BUSINESS WEEK ONLINE
July 17, 1998


WORKING ON THE RAILROAD -- ALL 32 MILES OF IT


Kean Burenga: "Not everyone had faith in my ability"
Kean Burenga leans over the back end of a moving train, scrutinizing each foot of track that appears from under the caboose's steel wheels. "That tie is in bad shape," he says, swaying to the car's distinct click-ker-click. "And that section we replaced in February. Feel how smooth it is?"

Burenga, 31, is president and general manager of two short-line railroads that dip through the cornfields and outlet malls of Northern New Jersey. Burenga's is a meager rail empire, totaling just 32 miles of track and some 35 rail cars -- which haul 45,000 tourists and 15,000 carloads of freight each year. "I don't consider myself an entrepreneur," says Burenga, whose cheap rubber sunglasses and hastily tied work boots lend him the look of a college senior. "I'm just running a small business."

Yet Burenga's stewardship, which began when he was 21, is unique in a world that worships the digital priests of high technology and high finance. As Burenga's Gen-X peers shinny up the Wall Street corporate ladder or lay plans for the next Yahoo!, he obsesses over arcana more familiar to the 19th century -- tightening bolts, upgrading rail beds, and improving engine efficiency. That relationship to the past extends to the future, too. "I've left a legacy here," Burenga says about the 16-mile Black River & Western Railroad, first laid in 1854. "And this is something that's going to go on and on and on."

The legacy extends back to Burenga's grandparents, who owned a feed and lumber mill adjacent to a rail spur in Ringoes, N.J., not far from where the Delaware River runs through New Hope, Penn. In 1965, a volunteer group helped save an old steam engine -- a 120-ton workhorse that consumed more than two tons of coal and 8,000 gallons of water per day. It ran weekend tourist excursions from the clapboard Ringoes station to a stop just a few miles away.

What began as a hobby slowly became a business. In the 1970s, Burenga's grandparents agreed to handle commercial traffic over the track. And they eventually accumulated a controlling stake in the for-profit, volunteer venture. But by 1988, the railway was near a dead end. Burenga's grandfather was approaching 80, and the line was suffering from poor morale, infrequent maintenance, and a general resistance to change. The family decided to put the business on the block. "Everyone was using computers and faxes," recalls Burenga, comparing other railroads to his grandparents' tradition-bound operation. "And they had done it all by mail."

Burenga wasn't happy about the thought of sending out farewell letters. He had come of age with the railroad and knew every corner of its tiny domain as ticket-taker, engineer, and station manager. Still, he says, "the presumption was that the railroad was going to be sold." After graduating from the University of Delaware, he returned to the Ringoes railyard, hoping to accumulate a few months of business experience before it closed. After that, maybe he would step into a starchy Manhattan finance job or try journalism (his father, Kenneth L. Burenga, is president and chief operating officer of Dow Jones & Co.).

Soon, however, the younger Burenga would become the railroad's de facto boss. His grandfather fell ill on vacation, and when he returned six weeks later, "everything was still going all right," recalls the grandson. Within months, Burenga was installed as vice-president and general manager, and he set to work retooling a business that, while based in part on nostalgia, was becoming an anachronism.

"Not everyone had faith in my ability," says Burenga quietly in his musty office next to the railhead. "I was 21. And whenever there's change, there's risk."

Immediately, he says, there was a list "100 items long" that needed his attention. First, he sold off a shrinking bulk-transfer operation that loaded freight from the railroad onto trucks. Then he instituted a new maintenance plan, refurbishing rickety stretches of track and eroding railbeds. How to fund all this? In part from milking the tourist business, which grew 44% during the first two years under Burenga. By the end of 1989, the Black River & Western was chugging slowly, dependably along, and Burenga removed the "for sale" sign then hanging ominously over the outfit.

The Black River, however, was still a struggling concern, hamstrung by massive maintenance costs and a tiny customer base. In 1982, for instance, the railway lost 60% of its freight business when its largest client, a maker of vinyl record albums, closed shop. Most frustrating for Burenga was his dependence on the huge Class One railroads, such as Conrail, that controlled the flow of cars on and off his patch of territory. As a short-line, his customers' shipping schedules were determined by the big haulers' timetables and switching operations.

Today, Burenga must work inside many of the same constraints. The Class One railroads still lord over the short lines, and industrial development along his fixed railpaths has matured. What's changed is Burenga's own entrepreneurial imagination, which likely remains the most important asset when it comes to increasing the railroad's $1 million in annual revenue, which is up from $400,000 in 1992. "There's a great sense among all my employees that we're doing something with nothing," admits Burenga, about his full-time crew of eight. "It's been a struggle financially." Indeed, he reports profits of nearly zero, with all spare income plowed back into deferred maintenance projects.

Burenga's entrepreneurial education has paid off -- and sometimes stung, too. In 1991, for instance, he brought the hulking steam engine out of mothballs, which reinvigorated the tourist trade and remains the railway's best-known trademark. But keeping it running is a hugely demanding task, siphoning off thousands of dollars and work-hours, as technicians build custom parts inside an aging repair shed.

In fact, the passenger business accounts for less than 20% of total revenues. So Burenga has gradually accumulated new freight customers, both on his existing route and also through the 1995 purchase of the 16-mile Belvidere & Delaware Railway a few miles to the north of the Black River & Western. Perhaps his most important client is Union Carbide, from which he runs a separate switching operation inside a local plant. Other customers include a corrugated-paper company, a lumber yard, and a plastic-resin concern.

What fills up much of Burenga's day, however, is maintaining good ties with the big rail carriers, which are vital if he hopes to ship his customers' goods in time and on budget. That has gotten more difficult, he says, with the recent Conrail buyout by the Norfolk Southern/CSX juggernaut. But last year he was able to secure a special operating agreement with the new alliance that should help customers move their cars with fewer transfers between rail companies.

Though the rail network ranges across the continent, life on the Black & Western still revolves, as it has for three decades, around the sleepy Ringoes railyard. Some 50 trained volunteers continue to run the tourist trains on weekends. (They're a big help in holding down Burenga's labor costs.) On a recent Thursday morning, children on summer vacation clamber onto two dark green passenger cars. A volunteer ticket-taker, in full uniform, mulls his watch.

Burenga has watched this same scene for virtually all his life, and its meaning has changed over time. "Everybody will tell you they love trains, but if you work here long enough you have to worry about the day-to-day challenges," he says. He adds that he'd like to double revenues in five years instead of 10. It won't be easy in a low-tech business with low margins.

Still, the business has a certain momentum. The 16-cylinder engine begins its crawl northeast, and the children are giggling in the car ahead. The Ringoes station, first built in 1872, whisks by. There's not an Internet connection or cellular phone in sight. And when the engine lets out its shrieking whistle, it would be impossible to hear someone on the other line anyway.

By Dennis Berman, staff reporter, Business Week Online

EDITED BY DOUGLAS HARBRECHT


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