Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, March 22, 1990                   TAG: 9003222545
SECTION: EDITORIAL                    PAGE: A-10   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

STOCK DEAL: WILDER WARINESS WAS WISE

Still, the intensity of his attention to things fiscal since his inauguration has surprised even us. Moreover, that attention didn't wane with the end of the General Assembly session. In his skepticism about the sale of state-owned stock to the CSX Corp., Wilder may have performed a greater service than anything he did during the legislative session. Now, the proposed deal apparently is dead: On Tuesday, CSX announced it has called off its proposed takeover of the RF&P Corp.

Wilder's blossoming as a fiscal conservative - the bloom is bright enough to have caught the eye of a fair number of non-Virginians - is partly the result of circumstance. When he took office in January, an economic slowdown, ill-considered tax-code changes and rising demands on the state for costs previously borne by the federal government were combining to put the state budget in a vise.

As we noted the other day, there's plenty of reason to worry that the state is still in a fiscal squeeze. But Wilder and the 1990 General Assembly produced a budget that at least has room to breathe: The fact that nothing worse happened may be a significant, albeit negative, accomplishment.

Most legislators came away from the session praising Wilder's ability to work with them in crafting a tough-times budget. An exception is Democrat Hunter Andrews of Hampton, majority leader of the Senate and chairman of its Finance Committee.

Wilder and Andrews crossed lances throughout the session. The joust continued last week, when the Wilder-influenced board of the Virginia Supplemental Retirement System removed Andrews and Del. Robert Ball, D-Henrico, as the VSRS representatives on the board of RF&P Corp.

The state's financial interest in RF&P, which operates a railroad between Richmond and Washington plus a real-estate subsidiary, dates to the 1800s. Then, it was commonplace for governments to buy stock as an incentive to railroad construction. Today, the state - via the VSRS pension fund for state workers - owns about 20 percent of RF&P's stock. That stake is why the VSRS names two directors to the 12-member RF&P board.

CSX holds 36 percent of the RF&P stock; the third large holder is Norfolk Southern. CSX had offered $34.50 per share to buy up the RF&P stock it doesn't own already. Both Andrews and Ball, chairman of the House Appropriations Committee, favored the deal, which would have required legislative approval.

But critics said the offer was far too low. Their assessment was based not so much on RF&P's operating profits ($33.7 million last year) as on real-estate holdings judged to be worth as much as $900 million. It's a sweetheart deal, said the critics, between huge CSX and an RF&P board dominated by members with CSX connections. The stock, they said, should be worth from $50 to $60 per share.

Maybe the critics were wrong; maybe $34.50 was a a fair price. Last week, the state had hired a New York-based analyst to evaluate the offer. Maybe the recommendation to the state would have been to sell the RF&P stock.

Clearly, though, the state had big bucks at issue. And just as clearly, the state's interest was not necessarily the same as that of other RF&P stockholders, especially CSX.

Ball, who had been a VSRS representative to the RF&P board for only a few weeks, said he owns stock in neither that company nor CSX. Andrews said his holdings are worth less than $10,000, the threshold at which state conflict-of-interest laws kick in.

The issue, though, wasn't impropriety. The issue was rushing to premature judgment.

The governor was right to insist on caution. He was right to insist on an independent evaluation before calling a special General Assembly session to OK the CSX bid. He was right to exert his influence on the retirement-system board to replace Andrews and Ball on the RF&P board with two representatives whose minds weren't made up.

The death of the deal hasn't cost the state's pension fund: It still owns a big block of stock in a corporation that, even at $34.50 per share, obviously is a going concern. But if the deal had gone through, and the stock were worth $50 to $60 per share, the state stood to lose tens of millions of dollars.