Woonsocket rail developers dealing with financial troubles

Woonsocket rail developers dealing with financial troubles

WOONSOCKET – A train company trying to bring passenger rail service to the Blackstone Valley appears to be on shaky financial footing after a series of lawsuits accused them of withholding payments from state and private entities over the past several years.

The Boston Surface Railroad Company, a startup rail company founded by entrepreneur Vincent Bono in 2012, is currently in a dispute with the Rhode Island Department of Transportation over lease payments on the train station at 1 Depot Square. The company began leasing the state-owned station in 2015 to serve as its headquarters and a future midway stop on a Providence-Worcester route.

According to court documents obtained by The Valley Breeze, a District Court judge ruled in June to award more than $8,000 in lease payments to the RIDOT after the BSRC failed to pay rent on the building between July of 2018 and April of 2019. The suit alleges the company failed to pay $1,000 per month in rent and also accuses Bono of several other violations of the lease, including living on the property, making capital improvements and subletting to tenants without RIDOT’s consent.

It’s not the first time the company has faced legal action over a failure to make payments. In February, Kun Realty, a Cumberland-based real estate company, sued the BSRC for approximately $70,000 after the company defaulted on payments related to the sale of an Arnold Street property. In 2018, a Johnston-based law firm filed a similar lawsuit against the company for failure to pay approximately $5,000 in legal fees.

Bono was on vacation and not available to discuss the issues surrounding the company this week.

Speaking to The Breeze this week, Todd Stacy, one of the company’s principals, acknowledged the BSRC has had “cash flow issues” similar to any startup, but said the dispute with the RIDOT stems from political rather than financial issues. The company, he said, plans to introduce a counter claim in Superior Court alleging the RIDOT owes them $18,000 in rent credits for failing to maintain heat or air conditioning in the building for close to two years of their tenancy. During that time, he said, the company spent close to $9,000 in temporary heating costs.

“It’s not so much withholding, it’s just the cash flow hasn’t been there,” he said. “They’ve made it difficult for us. We had tenants in there who were helping to pay the rent, and then they forced us to remove the tenants.”

At one time, he said, the company was subleasing to three separate tenants to help pay the costs for the building, but those tenants have since been removed. The only subtenant now is the Blackstone Valley Tourism Council’s Polar Express train ride, which pays a monthly fee to operate out of the building.

“The fact is that originally, RIDOT solicited us to move into the depot, not the other way around, and we save the state about $80,000 a year in maintenance, fees and soft costs that they no longer have to spend,” he said, adding the company could move its headquarters to Worcester or another community if it chooses.

Despite its name, the company has no plans to establish a route to Boston. Instead, the proposed route would go through Providence, Woonsocket and Worcester, with an eventual extension planned for Lowell, Nashua and Concord. Last year, the company incorporated in New Hampshire after opening an office in Nashua, one of the stops on its northern route. The company had previously been incorporated in Massachusetts since 2013.

In the spring, the BSRC began selling small bonds as part of a revenue campaign to raise between $5 million and $10 million to support the first three years of operation. According to Stacy, most of the company’s resources right now are going toward getting the passenger rail operational, which includes track upgrades and new equipment. The company, he said, still hopes to meet a target deadline for their first trains by the end of 2020.

“We’re in the fundraising phase, so while we’re doing that, there’s no revenue other than very minor things like the Polar Express,” he said. “But the fundraising is something that takes a long time. It’s something that could take a year.”

The company is currently in the process of appealing the District Court ruling related to their use of the Woonsocket station and filing a counter claim in Superior Court, with a hearing scheduled for Sept. 27. Stacy said the BSRC also hopes to purchase the station and is in the process of making an offer to the state.

“We would like to buy the Woonsocket station, which has been on the table previously, and we do have funding for it that’s been secured. So if that happens, then things can go a lot smoother and faster,” he said.

Comments

Being a train buff, I bought one of the bonds. I now see why BSRC has not sent it to me after many weeks of waiting. I knew that the company was unlikely to make a go of it in the long run because no one yet has been able to make a profit solely on hauling passengers. I "invested" a very small amount for sentimental reasons and in the expectation that I might never get my money back. But I didn't imagine I would lose my investment even before receiving the bond document.