SAN ANTONIO, Texas — Union Pacific Railroad is undermining San Antonio’s bid to land a Toyota Motor Corp. plant and it isn’t heeding pleas to negotiate, local economic development and county leaders say.
The San Antonio Express-News reports that Toyota wants its prospective factory to be served by more than one railroad — to cut shipping costs and as a hedge against rail problems — but Union Pacific isn’t talking to the Japanese automaker and won’t discuss selling rights to one of its lines to a competitor.
“The company (Toyota) has not received a proposal that comes anywhere near what it wants,” said Mario Hernandez, president of the Economic Development Foundation, referring to Union Pacific, based in Omaha, Neb.
Frustrated city officials say that if Union Pacific continues to be the spoiler in Texas’ package of incentives to lure Toyota, they may consider punitive action against the railroad, such as re-examining its lucrative contract to haul coal to City Public Service power plants, Hernandez said.
Toyota seeks “dual tracking rights” that would allow another railroad access to a Union Pacific-owned monopoly line, which runs from its switching yard at KellyUSA industrial park through South-Central Bexar County near a location that’s emerging as Toyota’s favored site.
Toyota reportedly would manufacture 100,000 vehicles a year at the plant, shipping 80 percent of them by rail, 20 percent by truck.
“We have not made much progress on the rail from the Union Pacific standpoint,” said Hernandez, who’s a key figure in San Antonio’s talks with Toyota. “Union Pacific says it is not against San Antonio, and I believe that. But Union Pacific is not helping San Antonio get what we are looking (for) from them.
“Toyota has told Union Pacific: ‘Don’t come back with any other proposal that does not have dual trackage.’ Union Pacific is not acting. It is not willing to do that. That’s their tactic.” Union Pacific spokeswoman Kathryn Blackwell acknowledged that negotiations with Toyota have stopped for now, but she said her company still seeks a solution.
“Toyota has delayed its decision,” she said, when asked why talks have stopped. “They’ve announced that.”
Toyota initially told state and city officials it would decide whether to build a new U.S. plant and its location in late 2002. Several weeks ago, a company spokesman said a decision may be made by February.
San Antonio and Marion, Ark., have emerged as finalists for the prospective facility.
“We’re happy to talk to Toyota at any point,” Blackwell said. “Toyota is an extremely important customer for us. San Antonio and Texas are extremely important to us as corporate citizens. We’re trying our best to find a solution acceptable to everyone.”
Union Pacific, as a publicly traded company, answers to its shareholders and isn’t obliged to help any community attract industrial tenants. But that’s little comfort to local officials, who are growing more frustrated by the day at what they perceive is Union Pacific’s intransigence.
“Union Pacific does have a responsibility to San Antonio, though,” Hernandez said. “San Antonio and Texas are among its biggest centers. Does Union Pacific want to be perceived as the reason Texas and San Antonio loses a once-in-a-lifetime opportunity? Does it want to keep a good customer (Toyota) happy? It is obvious Toyota is not happy.”
County Judge Nelson Wolff said Toyota officials are looking at a site in South-Central Bexar County near Union Pacific tracks. It’s land that was earmarked for the Applewhite reservoir and is partly owned by the city of San Antonio.
But a problem with the site is that it’s near Union Pacific’s monopoly line and relatively distant from the competing Burlington Northern tracks. The favored site is about 10 miles from the nearest tracks Burlington Northern uses, Wolff said.
“That could be the one Toyota picks,” Wolff said. “Toyota is keeping its options open with two or three viable sites.”
Hernandez didn’t identify the prime site, but said Toyota initially scouted 12 locations in the county.
Toyota’s U.S. spokesman, Dan Sieger, said the company does not publicly discuss its site selection process, including the railroad situation.
“These are private negotiations,” he said. Union Pacific owns all railroad tracks inside Bexar County. A competitor, Fort Worth-based Burlington Northern Santa Fe, has the right to use the former Southern Pacific tracks that run east-west and are north of the favored site — as part of a 1996 federal order.
Wolff said there are five possible routes to connect a Toyota plant site to Burlington Northern lines, and some would cross Union Pacific lines.
“That would be a problem,” Wolff said. “But this is a do-able project. If Union Pacific thinks it is not, they are sadly mistaken. It can be done at a relatively reasonable price.”
Hernandez stressed the easiest solution is for Union Pacific to sell the rights to use its existing tracks to Burlington Northern.
“Building new lines is a possibility,” Hernandez acknowledged.
But he said Toyota “isn’t now satisfied” with a plan to build new lines because it “is not well-defined yet — the route, who would pay for it, the authority for getting the routes.”
Local officials haven’t been successful in attempts to get Union Pacific and Burlington Northern together to talk.
Hernandez said a recent meeting in Austin — involving the Texas Department of Economic Development, Texas Railroad Commission, the San Antonio “Toyota team” and Burlington Northern — was canceled after Union Pacific said it wouldn’t attend.
“We are just asking for the same treatment” that Toyota would get from Union Pacific in Arkansas, Hernandez said. Union Pacific’s Blackwell said, “We chose not to attend the meeting because we do not negotiate with our competitors on this.” Union Pacific officials have said the company has done business with Toyota at its other U.S. assembly plants for three decades. Burlington Northern spokesman Joe Faust said his company is negotiating with Toyota, the Texas Department of Economic Development, Bexar County and city officials.
“Because of the sensitivity of these negotiations, we are not commenting,” Faust said.
At the competing site in Arkansas, Union Pacific and Burlington Northern both operate tracks. A Union Pacific switching yard is nearby, too. Three other railroads use tracks across the Mississippi River. Those railroads — CSX, the Norfolk Southern Railway and the Canadian National Railroad — are close enough to offer additional competition, Hernandez said.
“Toyota is more apt to split the (rail customer) pie many more ways in Arkansas than it would here,” Hernandez noted.
Asked why Union Pacific is sticking by its stance of serving Toyota here as a monopoly, Hernandez said the rail carrier is holding out to get the best advantage it can from a new assembly plant.
“There is no better way to serve a customer than to have a monopoly,” Hernandez said. “That is not acceptable to Toyota, though.”
A group of Union Pacific officials met Nov. 25 with city, county and economic development officials with promises to make an attractive offer to Toyota, but the meeting ended badly.
“Their PR trip did not work,” Hernandez said. Last month, Wolff and County Commissioner Lyle Larsen hinted at possible, yet unspecified, retribution by Bexar County against Union Pacific if the Toyota deal fell through. The railroad’s contract with CPS gives the city some leverage in the ongoing negotiations.
“CPS has a big stake in Toyota coming here,” Hernandez said, noting that the power consumed by an auto assembly facility would be six times that of any one of CPS’ largest existing industrial customers.
“We’ve never seen anything like this, something that would have this demand for power, including at off-peak periods, that could spread tremendously the cost of utility infrastructure,” Hernandez said. Union Pacific has the CPS contract to haul coal from Wyoming to the electricity-generating plants in Southeast Bexar County.
“That’s a big contract,” Hernandez said without specifying a dollar amount. “Union Pacific is leveraging its position (with regard to Toyota). We have to do the same.” Meanwhile, San Antonio leaders have received assurances from the chairman of the House Appropriations Committee that the powerful panel that controls federal spending will look into legislation to help cities attract industry that provide economic development.
Rep. Henry Bonilla, R-San Antonio, made the case for such legislation to Chairman C.W. “Bill” Young, R-Fla., who said the panel would look at financing mechanisms after the 108th Congress convenes in January.
Young said Bonilla made a “strong case for the economic benefits of a new rail spur in San Antonio, and I look forward to crafting an appropriations bill that will fund projects of such economic benefit.”
Congress has adjourned for this year. Bonilla said it’s too early to tell how much federal money would be made available for economic development projects.
“If we can get $5 million to $10 million (from federal and state sources), then we’re there,” Hernandez said, citing the new rail improvement district that can arrange financing and seek grants for rail construction. A newly created Bexar Country Rural Rail Transportation District would not have the power of taxation and would need assistance in the form of grants and loans to complement revenue bonds and other financing.
Wolff said the rail district’s board will be appointed by Commissioners Court on Wednesday. Bruce Flohr, former board chairman and founder of San Antonio-based short-line railroad RailTex Inc., has agreed to be on the board, Wolff added. RailTex was acquired by Florida-based Rail America several years ago. San Antonio leaders also are looking to the state of Texas for assistance to combat efforts by rival Arkansas.
Arkansas Gov. Mike Huckabee, a Republican, has proposed an increase in the state sales tax that could generate $20 million for economic development. The Arkansas legislature will ponder that proposal when it meets next year.