Texas State Railroad could start moving freight

[friscobob]

http://tylerpaper. com/article/ 20120217/ NEWS01/302179971

Freight Lines Could Help Texas State Railroad Earn Money
By BETTY WATERS
Staff Writer

RUSK -- Three companies have expressed interest in the development for
freight use of a portion of railroad track used primarily for the Texas
State Railroad, the board for the Texas State Railroad Authority was told
Thursday.

The venture could increase long-term profitability and help support the
tourist train side of the track for the financially troubled railroad,
officials said.

Board members discussed freight rail usage and other possibilities that
could be explored by the board and the private company that operates the
tourist train, American Heritage Railways Inc., to address financial
difficulties.

At the same time, they voiced support for the company that threatened to
shut down if its demands for financial help were not met and then rescinded
its threat, pledging instead to continue to operate the tourist train
through 2012.

"We still think (Allen Harper, American Heritage Railways CEO) is the best
tourist railroad operator in the country and we're glad to have him here,"
Steve Presley, board president, said.

"We still have confidence that they have the ability to make it (the Texas
State Railroad) profitable this year," Presley added. He cited American
Heritage as an example for the state of how a public and private partnership
can work.

Board members indicated bewilderment over Harper's sudden "change of heart"
to continue operating the railroad after having notified local officials of
an impending shutdown.

"It doesn't add up," board member Charles Hassell said.

After news spread about the possible shutdown, Presley was contacted Monday
by Iowa Pacific Holdings, a company interested in taking over operation of
the tourist train and developing a freight line.

Iowa Pacific Holdings owns several short-line freight rail lines in the
United States and two in the United Kingdom, as well as four tourist
railroad lines in the United States.

It was a provisional offer and American Heritage Railways had to definitely
make up its mind to leave, but because American Heritage decided not to
leave, the offer cannot be exercised, Presley said.

Presley said Harper changed his mind about shutting down after the board
president informed him Iowa Pacific Holdings was interested in taking over
the contract immediately.

In an interview earlier, Harper said he loves the Texas State Railroad and
because of the expectation for assistance from the authority and the cities
of Rusk and Palestine, he would continue operating the railroad.

Plans were being made for the shutdown when word came that Harper wanted to
keep the railroad open, said David Shranck, general manager. Harper has
invested about $3 million during the past four years and doesn't have more
money to lose, Schranck said.

Harper told the

Tyler Morning Telegraph

he had decided he did not want to walk away without giving 110 percent to
turn the railroad into a profitable operation.

Board members voiced displeasure that Harper's decision to keep the railroad
open was made in a news release to the media before they learned about it.

Schranck replied that the company was trying to get the word out fast to
potential riders but calling a board meeting requires 72 hours notice under
state law.

Presley said he was never worried that the Texas State Railroad would shut
down because there are other tourist train operators that could have stepped
in had American Heritage stepped out.

While the Iowa Pacific offer could not be accepted, Presley said, two more
private train companies have contacted American Heritage Railways directly
expressing interest in setting up freight operations on the tracks.

They proposed to develop freight line operations on a portion of the 28-mile
track that runs from the Rusk depot of the Texas State Railroad to the
Palestine Depot and three miles farther to the Union Pacific line in the
city of Palestine.

The stretch into Palestine would have to be rehabilitated and it would be up
to the freight operator how much of the tracks would be used, Presley said.

American Heritage Railways has said it is will seek outside companies for
the freight rail business. Harper is willing to bring partners in to run the
freight side of the Texas State Railroad tracks, Presley said.

It would be best for that side of the operation to be handled internally by
American Heritage, Presley said.

"It's better for private enterprise to be running private enterprise than a
governmental board trying to run a private enterprise," he added.

The new opportunity for the freight rail business could help insure
long-term viability of the tourist railroad, Presley said.

"The freight rail business probably has much more profitability than we
realized before, so that may be a very good opportunity long term for the
railroad to make additional profits," he said.

The Palestine depot is located centrally with highways in and out of the
area to be able to bring freight in and distribute it from trains or to be
able to bring items here from trucks and put them on trains going north,
Presley said.

Attracting interest in generating freight revenue, particularly on the
stretch of track between the Palestine depot and the Union Pacific line, is
one way to improve finances of the Texas State Railroad along with
attracting more riders for more ridership revenue, consultant Gary Tray--lor
told the board.

Pools of grants are available that the board could begin identifying and
seek, Presley added. He and Traylor are going to work on grant possibilities
and report back to the board in April or sooner. The board could approve
engineering studies or other measures necessary to pursue the grants,
Presley said.

A historic preservation fee of 5 percent of ticket prices for the Texas
State Railroad could raise $150,000 annually and provide a new revenue
stream, Presley said.

The board passed a motion to explore details of what would be involved in
starting and spending the fee, which is charged by historic trains in some
other states. It has not yet been approved for the Texas State Railroad.

In another move, the board directed compilation of a list of equipment at
the Texas State Railroad that could be classified as scrap surplus material
for presentation to the Texas Parks and Wildlife Department. The board
indicated it may try to sell the scrap if it receives a release from the
department.

The board voted to notify American Heritage Railways that it is unable to
meet three of its demands for financial assistance and that it is the place
of the cities of Rusk and Palestine to respond to the demands. Also, the
authority does not have available funds, Presley said.

The company requested $250,000 immediately for cash flow and help of about
$70,000 in marketing assistance, another $300,000 on July 1, and that
Palestine and Rusk release Harper personally and American Heritage Railways
Inc. from $100,000 in guarantees for loans each year for the next four
years.

[BoxcabE50]

Would freight revenues actually get them back on the plus side?