Delaware Valley, a subsidiary of Virginia-based RailAmerica Inc., took over the Octoraro's operations on July 1 after it was awarded a five-year contract to run the lines, which are owned by the state Department of Transportation and SEPTA.
The contract also calls for Delaware Valley to buy 17 miles of state-owned track that run from Modena, near Coatesville, to Elsmere, Del. The line provides a connection with CSX (rail) Corp. at Wilmington and with the Brandywine Valley Railway near Coatesville.
SEPTA owns the remaining miles of track, which run east-west from Chadds Ford to the Pennsylvania-Maryland line.
"We expect our new railroad to handle approximately 3,000 carloads of freight during its first year of operation," RailAmerica's president, John Marino, said last week..
The 3,000 carloads would be 300 more than were moved annually by the Octoraro, said Ed Robinson, the new railroad's general manager. Robinson is one of several Octoraro employees who were hired by the Delaware Valley. The Delaware Valley is also operating out of a SEPTA facility in Kennett Square that had been used by the Octoraro.
The additional carloads of freight are expected to come from increased business with present customers as well as new customers. The railroad serves several major industries, including Herr Foods and Lukens Steel.
"Our marketing people are working to establish a distribution center to bring in products from the Midwest," Marino said. He said peat moss and other gardening products were among the items that could come here. "It then could be distributed to the mid-Atlantic states.
"We could also be serving customers not located on the rail lines. With a transfer facility, where customers could truck their goods, they could take advantage of long-haul rail rates. That would broaden our reach and enable us to serve more people in the county and beyond. After all, we are at the fringe of suburban development."
Marino called traffic volume for the first few weeks of operation "better than we expected."
John Brown, PennDot's acting director of rail freight, said that some industries have indicated a desire to increase their rail business.
"That's the basis for the railroad's prediction," he said. "I think it will be close."
The railroad plans a major rehabilitation project for the lines, particularly the east-west route. It is under special speed restrictions
because of poor track conditions. The railroad hopes to receive as much as $400,000 in capital improvement grants from the state for fiscal 1994-95.
Keith Chase, PennDot's deputy secretary for rail freight, said no determination has been made on how much funding the railroad will receive. The Delaware Valley, unlike the Octoraro, will get no operating funds from the state. During its five-year pact, the Octoraro received more than $2 million in operating and maintenance funds.
"We'll consider all applications (for capital funding)," Chase said. "A lot will depend on the total funding available. That's still a month away. Since we are no longer in the operating assistance business, that will be a key benefit for the commonwealth."
Marino and Robinson said the railroad expected track improvements to start this summer. The purchase of new equipment is also planned. Equipment is being leased.
Robinson said the future of the Chadds Ford & Brandywine Railway, which had been operated last year as an excursion passenger line in conjunction with the Octoraro, had not been decided.
Chase said the planned track improvements would enable the railroad to be more efficient. "That should mean higher speeds, fewer derailments and lower maintenance costs," he said.
Brown said RailAmerica's assets were a key reason the company was awarded the contract by a state selection committee. RailAmerica also owns short-line railroads in Michigan and Tennessee and the company's stock is traded on Nasdaq.