Most entrepreneurs who run short-line railroads are train buffs with plenty of enthusiasm but little business sense. The owners of the Cairo Terminal Railroad get their kicks a different way. They make money.
This is one locomotive that isn't bound for glory. It has barely moved a hundred years when suddenly it shudders, slows to a crawl, groans, and dies. Bill Mowatt, 51, leaps from the cab and throws open the engine cover. Passing by, you would have thought it odd: a middle-aged man working on a lone, dilapidated engine on a section of weed-choked track.But the 30-year-old locomotive is the workhorse of a lucrative, freight-hauling short line, and Mowatt is one of the principal owners, managers, and operators. Sometimes, he is also the mechanic.
"I want to make one thing very clear," mutters Mowatt, wiping sweat from the grimy creases of his face. "I am not a 'train buff.' Maybe you find this stuff romantic, but I'm running a business here. So erase the term 'train buff' from your vocabulary. This isn't damn hobby. In fact, I'll be truthful with you. I don't even like trains."
Certainly, he is not sentimental about them. And Cairo, Ill., the home depot of his line, isn't the sort of place where train whistles in the night evoke romantic yearnings. Cairo (pronounced "Kayrow") is a once-thriving port on the Mississippi and Ohio rivers, with a population of 6,127, few businesses, and high unemployment. It is no place for a promising business start-up, either -- especially one in a precarious industry. Of the roughly 380 short railroad lines still in existence, at least 25 have gone bankrupt in the past five or six years, and scores seem ready to follow. In an age where most freight is shipped by trucks, it is wise not to be sentimental about trains.
Even so, owning a short line seems an enduring entrepreneurial dream. In the past 10 years, 134 new short lines have been formed, a large percentage of them since the last 1970s and early '80s, when deregulatory railroad legislation made it easier for large railroads to sell of unprofitable branch lines. When the federal government sells Consolidated Rail Corp. (Conrail) to the private sector, probably early next year, the new owners may slough off hundreds of miles of track, providing a windfall of opportunity for aspiring short-line owners.
"A short line is an extremely risky undertaking, but it can be quite profitable if it's done right," says Peter Gilbertson, an attorney with a Washington, D.C.-based law firm that specializes in transportation and short-line finance." A lot of entrepreneurs buy them because they love railroads, but it takes more than good intentions to run one. Since short lines are formed from abandoned track, they're money-losers to begin with. So, when a line does make it, it's usually the story of a tough turnaround."
Mowatt's Cairo Terminal Railroad is one of those stories. In 1982, when Contrail abandoned a 160-mile branch line in Illinois, running from Mount Carmel to Cairo, Mowatt and two friends, Bill Cecil and Dick Hockgeiger, faced the loss of their jobs. They had worked the Cairo line for decades, and were long settled with their families in Mount Carmel. They were in their late forties, mid-fifties, at the time -- too young to retire but too old to change.
"Conrail gave us two choices when they put the Cairo line up for sale," says Cecil, a portly man with a quick smile. "We could by transferred to another location far away, or be unemployed." Like his two colleagues, Cecil speaks with the thick, soothing roll of Cairo's two rivers. Although geographically in the Midwest, culturally their place is in the South -- an old South of river barges, loamy bottom land, and run-down railroads. So their choice was not hard. They spurned Conrail's offer of reassignment, and decided to save their jobs by purchasing the line.
To preserve local rail service, the federal and state governments have recently implemented several programs to provide financial assistance for entrepreneurs who buy short lines. The prospective buyers of the Cairo line, however, preferred to go it alone.Each took out a second mortgage on his house, and together they ponied up $135,000 to buy two rebuilt diesel locomotives, one lime-colored caboose so old that no one can fathom when it was built, and an eight-mile segment of worn track in Cairo. Another $15,000 was invested to rehabilitate the line. "The track needed work because Conrail and its predecessors had neglected it," Mowatt says disdainfully." On one section, I counted only every 45th tie as any good."
What the three men lacked in business training, they compensated for with more than 100 years of combined experience in railroads. "We've worked in railroads all of our lives," says Hockgeiger, the quietest member of the group. He started when he was 16 as a clerk with the New York Central, which later became Penn Central, the largest of the six bankrupt Northeast railroads that were nationalized and merged into Conrail. In more than 30 years of railroading, the highest rank Hockgeiger ever reached was chief clerk. "Hard work on a railroad is all I know," he says.
Bill Mowatt, perhaps, has the best grasp of basic business economics. He took over as president of the company, the others as vice-presidents. When Mowatt isn't working on the railroad, he is helping manage his family's 650-acre farm in Mount Carmel. All three men share the daily administrative and operational tasks, but Mowatt spends most of his time in the office, cutting deals and keeping the books. "When we started this thing, I knew there were certain prerequisites that needed to be satisfied," he says. "Too many entrepreneurs ignore the basic realities of short-line ownership."
