(The following article by Debbie Messina was posted on the Virginian-Pilot website on August 13.)
HAMPTON, Va. — Plans to bring light rail to Norfolk suffered a blow Thursday when Norfolk Southern Corp. ended negotiations to sell its Norfolk-Virginia Beach rail corridor to Hampton Roads Transit, saying the agency’s offer was too low to be taken seriously.
The development could derail HRT’s proposal for a “starter” light rail line in Norfolk. More than half of the proposed route follows the Norfolk Southern freight line. The setback also could scuttle any chance of a future extension of the Norfolk line into Virginia Beach, as well as that city’s interest in potentially using the corridor for express buses.
HRT, negotiating on behalf of Norfolk and Virginia Beach, offered $2.7 million for the 15.4 -mile right-of-way. The land recently was appraised at $48.4 million.
H. Craig Lewis , Norfolk Southern’s vice president for corporate affairs, said the railroad doesn’t consider it a serious offer, adding that HRT’s handling of the negotiations is “befuddling.”
“I’ve never encountered anything like this,” said Lewis, who has been involved in dozens of transactions between the railroad and transit agencies.
“We can’t give you a donation of $45 million ,” Lewis said, referring to HRT.
Michael S. Townes, HRT’s president and CEO, said in a statement, “Public airing of negotiations by Norfolk Southern is nothing but an attempt to extract a value beyond reason in a community that Norfolk Southern calls home.”
Townes said HRT’s offer is “fair and reasonable” and “responsible to the citizens and taxpayers of our region.” He said Norfolk Southern’s asking price “is not consistent with the real value of the rail line.”
Although Lewis compared the status of the negotiations to an obituary, Townes does not think the issue is dead. He said HRT plans to continue discussions with the railroad but “will not be conducting negotiations with Norfolk Southern via the media and has no further comment.”
Lewis provided examples of recent sales of its rail lines for other transit projects. In the late 1990s , it sold 32 miles in New Jersey for $67.5 million . In December, 3 miles in Charlotte went for $14.75 million. The railroad is currently discussing selling 1.7 miles in Pennsylvania for $4.5 million.
“We want a fair price,” Lewis said. Norfolk Southern is a business that must look after its shareholders and asset values, he said, adding that selling the property far below value would set a bad precedent.
But HRT is basing its offer, in part, on another transaction – a 1997 sale of 1.14 miles of railroad corridor near the resort area to Virginia Beach for $255,000. That was about $224,000 per mile. HRT’s current offer is about $175,000 per mile, which the transit agency said is fair because the property under negotiation is not as valuable.
Lewis, however, characterized the earlier Virginia Beach sale as “a substantial charitable contribution” because the assessed value was $760,000 . “It’s a classic example of no good deed ever goes unpunished,” Lewis said.
Two appraisals have been conducted on the corridor property. HRT paid for the initial one in February 2000 that came in at $38.6 million. Norfolk Southern paid for an updated one a year ago that valued the property at $48.4 million.
HRT said its offer is substantially lower than the appraisals because of the property’s size, shape, easements and other encumbrances. For example, Dominion Virginia Power lines run much of the corridor’s length, as do some water and sewer lines.
Norfolk Southern officials said they have welcomed and even encouraged HRT and the cities to condemn the property to help establish a fair price, but HRT has not chosen that route.
For years, HRT has counted on using Norfolk Southern’s corridor for light rail before any numbers were put on the table.
From the start, Norfolk Southern worried that HRT was making too many assumptions. In 1996 , the company criticized HRT for seeking approval from the cities on specific rail routes without engaging the railroad in discussions about the feasibility of using the rail lines.
Lewis noted that in February this year – the same month that HRT made its offer of just more than 5 percent of the appraised value – the transit agency published a light rail brochure showing the route along the Norfolk Southern tracks.
“We need to set the public record straight,” Lewis said. HRT’s literature makes it “appear this thing is going to happen.”
Norfolk’s $198.5 million starter light rail line has not won approval from the Federal Transit Administration, a critical step for receiving federal funding.
The FTA asked HRT to refine its cost-benefit analysis, which did not meet federal thresholds, before deciding whether to recommend the project. The project rated medium to medium-high on other measures such as land use, financing plan and local financial commitment.
The updated proposal HRT will submit to the FTA this month sets aside $10.5 million for property acquisition. The 7.5-mile line includes 4.8 miles of Norfolk Southern track. HRT will not disclose its estimated payment to Norfolk Southern.
“Nothing will ever succeed unless both parties are winners,” Lewis said.
Virginia Beach Mayor Meyera E. Oberndorf said she was stunned by the news. “I have great confidence that a corporation that has been so philanthropic in this region, if they stop and think about it … will reconsider.”