A Secretive, Biased Process

The outcome was preordained

The process used to replace Iowa Pacific with a new rail operator has happened outside of the public’s purview. Using the California Public Records Act, Greenway obtained communications between the RTC and Progressive Rail (PGR). In this document, we describe a process that strongly favors hiring Progressive Rail well before Iowa Pacific had even announced it would like to get out of its contract.

Progressive Rail first expressed an interest in operating the Santa Cruz Branch line in an email to George Dondero, Executive Director of the RTC[1], on 7/25/17. Regular communications about a potential proposal began at least 83 days before the official Request For Proposal (RFP). These emails show a plan to use Progressive Rail as the rail operator well before even the Commissioners knew, much less other potential rail operators.

An employee of Iowa Pacific (IP), Mark Westerfield, was a Managing Director for IP and in charge of the Santa Cruz Branch line.

On 9/15/17, an email from George Dondero to Craig McKenzie, CEO of PGR[2], mentions a meeting organized by Mark Westerfield and implies that Mark should not be “officially” involved due to his employment status with IP. On the same day, Westerfield sends an email to Dondero and Luis Mendez[3], Deputy Director of the RTC, indicating that he was now with Progressive Rail.

On 9/26/2017, an email from McKenzie confirms Westerfield’s new position[4].

On 10/24/17, Craig McKenzie sent an email[5] with a link to a presentation[6] pitching Progressive to the RTC. The email described an upcoming trip to present to George Dondero and Luis Mendez.

On 11/21/17, Craig McKenzie sent an email to George Dondero and Luiz Mendez[7] stating that his team had surveyed the tracks:

“We are respectful of the fact that the portion below the washout is technically in Service. That said the guys did go a little bit further only to come upon a group of Mexicans living on the tracks at MP 4.9. Reportedly they waived guns and so my guys turned around.”

By December, the relationship between Progressive Rail and the RTC was well established. On 12/4/17, Iowa Pacific sent a letter to the RTC[8] requesting that the RTC find another operator. The letter mentions a letter sent by Dondero on 12/2/17, wherein Dondero suggests abandonment. Just 3 days later, on 12/7/17, the RTC Commissioners met[9] and there was no announcement that Iowa Pacific wanted out or that the next day, on 12/8/17, the RTC would release the RFP[10] for a new rail operator. It is inconceivable that the RFP did not exist before 12/4/17 when the RTC was first formally told of Iowa Pacific’s intentions to withdraw, or even earlier on 12/2/17, when Dondero mentioned abandonment to Iowa Pacific. There are serious questions regarding violations of the Brown Act in these closed door meetings regarding an issue so central to the RTC and the public.

The RFP process was extraordinarily well timed to be both quick and inconvenient for other rail operators to bid or for the public to weigh in. The RFP was released 12/8/17, less than 30 days before the Proposals were due on 1/4/18—and needless to say over the holidays. It is no surprise that the RFP from Progressive Rail[11] is the most extensive and polished compared to the other four submitted. It should also be noted that this proposal has a very different tone than the one sent in October.

On 1/18/18, just fourteen days after proposals were submitted, the RTC staff announced[12] that they had analyzed all proposals and were recommending Progressive Rail. This occurred at the first meeting of the RTC since the RFP was released.

A PGR letter to Watsonville City Council[13], reviewed twice by George Dondero and Luis Mendez, despite the fact that no contract had been signed with PGR, is particularly troublesome. Rather than sending to county counsel a legitimate question about a city’s ability to regulate a federally supervised rail operator once an agreement is signed, the RTC chose to have the unsigned rail operator itself respond to the city’s question. Thankfully, Alan Smith, Watsonville City Attorney, wrote a letter[14] on 3/2/18 confirming that such activity could be preempted by federal law and listing a series of examples where state and local governments were not able to enforce regulations against railroads due to federal preemption.

Each step of the RFP process with Progressive Rail appears to have been carefully coordinated behind the scenes toward a preordained outcome. This is a violation of the public trust and makes a mockery of the so-called “public process.” Clearly, the other operators who invested time and effort into this proposal process never had a chance.