A monthslong and increasingly bitter disagreement between Clark County and the operator of the county-owned Chelatchie Prairie Railroad has now spilled into court, with both parties filing lawsuits.
Relations between Clark County and the Portland Vancouver Junction Railroad, the company that holds the lease to operate the 33-mile rail line, have become increasingly strained since late 2017 when the county began implementing a new state law that allows industrial development along the track. Eric Temple, the company’s president, has become frustrated about the slow pace of the implementation. Then, late last year, the county began questioning if the railroad’s lease was valid.
Both sides entered mediation last week, but those efforts dissolved Friday, when Clark County filed a lawsuit. It asks the court to find the lease with the Portland Vancouver Junction Railroad “void and unenforceable,” as well as in violation of the state’s constitution.
“The Chelatchie Prairie Railroad is an important public asset that should benefit all county residents and taxpayers,” said Clark County Manager Shawn Henessee in an emailed statement. “The county has attempted to resolve its dispute with Portland Vancouver Junction Railroad regarding the railroad lease, but believes it is in the public’s best interest to seek court rulings regarding the future of the agreement.”
In the statement, Henessee said that the county filed the lawsuit seeking clarification on the lease after Portland Vancouver Junction Railroad indicated it would sue the county. Henessee said he would not be commenting further.
Portland Vancouver Junction Railroad countered with its own lawsuit accusing the county of not fulfilling its obligations and for a judge to declare the lease valid.
Temple told The Columbian that he’s invested millions of dollars and 15 years of his life turning one of the nation’s worst railroads into what could be one of its best. He said the county is attempting to renegotiate the lease in an “unfaithful” and “unethical” way.
“They want to steal 15 years of my life,” he said.
In his statement, Henessee thanked Portland Vancouver Junction Railroad for participating in the mediation and hoped both parties could “work together to efficiently and effectively address the legal questions that must be resolved.” Temple said he’s optimistic but said the litigation has created complications.
“The relationship going forward is going to be very challenging,” he said.
Temple’s history of the railroad
The Chelatchie Prairie Railroad was built in the late 1800s and served a large mill that once stood at the end of the line. After the mill closed, the line was acquired by Clark County in the 1980s and 1990s. Clark County is one of the few counties to own a shortline railroad and has been looking for a way to turn the aging line into an asset.
“The (county) hired consultants who told them that their railroad was on death’s door and they would need to make some changes,” said Temple.
The lawsuit filed by Temple describes the county’s recent relationship with the railroad. According to the lawsuit, two consultants hired by the county in 1997 and 2002 found that companies would be reluctant to commit to operating it because of its questionable long-term viability and poor condition. In 2004, the railroad was listed in the worst category under the Federal Railroad Administration, according to the railroad’s lawsuit.
The county solicited over 400 companies to operate the railroad, according to the lawsuit. In 2004, Columbia Basin Railroad Company Inc., the predecessor to Portland Vancouver Junction Railroad, was the only company interested and signed a 30-year lease, according to the lawsuit. In 2012, Portland Vancouver Junction Railroad took over the lease.
According to Temple and the lawsuit, the county made commitments to secure grants to improve the railroad and to rezone areas adjacent to it in hopes of making it economically viable. Temple said that the county has been helpful in getting grants, and together they’ve secured an estimated $5 million from the state. However, the county failed on rezoning, said Temple.
In 2016, the county attempted to establish a rural industrial land bank near the railroad but it was struck down by a state land-use adjudication board. In 2017, Gov. Jay Inslee signed Senate Bill 5517, which allowed freight-dependent industrial development adjacent to the railroad. However, the county has not finished implementing the law, while Temple said he’s spent millions improving the railroad in anticipation of the rezoning.
“They no longer have an excuse to not do it,” he said.
Portland Vancouver Junction Railroad’s lawsuit pointed to a 2011 meeting where then-County Administrator Bill Baron and others stated that the county sought to shift the risk of the railroad on to “another party” and entice an operator with “favorable terms because the railroad required heavy public subsidy at the time due to inadequate business.”
‘Form only’
The central argument in the county’s lawsuit is that the lease with Portland Vancouver Junction Railroad is not valid. The lawsuit states that in November 2004, the board of county commissioners approved a request from Clark County Public Works to authorize its director to “negotiate and execute” a lease agreement with Columbia Basin Railroad Company.
The county’s lawsuit states that then-Director Pete Capell executed an agreement that was signed by Deputy Prosecuting Attorney Curt Wyrick. But the lawsuit states that the signatures appeared under the notation “Approved as to form only” and the county commission never approved the lease.
Under the terms of the lease, Portland Vancouver Junction Railroad pays no rent to the county until it transports 1,000 carloads in a calendar year by rail. After that, the county charges $10 per carload for the next 1,000 carloads, which gradually increases to $30. So far, that threshold has not been met.
The county’s lawsuit also states that because Portland Vancouver Junction Railroad has operated on the county’s railroad for 14 years with no charge, it violates the state constitution’s prohibition on gifts of public funds to individuals or companies. The lawsuit also states the length of the lease violates the state constitution and county code.
Portland Vancouver Junction Railroad’s lawsuit, referencing a county staff report, states that Capell had the authorization to execute the lease, which it states is signed as being “approved as to form.” Temple also said that the lease contains a warranty provision with a fallback term of 50 years if it’s found to be invalid.
The county’s lawsuit also alleges that Portland Vancouver Junction Railroad violated the lease by preventing the inspection of track maintenance or improvement records. Temple dismissed the claim, saying he’d gladly turned over records but the county never asked.
Under the contract, Portland Vancouver Junction Railroad performs normal maintenance while the county is responsible for maintaining its public road crossings and signals, as well as road surfaces within the right of way. The county argues that Portland Vancouver Junction Railroad has also prevented it from performing maintenance. But Temple said that performing maintenance has previously never been an issue in the past.
Temple said that the current arrangement with the railroad is so complicated it’s impossible to undo. He said that if the lease is voided he will sue the county for breach of warranty and unjust enrichment. He said he could also sue the county if it doesn’t complete the promised rezone.
