The Northeast Texas Rural Rail Transportation District (known as NETEX) Board of Directors this month received audits for past few years, heard updates from the rail operator and a took public comments.
Auditor indicated his reports would get NETEX caught up through Sept. 30, 2021, but that his discussion focus would be the audit for the most recent fiscal year, 2021, but noted it’s almost time for the 2022 audit. He said the other reports were very similar to the 2021 audit.
Following a change in operators as well as board members, NETEX’s finances were complied and submitted in 2022 for audit. Because he was given more than one year’s worth of finances to consider, it took longer to complete the work. Auditor Mike Ward said he also will add a budget to budget comparison to final report, but encouraged the NETEX Board to contact him with any questions they may have regarding the audit. The document was drafted the same way it would be for a city our county. Ward encouraged the NETEX Board to review the audit reports and contact him with any questions they might have. The process should be easier for the 2022 audit, even though the report will look different due to required reporting changes.
The main thing, Ward said the auditor’s independent audit report found NETEX 2021 finances to be presented fairly.
“It’s a clean, unmodified opinion, which is what you are going for and which you accomplished,” Ward said. “Everything was made available to me. I didn’t have any difficulty getting information.”
NETEX ended 2021 with about $300,000 in cash and $2.8 million in appreciated capital assets, which was factored using the only number he was able to find for assets (an actuarial report from about 2015 which contained a professional opinion), then factored in deprecation for the given number of years. The rail district ended the FY with a net position that’s unrestricted.
“At the end of the day, you ended with a net position that’s unrestricted, which is equal up to your cash which is almost $200,000. Again, that net investment of your fund balance is related to the capital asset.
As far as changes in net position from 2020 to 2021, NETEX had about $115,000-$116,000 in total operating revenue, $24,000 consultant fee in the miscellaneous category, $162,000 of operating expenses including $117,000 depreciation asset expense.
Total $4,696,000 worth asset on the books, with $1.9 million of that depreciated, which brings it the net valued down to $2,817,000. Financial statements included about $7,000 spent on travel, $9,000 on insurance, about $26,000 in legal fees and the rest was depreciation, Ward said.
The value of assets will change as improvements are made. There have been several, especially over the last 1.5 years, and others are planned. That should be reflected in future reports. NETEX Chair Cheryl Williams said the board, in cooperation with NETC, should be able to compile and provide a report for the auditor to use to more accurately reflect assets over the past couple of years. Selak said his group has tracked those improvements and depreciations and can provide them as needed for the audit and NETEX records/reports.
Williams said the budget comparisons, a budget change made in past months, and asset/depreciation information should be included in the final budget report presented for NETEX Board approval. The NETEX Board officers, along with NETC and Mitzi Y’Barbo (Sulphur Springs-Hopkins County EDC Research Analyst/NETEX Administrator), will work to get the information Ward needs to complete the audit reports, and will also attempt to compile a NETEX budget for approval. NETEX Board member Brad Johnson said he’s retired and would be willing to help Williams, Hutchins and Y’Barbo, if needed.
Right of Way
Williams reported there were not contracts RAMS has forwarded for consideration this month. She said there are a few requests that aren’t quite ready yet. Williams, who also serves as Collin County Precinct 2 Commissioner, said she has been working with the City of Lavon, RAMS and attorneys on some right-of-way agreements for road work. She also as of the Jan. 5 meetings had not received any recent updates on a Northeast Texas Farmers Coop track lease either.
The monthly NETEX treasurer’s report was fairly simple as there’s only been one transactions so far during the new calendar year.
Treasurer Mark Hutchins did report that NETEX in November had invoices for a total of just under $210,490 paid to Northeast Texas Connector (NETC) for bridge repairs and floating rail repair NETEX contracted with NETC to perform. Thanks was offered to NETC owner Mike Selak and crew for getting the much-needed improvements none.
That, however, brought the past month’s general account bank balance down to $518,859.23, and the amount in NETEX’s money market account was a little over $50,000 in the money market account, Hutchins reported during the Jan. 5, 2023 meeting.
NETC 2022 Update
Amanda Fernandez, Northeast Texas Connector Railroad customer service representative, presented the monthly NETC update to the NETEX Board of Directors. The monthly carload count increased by 16 cars in December of 2021 to 132 cars in December of 2022 (which was the same carload count as in November 2022 as well).The annual carload count has increased by 261, growing from 1,218 carloads traveling on the NETEX tracks January-December of 2021 to 1,479 carloads from January to December of 2022. That’s a 21% increase; the rail moved 3 million gross tons on the rail during that time as well, Fernandez reported.
“Our inbound cycle time did increase to 6 days. That’s up 4.5 days. That’s quite a jump. We did have two derailments. It didn’t really affect servicing of customers, but it did affect our interchange as far as service to customers. The derailments happened in Greenville and Sulphur Springs, and it was just a gauge issue. We had to call in a crane for the one in Sulphur Springs but the one in Greenville we were able to pick that up ourselves,” Fernandez said.
NETC replaced 40 ties from the derailments. Improvements at NETEX bridge 508.4, which was reported in November, was complete as of the Jan. 5 NETEX board meeting, as well as bridge 507.19. Both are in the Weaver area. No brush cutting was performed by NETC in December, because the brush cutting machine was engaged in the bridge repair work. A third bridge, 509.67 has also been completed, Miguel Fernandez with NETC also reported.
Selak said discussion has continued to determine what information and documentation would be needed to possibly apply through Texas Department of Transportation for what is anticipated would be around $30 million in grant funding to make needed repairs on the rail to get it up to Class 2 standards along the entire line. A sizeable grant match would be required for any entity receiving a portion of the transportation funds that have been designated by the federal government for road, rail and other transportation improvements.
The NETC operator also said he anticipated being in Kansas this week to speak with Kansas City Southern representatives about possible future opportunities and concerns for NETEX and NETC as operators.
Sulphur Springs-Hopkins County Economic Development Corporation Executive Director reported the EDC will open bids on the building for a weigh house today and award the successful bid for the transload facility being built on EDC property in Sulphur Springs at the EDC meeting Jan. 23, 2023. NETEX operator Northeast Texas Connector (Freedom Rail Group) will use the facility to load and unload, and weigh cars shipped through Sulphur Springs along the NETEX line.
Sulphur Springs Assistant City Manager/Community Development Director Tory Niewiadomski attended the meeting, at the invitation of Board member Brad Johnson, to address the board during the citizens comments portion of the meeting.
Niewiadomski sought guidance regarding the NETEX Board of Director’s permitting or other process for a developer to attain permission to run a sewer line under the track. Niewiadomski noted the developer for Ladera RV Resort which, as planned, will wrap around behind the Paris Junior College-Sulphur Springs Center from Loop 301 to Jefferson Street. The property abuts the railroad on one side. In order to tap into the existing sewer main, the developer will need to bore under the NETEX tracks which runs along one side of the property. Niewiadomski said he realizes the board cannot consider the request at that time because it’s not on the agenda as an action item, he sought information about the steps the the developer and potentially the city will need to take for such a request. RAMS is hired to handle NETEX’s right-of-way matters, so the request would need to go through RAMS. Then, if RAMS is satisfied Ladera’s request meets all requirements, RAMS would then submit it to NETEX Board for approval. NETEX Board indicated they would give the city official the appropriate contact information so the developer can submit the bore request.