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The Desert Line Mirage Lives on — for Now

There is a 70-mile stretch of defunct rail line along the Mexican border in southeastern San Diego County known as the Desert Line. It’s a leg of the “Impossible Railroad,” a nickname earned decades ago that once again rings true.

A group of border-region business interests are eager to see the dream of rebuilding the Desert Line become reality, but the project is now mired in conflicts involving its latest owners and the Metropolitan Transit System – and at least two U.S. congressmen want to know just what the heck is going on.

The intoxicating possibilities of restoring a line first envisioned over a century ago has lured investors and drawn support from politicians, business and civic leaders on both sides of the border. A rebuilt Desert Line [1] would provide a crucial link between auto factories and other manufacturers in Mexico and lucrative eastern U.S. markets. Supporters claim a fully functioning line would save money and reduce pollution as thousands of trucks would no longer have to take the trip across the border to connect with a rail line.

Two years ago, county transportation officials signed off for yet another company to take on the challenge of restoring the Desert Line.

And so far? Impossibility looms again.

Some investors want their money back or have shied away. Former project leaders have turned against current ones and the mess has brought allegations MTS officials were reckless with a valuable public asset.

Last week, two members of the House Transportation and Infrastructure Committee demanded answers about the project.

Their first question for MTS: Why did you let this company take over?

An Impossible History

The idea of building a roughly 148-mile rail line from San Diego to El Centro began more than a century ago and to say it has been prone to disaster is an understatement. Its chronology is basically a list [2] of catastrophes, one after the next.

Crews broke ground on the Impossible Railroad in 1907. Four years later it was attacked by Mexican revolutionaries. Six years after that the federal government halted construction to conserve resources during World War I.

Then in 1926, 1927 and 1929 rains wiped out huge portions of the track. In 1932, floods, fires and landslides (basically everything except frogs and hail) closed key tunnels along the line. Fast-forward to 1976 and Hurricane Kathleen took out some bridges.

MTS purchased 108 miles of the Impossible Railroad line in 1979 that included the Desert Line for $18.1 million.

But as if on cue, a storm damaged parts of the Desert Line a year later and fires destroyed a couple bridges two years after that.

Since then, various owners of the lease have tried to work out other ways to make some cash off the asset, but those efforts pale in comparison to what a fully built railroad might yield.

Two years ago MTS was presented with a deal that would let another company, Pacific Imperial Railroad, have a go at the Desert Line while it collected half a million dollars every six months on a restructured lease [3].

Under the new lease, if Pacific Imperial failed, MTS would get the line back without having put a dollar of taxpayer money into the project. And that nearly just happened.

The company missed the most recent payment, due July 1, and was at risk of losing the lease. On July 2, Pacific Imperial told MTS the House letter spooked its board of directors and the company expected to make the payment on time.

Indeed, Pacific Imperial submitted a $500,000 lease check just before a deadline set by MTS. That payment in many ways was a counter-punch from Pacific Imperial to the growing cacophony of critical voices.

The company said it has a $150 million investment agreement with another company to help rebuild the line and is meeting with other potential funding sources of funding.

Still, MTS is getting its share of blame for ever entering into an agreement with the company in the first place.

An Impossible Present

The company currently in jeopardy of defaulting on its 99-year lease of the Desert Line is Pacific Imperial Railroad, and businessmen Charles McHaffie and Dwight Jory are leaders [4] in the company’s effort.

The pair has had an array of lawsuits [5] filed against them over the years, some with investors alleging they were swindled.

Gina Seau, Chargers star Junior Seau’s ex-wife, reportedly claimed [6] McHaffie spent a $2.5 million loan designated for the Desert Line project on something unrelated. That case was dismissed.

Even the public face of Pacific Imperial Railroad makes it look like the company doesn’t have its act together. The clients on its website are “coming soon,” as is contact information for potential investors.

Its most recent press release is from November 2013 announcing David Rohal as president. Rohal is now one of the company’s harshest critics.

And the company’s online description of the project reeks of fantasy. Pacific Imperial Railroad CEO Donald J. Stoecklein has even trademarked a fake name [7] – “Maquilatropolis” for the area in Mexico Pacific Imperial says will be its customer base.

Stoecklein, through his assistant, initially agreed to an interview but later pushed it off.

One June 27, Reps. Duncan Hunter and Jeff Denham demanded in a letter to MTS head Paul Jablonski [8] that the agency explain why it entered into an agreement with Pacific Imperial Railroad.

“Information brought to our attention suggests that the San Diego and Arizona Eastern Railway line, a public asset, is significantly mismanaged,” they wrote.

In the letter, Hunter and Denham wrote they were worried MTS was not utilizing the asset “to provide the best services possible to the general public.” (Kind of the agency’s primary mandate.)

Among the questions they asked:

• Did the transit agency give its board an accurate picture of Pacific Imperial Railroad’s finances or ability to run a railroad before it signed the lease?

• Why did it give the 99-year lease straight to that company instead of casting a wider net of potential candidates?

• Is what MTS did legal?

MTS responded [9], admitting it took no “position as to the appropriate financing method for the project and therefore did not substantially participate in any discussions about how PIR planned to finance the project.”

Instead, the agency said it was well within its rights and that the terms of the lease were structured to protect taxpayers, so there was no need to “second guess” the company’s finances.

MTS spokesman Rob Schupp said the agreement to lease the line to Pacific Imperial Railroad was not explicitly sought after by the board but ended up being the best move for the agency in 2012.

“Virtually no money was being made,” Schupp said. “What we wanted to do is renegotiate the lease to protect this public asset.”

And he said that in addition to MTS purchasing the Desert Line in 1979, the total 108-mile purchase came with what is now the trolley’s 15.5-mile blue line from San Diego to San Ysidro, which has more than paid for itself.

The purchase also came with what is now the trolley’s orange line from San Diego to El Cajon and a 7.2-mile line from National City to Imperial Beach.

Hunter’s deputy chief of staff, Joe Kasper, wrote in an email that MTS deserves credit for responding but that it didn’t explain “the level at which PIR was scrutinized before it awarded a lease that’s in the public interest.”

“It’s quite possible that based on the response from MTS that Congressman Hunter and others will call on MTS to terminate the lease,” Kasper wrote.

So as MTS collects its money and waits for Pacific Imperial to fail or somehow actually pull through, the Desert Line is at a crossroads – again.

There is intense interest throughout San Diego in making the line happen, its promise for radical change in international border trade is too alluring.

An Impossible-to-Predict Future

One civic leader who sees the defunct line as a chance to improve the border economy is philanthropist Malin Burnham.

He’s on the board of a group called the Smart Border Coalition that’s meant to improve efficiency along the border. To him, it’s bizarre that nothing’s happening with the Desert Line and that MTS is not more interested in investigating PIR to see whether it’s capable of getting the line running.

“Heavy manufacturing in Tijuana comes across the border via trucks, and about 3,000 trucks come across the border every day,” he said. “It’s slow, it pollutes the air with all the waiting time and it adds a lot of traffic to the roads.”

Burnham and the coalition see the Desert Line as a chance to completely change the way heavy goods manufactured in Mexico are brought to the U.S. – and save serious money in the process.

Despite any current problems or allegations against Pacific Imperial and MTS, Burnham is confident rebuilding the line can happen.

“There’s a Toyota plant in Tecate, they are building 55,000 pickup trucks a year,” he said. “They go on a truck, haul them to Los Angeles to put on a train to go to the Midwest and then the east, where the market is.”

For the rail line to be a good investment, Burnham said it would need to fill 300 rail cars a day. The coalition expects factories in Tijuana to fill up to 1,000 rail cars a day, taking roughly 3,000 trucks off the roads and out of clogged border crossing lines.

“If [Toyota] could load those trucks on a railcar at their plant, and they have the track there, and let it go over this line we’re talking about, they’d save over $30 million a year,” Burnham said. “Now that’s real money.”