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Railroad account settlement, lease amendment approved

June 5, 2013 by

Lake County’s Board of Commissioners approved an account settlement as well as a lease amendment with Lake Railway during their Wednesday, May 15, regular session.

As a last duty Lake County Property and Lands Mgr. Bob Pardee detailed the topics for the commissioners, as well as provided an update on the Connect Oregon II grant project status.

Lake Railway, the railroad’s operator since May 2009, has been fronting funds for needed work on the 55-mile Lakeview-Alturas rail line in completing the Connect Oregon II grant-funded infrastructural project.

Pardee noted that the county served as the fiscal agent for this $648,000 Connect Oregon II grant, which was completed and signed off by the state in February under Lake Railway’s operation.

The discussion for final approval by the commissioners pertained to final invoicing and accounting locally on the project, Pardee said, namely reimbursing Lake Railway for $119,390 of improvements they funded with their own dollars in good faith.

Pardee suggested to the County to not wait state reimbursement, but instead paying Lake Railway now with the knowledge that the County will be reimbursed by the state.

This way, the operator is paid in full for the dollars they contributed as the County awaits for the last of its reimbursable dollars from the state, Pardee said.

The County received the Connect Oregon II grant five years ago that was chiefly dedicated to specific curve and drainage issues along the railway, Pardee said.

When the county terminated its agreement with Modoc Northern in May 2009, the County entered in an agency agreement with Lake Railway he said.

An agency agreement provides an opportunity to operate the railway, with the operator paying a flat fee for the privilege of operation to the county.

The railroad operated under this agency agreement between May 2009 and November 2010, with Lake Railway paying $5,000 per month for the right to commercially operate on the rail line, Pardee said.

At that time, there was a reimbursement clause that allowed Lake Railway to be reimbursed up to the amount of that operations fee, he said.

Under the original five-year lease agreement, the lease fee was $3,000 per month, and the agreement contained a condition that allowed reimbursement from the County for approved work up to the lease fee as a maximum amount.

The agency agreement served as a flat fee for operations, while the lease agreement allows for reimbursement of approved infrastructural work, Pardee said.

Correspondence with Lake Railway indicated their interest in trading out their infrastructural investment of $209,350 for their outstanding lease payments of $80,000, Pardee said, which would bring their owed lease amounts due to zero.

“We’re not forgiving any debt,” Pardee said.  “This is just to account for the quality work they did.”

Amendments to the existing lease agreement include three components.  The first is a minimum $1,000 lease payment or one percent of the operator’s gross operating revenue, whichever is greater.

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