unable to produce the necessary cash, so it borrowed the $450,000 from the port authority over the past three years to pay for repairs and improvements to the line.
The loan is to be repaid at 3 percent interest over three years with payments to start in July, Drake said.
He acknowledged that the bankruptcy could result in the port authority's losing the $500,000 it has lent the railroad.
"It's possible," Drake said, noting the port authority lent the money from its operating funds.
The situation isn't ideal, Drake said of the need for the port authority to subsidize the railroad. "It's money we could be using for other projects," he added.
But, in lending the money, the port authority thought "it was imperative to keep the line operating and to keep it safe," Drake said.
Under the bankruptcy proceedings, the Central Columbiana will be required to repay its chief creditors, which should include the port authority, Drake said.
If the company fails, then the port authority will seek another operator and try to recover its $500,000 through a more lucrative lease, he said.
With the improvements done to the line, it's more marketable now than when it restarted in 2001, Drake said.
"We'll emerge from this better than before," he insisted. "The long-term prospects of the railroad are good."