Ridden Into Town On A Rail
When Ron Maynard announced his plans to build a new railroad repair facility just outside the tiny Weld County town of Hudson in 1988, the government couldn't be helpful enough.
Maynard's company, Rocky Mountain Railcar Inc., received tax credits and hundreds of thousands of dollars in fixed-interest loans from state and federal agencies. Maynard won a grant for training new workers he would be hiring. In 1989 Governor Roy Romer helicoptered to Hudson for the company's grand-opening ceremonies. And when Maynard admitted last year that he couldn't make payments on the government-backed loans, state officials wrote a new quarter-million-dollar loan.
Despite all the attention, two months ago Rocky Mountain Railcar filed for protection from its creditors under federal bankruptcy law. The financial failings are not the only thing that is troubling, however. Despite the company's initial promise of good jobs in an economically depressed area, Maynard's critics say there are plenty of indications that the results have been less than ideal.
Many of the new jobs turned out to be low-paying, and the federal courthouse is peppered with lawsuits brought by former workers injured on the job who could not convince the company to pay their medical costs. Rocky Mountain Railcar has been investigated and fined several times for safety violations at the new facility. And state labor officials have piled up so many complaints about wage violations that they have taken the unusual step of ordering local placement centers to not send any more job applicants to the company.
Maynard, the sole owner of the company, dismisses the notion that he isn't running a decent business. He is vigorously fighting recent fines levied against Rocky Mountain Railcar by the Occupational Safety and Health Administration.
"I tried to do everything I can legally," he says. "I don't know all the rules and regulations, but I try to do what I think is right. I've got the bureaucracy of the state of Colorado thinking I'm a bad guy."
Colorado's economic-development workers have been criticized for their failure to attract big businesses. Yet the case of Rocky Mountain Railcar illustrates the flip side of job-creation efforts. Despite government's interest in the Hudson company, some people have concluded that perhaps the money could have been better spent.
Five years ago Weld County officials were thrilled when Maynard announced his intentions to move Rocky Mountain Railcar from its location inside Rocky Flats to a site northeast of Hudson. "When Ron Maynard first came to town, he was given the red carpet," recalls Jodi Hartmann, vice-president of the Greeley/Weld Economic Development Partnership. "He got everything he ever wanted from local government, because we all wanted to believe in him. I mean, nobody talks about bringing jobs to Hudson."
The company began getting financial breaks almost immediately. The property on which Maynard planned to locate was outside Weld County's designated enterprise zone, so he asked the state to extend the zone's boundary. Officials quickly agreed, saving Maynard an estimated thousands of dollars through tax credits.
Other agencies kicked in relocation funds. The Colorado Housing and Finance Authority, a state agency that sells bonds to raise development money, pitched in a loan of nearly $1.7 million, and the federal Small Business Administration added $750,000 more.
The company also qualified for a $50,000 grant from Colorado FIRST, a job-training program in the state's Office of Business Development, to train Maynard's new welders at a Greeley community college.
Even much of Rocky Mountain Railcar's business was coming from the government. Maynard's expansion plans grew out of a subcontract to design railcars for the MX Peacekeeper missile system. Although the contract called for only two prototypes, the Air Force eventually envisioned a dozen trains secretly carrying the missiles to different launching sites.
All this activity prompted a lot of talk about jobs around Weld County. In a September 1988 letter to Romer, the director of the Economic Development Action Partnership noted that Rocky Mountain Railcar was "an excellent employer for Weld County, with plans to hire 100-150 employees." When the new $5 million facility opened in May 1989, the company announced it intended to employ 280 people within the next two years.
It wasn't long before business started to unravel for Maynard, however. In 1991 Congress killed the Peacekeeper program. Soon after, the company lost its largest contract--to repair railcars for Houston Power and Light, a Texas utility. Maynard's crew went from working on 115 cars a week to 3.
Maynard also discovered that he was not paying market value for his skilled workers, primarily welders. When construction at nearby Denver International Airport began, his welders, who he says earned from $7 to $10 an hour, bolted for DIA, which was paying up to $18 an hour. In one month, Maynard says, he lost nearly sixty welders.
Meanwhile, on-the-job injury claims began showing up in federal court. Because Maynard was in the railroad business, he was permitted to insure his company under the Federal Employees Liability Act. While the state workers' compensation system pays a set amount when a worker gets hurt on the job, FELA demands that a worker prove the company negligent.
Maynard soon gained a reputation among lawyers as someone who would not pay out a claim easily. Gary Wood, an attorney who has sued Rocky Mountain Railcar several times, recalls that Maynard once sent one of his supervisors with a hidden microphone and recorder to tape a conversation with a man injured on the job in an attempt to gather evidence against him. Maynard says he can't recall if the incident ever happened. But he adds that if one if his supervisors did record a conversation, it wasn't at his orders.
Unlike railroads that cover their workers through FELA, Maynard has not carried supplemental insurance for those who cannot work due to on-the-job injuries. Wood says the company's reluctance to pay for employees' injuries often results in lean times, because employees must foot their own, frequently substantial medical bills while their cases slog through court. Welder Paul Hovenga's four-day stay in intensive care after a work injury, for example, helped push him into personal bankruptcy, Wood says. (The case is at a standstill while Rocky Mountain Railcar wends its way through bankruptcy proceedings.)
Maynard replies that he won't pay for injuries that are the employee's own fault. Meanwhile, notes Wood, the policy leaves many workers--whose jobs usually are physical and dangerous--without alternatives. "The people who work there have such low wages that they can't buy their own insurance," he says.
Just how low those wages were was revealed in 1992, when Maynard asked the state for more help. The state's Office of Business Development responded by ponying up another $260,000 loan. "The state already had an investment in Rocky Mountain Railcar, so they had an interest in seeing it stay alive," recalls Hartmann, whose Weld County agency administered the new loan. "Plus, of course, there were jobs at stake. That was the overriding factor in our loan to them."
In exchange, Maynard was asked to list the type of jobs the state's money would be saving. According to his own figures, of the 80 workers Maynard still employed, 46 were paid less than $15,600 a year. Many were paid less than $11,000. (State officials concede the jobs are low-paying. But they explain that Weld County wages are lower than in many other parts of Colorado.)
As a result of the new state loan, Hartmann says, Rocky Mountain Railcar stayed afloat. Yet its labor problems persisted. In the fall of 1991 the company suffered its first fatality when Antino Mota-Gonzales was crushed to death after a steel door from a railcar fell on him while he was welding. In September, another employee, Ronnie Rodriguez, died after being overcome by diesel fumes during a tank-car inspection.
A third worker, Benjamin LeRoy Cordova, suffered brain damage during the same accident. In court papers filed recently, Cordova's attorney says his client has since made an unfortunate discovery. Because Rocky Mountain Railcar was out of money and carried no workers' comp insurance, the lawyer wrote, Cordova now found himself "unemployed because of his [on-the-job] injuries with no source of income or method of paying his bills."
In November the federal Occupational Safety and Health Administration fined Rocky Mountain Railcar $245,000 for what the agency claimed were "willful" worker-safety violations that led to the fatal incident. Maynard is appealing the ruling.
Federal labor authorities aren't the only ones who have had run-ins with the Hudson company. In early 1992 the Colorado Department of Labor began receiving workers' complaints, many of which centered on a $75-to-$100 "training fee" Maynard charged his workers.
Labor investigators discovered that in many instances the training didn't amount to much. Recalls one state labor official who asked not to be named: "One security guard received this training. It consisted of, 'If something happens, call this number. And here's a sign-up sheet for people who come in and people who leave.' That isn't training: It's an orientation that's part of the cost of doing business."
The department's labor-standards unit has since ordered local job centers to stop referring applicants to the Hudson business. "Since July 1992 we have received over twenty wage claims, and the employer has been very uncooperative in resolving these claims," the unit's administrator, Charles DeMoulin, wrote. He added that "the U.S. Department of Labor has also received complaints, and their investigators received no cooperation in resolving the wage disputes." (A spokesman for the federal agency said the investigation was ongoing and he could not comment.)
Maynard contends that the state labor department is on a senseless crusade to get him. He says he levied the training fees primarily on workers who wanted to become welders. He points out that the fee was far less than a worker would have to pay if he took classes at a private vocational school, and that he has spent more than $900,000 in the past year training welders--who then too often leave his company.
"Here I am the largest employer in southern Weld County, and I'm always finding myself fighting with the state," he complains. "The State of Colorado needs to be training people instead of fighting industry just because of some $75 fee. If I'm doing something illegal, put my ass in jail."
Last May Union Bank & Trust declared Maynard in default on a $700,000 loan and claimed that the company had not provided "accurate and timely" financial reports or paid its taxes. On September 17 Maynard involuntarily filed for bankruptcy protection.
But Ron Maynard says he is optimistic. He says he has a new contract with Burlington Northern Railroad and that Rocky Mountain Railcar is on the rebound, with or without Union Bank.
"The bank," Maynard says, "is being nothing but jerks. I think they're very incompetent." An attorney for Union says he has not seen any new Burlington contract. Bank officials declined further comment on the case.
Although some officials privately say that they are not optimistic about the company's future, it may yet pull out of bankruptcy.
Even so, Hartmann says she will always harbor one nagging question. "It's worthwhile to ask: How does a company like this get government loans?