Financial miscue leads to rejection of GLBT railroad
The U.S. Surface Transportation Board has rejected Great Lakes Basin Transportation’s proposal to build a 261-mile railroad that would have cut through Indiana, Illinois and Wisconsin.
The board announced its decision on Wednesday, claiming that the financial information provided by Great Lakes Basin Transportation (GLBT) was “fundamentally flawed” and that it was impossible for the board to determine whether the proposal met the necessary criteria. The board added that Great Lakes’ assets “are so clearly deficient for purposes of constructing a 261-mile rail line” that the board would not further consider the application.
Large construction projects such as railroads do not need to be fully funded in the early stages of an application. However, any company making such a proposal must be financially stable to make it through the application process, and the board was not convinced GLBT met that standard.
GLBT’s proposed rail line has been a subject of controversy in the Midwest for the past two years. In early 2015, GLBT, a freight traffic control corporation founded in 2011, proposed the first rendition of what would have been, if accepted, the largest rail project the United States has seen since 2011. The original proposal called for an $8 billion, 281-mile rail line that would start in LaPorte, Ind., and run through 11 counties in Indiana, Illinois and Wisconsin before reaching its final junction in Milton, Wis. The line would have been able to handle 110 trains a day and been a great help to Chicago’s crowded railways. According to transportation experts, freight congestion in the Chicago area is so bad that trains take three days to get from Los Angeles to Chicago, and then another three days just pass through Chicago itself. The new rail likely would have helped alleviate that issue.
Since the original proposal, GLBT has been forced to modify its route twice due to strong pushback from the communities that would be affected by the rail. Protest groups that have formed in response to GLBT’s first two routes include “Block GLB Railroad” in LaSalle County, Ill.; “Citizens Against the GLB Railroad” in Boone County, Ill.; “Rock Against the Rail” in Rock County, Wis.; and “Residents Against Invasion of Land by Eminent Domain (RAILED),” a joint effort between Lake, LaPorte and Porter counties in Indiana.
It was evident that many communities– especially Boone and Rock counties– had their voices heard and had an impact on GLBT’s planning for the third and most recent rendition of its rail project. As opposed to the previous proposals in which the railroad would have run straight through both Boone and Rock counties, the most recent proposal runs west of Beloit, Wis. and minimizes the length of rail that would invade Rock County. This proposal also avoids Boone County completely.
However, as is always the case with projects such as railroads, one community’s victory is another’s loss. GLBT’s third proposal hurts Winnebago County in Illinois much more than the previous, as the line would run straight through Rockford, Ill., one of the largest cities in the area. As such, Rockford residents were as delighted as anyone to hear that GLBT’s most recent proposal had been rejected.
While the united protest efforts of each community certainly had an impact in pressing GLBT into altering its route multiple times, it seems that GLBT’s failure to provide all necessary information to the Surface Transportation Board ultimately led to their own demise.
“The Board finds GLBT’s application incomplete and, therefore, rejects it,” read the Surface Transportation Board’s decision. “GLBT has failed to provide the Board with accurate financial information upon which the Board can rely to make a determination on the transportation merits of the project… To permit the Board to properly analyze the transportation merits of the proposed transaction, accurate financial information is an essential component of a construction application.”
According to the decision, the “error” referenced throughout the document was an incomplete line on the balance sheet of GLBT’s application, which seemed to state that a component of the project’s net income would be a negative number, although no description accompanied the figure.
“… the balance sheet provided as [part] of GLBT’s application, as supplemented,” the decision read, “contains an unexplained line item for ‘net income’ (amounting to negative $1,203,545) that appears to account for a substantial difference between its assets and its liabilities and stockholders’ equity. Because GLBT provides no underlying information to explain the basis for this line item or its calculations, it is not possible for the Board to determine the cause of this discrepancy or evaluate the information provided.
“The financial information submitted by GLBT, therefore, cannot reasonably be relied upon by the Board to determine the financial condition of the applicant under the statutory criteria.”
The Surface Transportation also criticized GLBT’s financial stability in the decision.
“… while the Board does not require that construction projects be fully funded at the outset of a construction application proceeding,” the decision said, “the financial fitness of the applicant is part of the [application process]. GLBT’s current assets of $151 are so clearly deficient for purposes of constructing a 261-mile rail line that the board will not proceed with this application given the impacts on stakeholders and the demands upon Board resources.”
GLBT may consider filing a new application to meet the Surface Transportation Board’s standards, but the group has yet to decide on their next move, according to GLBT chief legal and administrative officer Mike Blaszak.
Source: Janesville Gazette, Rockford Register Star