Project:   "Due Diligence" Evaluation of Capital Metro’s Rail Freight Operations

Client:    Capital Metro Transportation Authority

Capital Metro owns 160 miles of railroad, from Giddings, TX to Llano, TX. Austin is at the approximate mid-point. The line was acquired from Southern Pacific Transportation Co. in order to secure the right-of-way for potential light rail use. In the interim, freight service must be provided to a number of shippers.

For about ten years, Railtex operated the line. In 1996, operation was contracted to Longhorn Railroad. It quickly became apparent that the physical condition of the line was poor, and freight revenues were not sufficient to allow the operator to maintain the property, pay operating expenses, and earn a profit.

Capital Metro asked Zeta-Tech to perform several tasks:

  1. Quantification of the extent of deferred maintenance and resources necessary to overcome it
  2. Determination of potential future freight revenues for Longhorn Railroad, and whether they would be sufficient to allow the operator to cover expenses
  3. Assessment of how much of the railroad to retain for freight operation

Zeta-Tech interviewed current shippers on the line, prepared pro forma financial statements and five-year cash flow projections for Longhorn, and provided recommendations as to the best and least costly means for preserving the railroad for light rail use while ensuring continued rail freight service.



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