Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 8, 1990 TAG: 9003081951
SECTION: EDITORIAL PAGE: A-13 EDITION: METRO
SOURCE: RAY L. GARLAND
DATELINE: LENGTH: Long
The state-owned RF&P stock, now a subject of controversy because of the proposed merger with CSX, is the last surviving equity from the state's ill-fated, pre-Civil War policy of going into partnership with private investors to promote public works.
As far back as 1784, to encourage the development of canals, and later of railraods, the state had a standing offer to take 40 percent of the shares in such enterprises provided private investors had subscribed to 60 percent.
In 1860, on the eve of the Civil War, Virginia had outstanding obligations of $33 million as a direct result of the state's participation in private enterprise. With interest payments suspended during the war, the debt stood at $45 million in 1870. The question of how (or whether) to pay it off became the dominant issue of state politics for two decades. Nor was it exactly a small point. If paid in full, interest alone represented a larger sum than the total revenues of state government!
The great debt controversy burned deeply into Virginia's body politic, which resolved with one voice, "Never again!" Strict limitations on bonded debt were written into the state constitution, where they remained until 1971. Even when those restrictions were eased, the state showed great reluctance to abandon "pay-as-you-go." That will change now if the present governor and General Assembly have their way, but that's a subject for another day.
Of all those ill-fated investments, the RF&P stock alone proved a winner, and has steadily paid dividends into the state treasury, or the Virginia Supplemental Retirement System which now owns it.
There was good reason for this. The 113 miles of RF&P track between Richmond and Washington represented a critical link in the nation's rail system. And the RF&P's Potomac Yard in Alexandria served numerous lines in the glory days of railroading.
When the RF&P's first train attained a speed of 10 miles an hour in 1836, it was thought amazing. The railroad's first timetable, published May 30, 1836, promised to deliver travelers departing Richmond at 4:30 a.m. by rail, stage and boat to Washington by 6 p.m. the same day! That, too, was thought amazing.
We might contrast this remarkable advance with the account of a French traveler in the days immediately prior to opening the railroad as far as Fredericksburg. It took him eight hours to reach Potomac Creek by steamboat from Washington; four hours by stagecoach to Fredericksburg; and 13 hours by stage to Richmond.
Well, that's all ancient history now while the proposed deal to merge the RF&P into CSX, and for the state to tender its shares in the process is very much on the political front-burner. Gov. Wilder has acted with commendable common sense in demanding a thorough review before committing the commonwealth to the deal.
The CSX, which already owns 36 percent of the stock of the RF&P, and 50.16 percent of its voting stock, has offered to buy what shares it doesn't own for $34.50 each, or one share of CSX stock, now selling for about the same money. Based on the RF&P's current, annual dividend of $1 a share, that does not appear to be an unreasonable offer. But potential value may be another matter.
While the deal could have been done, theoretically, without the participation of the state's shares, representing some 20 percent of the total, the commonwealth's consent would have made it a foregone conclusion. And politically tidier into the bargain.
The chairman of the VSRS board, Charles Walker, who also sits on the RF&P board, thought it was a good idea for the state to sell. So did Sen. Hunter B. Andrews, D-Hampton, chairman of the state Senate's Finance Committee and also that body's majority leader, and Del. Robert Ball, D-Henrico, chairman of the House Committee on Appropriations. Andrews and Ball also sit on the RF&P board, representing the state's shares.
These puissant gentlemen called on the governor one evening last month to ask him to send down a bill in the waning days of the 1990 assembly consenting to the sale of the state's shares, as required by law.
The upshot of this meeting was that Wilder asked Walker for his resignation as chairman of the VSRS, and said he'd take his own sweet time to study the matter. In my view, he will either try to scotch the deal or ask for substantially more money for the state's shares.
And they may be worth a lot more than the offered $34.50. For starters, real estate owned by the RF&P in Virginia is assessed for at least $730 milion, or more value than CSX has thus far placed on the whole company. And assessed values in such situations may be deceptive.
The potential crown jewel of the RF&P is Potomac Yard in Alexandria. Once one of the nation's busiest freight yards, it is now largely unused. But "Pot Yard" comprises 320 acres stretching 2 1/2 miles along the Potomac River within sight of the nation's Capitol, and represents one of the potentially most valuable undeveloped sites in the country.
The RF&P had previously joined with CSX Realty to contemplate development of this site under the imposing title of "Alexandria 2020." It is by no means impossible that the underlying value of this property alone is greater than the current market value of all RF&P stock. We shall see.
by CNB