NORTH COAST RAILROAD AUTHORITY

BOARD OF DIRECTORS SPECIAL MEETING MINUTES

FRIDAY, MARCH 24, 2000 9:00 A.M.

WILLITS CITY COUNCIL CHAMBERS, 111 EAST COMMERCIAL STREET

WILLITS, CALIFORNIA

A. CALL TO ORDER

Chair Robert Jehn called the meeting to order at 9:00 a.m.

B. ROLL CALL

Directors present: Chair Robert Jehn, First Chair David Ripple, Allan Hemphill, Jack McKellar, Daniel

Opalach, Robert E. Simonson, and Max Schlienger. Also present: Executive Director Max H. Bridges,

General Counsel Christopher J. Neary, Property Manager Cyndee Logan, Consulting Accountant Russ

Mustola, and Administrative Assistant Pamela Fishtrom.

C. AGENDA APPROVAL

Chair Jehn announced approval of the Agenda.

D. PUBLIC COMMENTS

Fred Carmichael of Eureka recommended the meeting begin with a prayer or a moment of silence.

Chair Jehn asked Executive Dir. Bridges to investigate the rules regarding such action. Mr. Neary

recommended waiting until a similar decision is made regarding student initiated prayer in schools.

E. CONDUCT OF BUSINESS

1. Further Consideration of Federal Emergency Management Agency (FEMA) Alternate

Project Proposal

Executive Dir. Bridges reported the Environmental Assessment (EA) comments need to be addressed,

but are not insurmountable, just time consuming. NCRA’s response to the comments dictates whether

FEMA, as lead agency, prepares a response to the comments, issues another EA, or prepares an

environmental impact statement. Mr. Neary reported the Alternate Project typically excludes future

FEMA eligibility; however, Harry Sherwood has indicated FEMA may consider the Railroad, if repaired

through the canyon to Class I, a new facility, therefore, reinstating eligibility. The EA project

description identifies repair to the existing facility to utility with the exception of permanent repair to

several landslide prone areas. The Alternate Project predicates creation of a new facility. Invoking

Surface Transportation Board jurisdiction in construction of the new facility allows them to become the

lead agency in terms of environmental issues. In addition, Mr. Neary indicated that of the EA comments

95% can be summarily dismissed and the rest can be mitigated.

Chair Jehn read a letter from the Humboldt County Board of Supervisors requesting NCRA take no

action to deviate from the Improved Project plan.

Mr. Darling, President of Rail-Ways, Inc., indicated the STB historically declines to undertake

modification of existing facilities. Although when involved there is a high degree of protection from

outside agencies. He also spoke of his concern over the application of FEMA’s Landslide Policy

throughout the canyon. Mr. Darling discussed his amended proposal which includes aspects of both the

Improved Project and Alternate Project. He recommended designating the Somoa branch and south of

South Fork as Alternate Projects allowing for the release of $5 million to reduce $2,350,000 debt to

FEMA creditors, reopen the South End to Willits for $494,000, and make improvements to the Railroad.

Signal repair is needed in Willits, the only place where the Emergency Order is lifted. Segmenting the

line moves forward commercial interests, satisfies the burden of creditors, and is allowable by FEMA as

long as the purpose is not to avoid environmental issues. Mr. Darling insists this project does not

deviate from NCRA’s 5-Year Business Plan to restore service. If his proposal is implemented, Mr.

Darling conceded to connect the track by repairing those blocks selected under the Alternate Project to

the February, 1998, condition for use by work trains, passengers, and equipment.

Dir. Hemphill recommended building consensus with proponents of the North End by discussing the use

of Intermodal Surface Transportation Enactment Act (ISTEA) funds on the North End. Mr. Bridges

indicated that the use of ISTEA funds involve development, not repair, and the requirements by

CalTrans will be stringent, but the money will be available under either alternative.

Mr. Poulsen, Chief Engineer of Northwestern Pacific Railway, indicated the line could be open from

Eureka to Scotia in one month.

Mr. Bridges reported Alternative Project funds can not be used to pay interest. It is unlikely regular time

labor for emergency repairs would be eligible. Additional work to reopen the South End is eligible, plus

the amount for work that has been completed and is in excess of the funds available including signal

work. Past disaster work can be eligible, OES found $1.1 million that is possibly eligible. If the

program side of FEMA shows the work is eligible, the environmental side must agree that all necessary

environmental issues were resolved, and the documentation must be adequate. No monies would be

available for Rail-Ways under this proposal for probably 60 days. There is also no discretionary money

available under the fiber optic agreements as all lease revenue is pledged to the Q-fund.

In response to Dir. Opalach, Mr. Darling said the he would use approximately $565,000 of the money he

receives from the Project to repair the North End track to maintenance standard. From maintenance

standard to Class 1 costs $900,000-$1 million. That funding must come from other sources, possibly

ISTEA or fiber optics easements. The environmental costs must come from the total project costs as

proposed.

Several Board Members shared their discomfort with relying on FEMA to guarantee future eligibility of

the North End. Chair Jehn added the Governor’s office publicly announced transportation funds will be

available for the Railroad.

Dir. Hemphill motioned to continue this item to the next Regular Meeting rescheduled April 12, 2000, in

Eureka; seconded by Dir. Schlienger. Role call vote taken: Dir. Opalach, aye; Dir. Hemphill, aye; Dir.

McKellar, aye; Dir. Schlienger, aye; Dir. Simonson, no; Dir. Ripple, aye; Chair Jehn, aye; motion

passed.

At 11:10 a.m. Chair Jehn announced a recess. The meeting reconvened at 11:15 a.m.

2. Consideration of Request by Rail-Ways, Inc. and Herzog Contracting Corp. Regarding

Distribution of Disaster 1203 Funds

Executive Dir. Bridges reported this agreement represents consensus between Herzog and Rail-Ways as

to distribution of Disaster 1203 funds. Mr. Neary indicated this agreement would replace a previous

three-way agreement assigning Disaster 1203 funds. Dir. Schlienger motioned to accept the agreement

subject to approval by the California Transportation Commission; seconded by Dir. Hemphill. Vote

taken; motion passed unanimously.

3. Action on Standstill Agreement – Secured Creditor

Item to be heard after Closed Session.

4. Acceptance of Single-Year Audits for Fiscal Year End 1995 and 1996

Item taken together with Item E.5.

5. Acceptance of Single-Year Audits for Fiscal Year End 1997 and 1998

Dir. McKellar motioned to accept the single-year audits for fiscal years ending 1995, 1996, 1997, and

1998; seconded by Dir. Schlienger. Vote taken ; motion passed unanimously.

F. CLOSED SESSION – Convened at 11:30 a.m.

1. Conference with Legal Counsel – Potential Litigation

Government Code Section 54956.9(a)

2. Conference with Legal Counsel – Consider Initiating Litigation

Government Code Section 54956.9

3. Conference with Real Property Negotiator

Government Code Section 54956.8

Negotiating Parties: Pacific Bell; NCRA

Under Negotiation: Longitudinal Easement

G. ACTION TAKEN IN CLOSED SESSION – Reconvened at 12:10 p.m.

1. Conference with Legal Counsel – Potential Litigation

This item was continued to the next meeting.

2. Conference with Legal Counsel – Consider Ititiating Litigation

General Counsel Neary reported on this item and was given direction by the Board.

3. Conference with Real Property Negotiator

Property Manager Logan reported on this item and was given direction by the Board.

Agenda Item E.3 was continued to the next meeting by request of Mr. Darling, President of Rail-Ways.

H. ADJOURNMENT

The meeting was adjourned at 12:15 p.m.