grants loan to help Skunk Train
By TONY REED Of the Advocate
A special meeting of the Fort Bragg City Council Tuesday evening
resulted in a unanimous vote by council members to grant a loan to the
California Western Railroad, in the amount of $125,000 to keep its
operations going until the summer tourist months. The loan is a
public-private partnership between the city and Savings Bank of
Mendocino County, which has agreed to match the citys loan, totaling
The financially troubled railroad reported that it was filing for
Chapter 11 bankruptcy protection in December. At that time it was
reported that the railroad only had about $20,000 in available cash and
was unable to cover its minimal operating costs, including monthly
insurance premiums and staff costs. Meyer reported that he had obtained
a $31,500 loan at that time to maintain operations, but that amount had
been depleted. Unable to find other funding sources, the city was
presented with the loan proposal March 10.
At that time, it was reported to the city that CWR had approximately
$1.2 million in outstanding debt, $300,000 in back payroll taxes due,
and about $250,000 in necessary track repairs required before opening
for the summer tourist season.
According to staff reports, bankruptcy allows the railroad to be
protected from existing obligations to creditors, but does not solve the
immediate problem because the Skunk Train is a seasonal operation and
generates little or no revenue in the off season for track maintenance
But the loan is not without risk, as City Manager Connie Jackson
outlined in the staff report. Listed risks were that perhaps the loan
could not be repaid as scheduled, that the loan amount would exceed the
value of the collateral, and that CWR may be forced to close anyway,
despite the loan efforts made by the city.
CWR bankruptcy trustee Mike Meyer provided staff with estimates that
the value of the rolling stock, consisting of the railroads steam
engines and passenger coaches, was approximately $902,000. According to
research done by Council member Dave Turner, the estimate was
conservative, and there are, in fact people and agencies who make a
business of purchasing and utilizing railroad engines and equipment.
However, despite the risks, council members agreed that the risk of
losing the Skunk Train, which many feel is an anchor to downtown
business, as well as a city trademark, is greater than the risks posed
by granting a loan to CWR.
According to the resolution, the loan is to be paid back in full by
Sept, 25, 2003, at a 7.5 percent interest rate, with liens secured on
the railroads rolling stock.
Community Development Advisory Board Chair Ted Rabinowitsch openly
objected to the city loaning money from the Urban Development Assistance
Grant, which he said was conceived with the purpose of funding downtown
Those concerns were somewhat resolved by a suggestion from Council
member Lindy Peters that the interest on the loan also be repaid to the
UDAG fund, leaving it with a higher fund balance. Currently the UDAG
fund has a balance of about $800,000. It was once used to loan startup
funds to the Boatyard Center businesses, which were paid back in 1998.
The resolution to make the loan from the UDAG funds passed
unanimously, with some of the terms and conditions slightly modified
under the recommendation of appointed attorney to the city, Michael