Study says desert rail line would help economy.

Infrastructure: $40 million windfall seen

Reopening the rail line connecting San Diego with the east could pump $40 million or more into the local economy after 15 years in operation. But the Desert Line itself would reap a slim profit, according to a new feasibility study.

The study was conducted by the San Diego Association of Governments (Sandag) and presented to its board of directors June 23. No vote was taken on the study's recommendations, which favor reopening the line to increase trade in San Diego.

In November, a final report is due, which will include the costs of linking the Desert Line to the Port of San Diego, and Sandag's board is expected to vote on whether to move ahead with the rail line.

"If I had to vote on it today, I'd vote no," said County Supervisor Pam Slater, who represents the county on the Sandag board. "The concern I have is that these rail projects require huge capital investments - whether it's start-up money or maintenance and operation. Who's going to pay for it?

"Private industries' reluctance to pay for it says a whole lot. Government can't afford it and these projects always, always, always end up costing more."

Sandag recommends a public-private partnership to pay for the improvements, with operations and maintenance overseen by a private firm.

Modernization Cost: $75 Million

Restoring basic service to the 130-mile line to Plaster City in Imperial County would cost $18.8 million, and modernizing it to accommodate high, long "double-stack containers" would cost $75 million.

The so-called intermodal containers, which are now considered standard in the movement of goods, enable rail freight to be transported onto and off ships and trucks. The study says the Desert Line would be of little use to most companies, unless it had this capability. Otherwise, the line could only handle bulk shipments, such as grain.

And while the study recommends the modernization, it said return on the investment would be narrow.

For instance, it would take 14 years to recoup the $18.8 million cost to start basic service.

The study says: "For this level of investment, the expected financial return is negative after the first decade of operations and is a paltry 1.1 percent after 15 years. ... This prospectus may partly explain why private offers to undertake the project have not surfaced since the Desert Line was disabled in 1983."

About 20 miles of the 76-year-old line is inoperable due to aging and flood and fire damage. The San Diego & Imperial Valley Railroad currently moves freight along a portion of the line.

With the $75 million cost of the recommended intermodal line, the investment would be recouped in 13 years and, after 15 years, the return would be 2.3 percent, according to the study.

None of the figures include the additional cost of intermodal port facilities or the 20-year cost of rail line maintenance and operations, estimated to be $57 million.

City Council Support

Despite the costs, San Diego City Councilman Juan Vargas is adamant about the need for the line, saying it will help San Diego reap the benefits of NAFTA and increase San Diego's maritime trade. Mayor Susan Golding has a finance committee developing a funding strategy for the Desert Line.

Other proponents say San Diego thinks too small, that infrastructure is always costly and that similar port cities, like Seattle, are well ahead of San Diego when it comes to trade capabilities.

But the key to the feasibility of the Desert Line is its potential customers, the industries who would use it to ship their goods.

According to Michael Hix, Sandag senior transportation planner, dozens of firms were contacted about their interest in using the Desert Line. Sandag staff talked with potential shippers in Mexicali, Imperial Valley and Tijuana. At least 200 San Diego businesses have operations or investments in Mexico and a large number of them are interested in freight service.

"We've always been a cul-de-sac," said Councilwoman Barbara Warden. "This will provide an opportunity for us to get into the niche market provided by NAFTA.

"And rail would save businesses now using trucks about $4 million a year, which would reenter the local economy."