(Note: This is the second story in a multi-part series examining the Texas State Railroad and efforts to keep it running.
(The following story by Megan Middleton appeared on the Tyler Telegraph website on May 7.)
TYLER, Texas — Saving the Texas State Railroad has, at times, grown into a contentious debate over what is really the best option for keeping the costly tourist train chugging down the tracks for future generations to enjoy.
Passionate voices have emerged on both sides of one group’s effort to create a local public-private partnership that would allow a private operator to run the historic railroad.
The train is currently slated to become a museum in September unless the state allocates more money to continue running it or a way is paved for a private entity to operate it.
While the Texas State Railroad Operating Agency, which was created last year by an interlocal agreement between the cities of Rusk and Palestine, has pressed forward with its plan to save the train with a private operator, opponents of that idea have said the train is best left in the control of the Texas Parks and Wildlife Department.
Legislation is currently pending that would authorize the transfer of the railroad to an “operating authority,” that could then lease operations of the train to a private entity. In conjunction with that legislation, there also is a request for $12 million to be given to the “authority” to help pay for repairs to the railroad and address costs associated with the transition to a private operator.
“This is the best chance for saving and improving the Texas State Railroad that we have,” said Steve Presley, president of the Texas State Railroad Operating Agency. “I am very optimistic that the legislation will pass and funding will be provided.”
An opponent to the legislation, Michael Banks, president of Save Texas Parks, said during a hearing in Austin, though, that “Parks and Wildlife wants to keep the railroad. To me, this is the solution. Why give the railroad away?”
TRAIN TROUBLES
In December 2005, budget issues on a state level forced the elimination of train runs out of the Palestine depot. Residents rallied and legislators helped in restoring the Palestine runs by April 2006, but the executive director of Parks and Wildlife recommended in a letter written in March 2006 that the Texas State Railroad, on Jan. 1, 2007, be transferred to another entity for operation and management — or the train would be turned into a static historical display.
But the threatened shut down of the train at the end of 2006 was later narrowly avoided when funding was identified to keep the railroad alive through Aug. 31.
It was in February 2006, shortly after the budget cuts affecting the railroad caused residents and state leaders to take critical notice of the situation, that the Texas State Railroad Preservation Task Force was formed at the request of state legislators and at the direction of the mayors of Rusk and Palestine.
The group, made up of citizens from Cherokee and Anderson counties, was tasked with finding an alternative solution to state operation of the train, said Presley, who was president of the group that later evolved into the operating agency.
Parks and Wildlife would need $45 to 60 million over the next 10 years for repairs and continued operation of the train, Presley, also a Palestine city councilman, said.
“We discussed those numbers with the politicians, and they said there would be absolutely no support for continuing operations of the train if that’s what it was going to cost,” he said.
PRIVATE OPERATOR
With the help of a consulting firm that deals in tourist railroads, Stone Consulting, the group explored the idea of a private operator running the railroad.
In February 2007, the operating agency chose American Heritage Railways as the potential private operator. American Heritage operates the Durango & Silverton Narrow Gauge Railroad in Colorado and the Great Smoky Mountains Railroad in North Carolina.
The owner of American Heritage, Allen Harper, has told agency members and legislators that he is on a mission to preserve railroad history. By offering certain special events, such as “The Little Engine that Could,” “The Great Pumpkin Patch Express” and “Thomas the Tank,” American Heritage officials have said ridership of the Texas State Railroad could be doubled, and maybe even tripled.
In April, an eight-year contract with the potential private operator was finalized.
As part of the agreement with American Heritage, the “operating authority,” that would be created by the current pending legislation, would transfer to American Heritage an undivided 12.5 percent of the ownership interest of railroad personal and real property if the new operator meets certain performance requirements.
“What we’ve proposed to do is still have it under state control through the authority, but let a private operator run it at a profit to them that the state can’t make and let that private operator improve it,” Presley said. “The only way for the private operator to have the incentive to improve it is if they own part of it.”
American Heritage is also required to submit a capital improvements and rehabilitation plan for the railroad and work to offer continued employment to employees of Parks and Wildlife working at the railroad.
The 13-page contract includes other guidelines, including that American Heritage should work with existing community groups to continue fundraising opportunities; that the authority would lease railroad right-of-way property to American Heritage through a separate 99-year lease, which terminates if the contract ever terminates; and that American Heritage cannot divert real or personal railroad property from its use in conjunction with the operations of the Texas State Railroad without written consent.
Palestine and Rusk city councils have ratified the contract and chambers of commerce, including the Tyler Area Chamber of Commerce, have passed resolutions in support of the legislation that would create the “operating authority.”
Presley said the group carefully studied and discussed all the options related to saving the railroad.
“In the end, this is the option that worked out to both cost the state the least amount of money in the long run … but more importantly this option still allowed local control over a railroad operator; it kept it open and it improves it,” he said. “No other option that is out there improves the railroad from where it is today.”
He said this option also puts the railroad’s assets back on the property tax rolls, gives sales tax revenues to the cities and counties that they don’t now get and brings in more tourists.
Presley said there were four “very strong well capitalized bidders, any of which could have taken over and run this railroad.”
“American Heritage, for a variety of reasons, was the best potential operator,” he said. “With the safeguards we have in place and the oversight we are going to give and their ability to run it without government interference, it gives a better chance for success then us depending on the taxpayers continuing to put in that $45 to $60 million over the next 10 years.”
OPPOSITION
Michael Banks, a Jacksonville dentist and president of Save Texas Parks (formerly known as the Friends of the Neches River) has been vocal about his opposition to the idea of the railroad leaving Parks and Wildlife’s control and his belief that there is money out there to keep the railroad with Parks and Wildlife.
During Senate and House committee hearings, he and two other individuals, including a member of the Friends of the Texas State Railroad, spoke against the legislation related to the transfer of the train out of Parks and Wildlife. Several Palestine officials and members of the operating agency, that includes residents of Palestine and Rusk, spoke in favor of the legislation.
Banks said he and others are working to see the train stays with the state “so the railroad will be there.”
“We are not doing this just to be rebels,” he said.
He believes there is a “higher risk of failure” with a private operator.
“It’s more secure with the state than it would be with a private operator,” he said. “It’s a very expensive operation. For a private operator to operate the railroad with historical value and for the benefit of the people of the state of Texas, it will be hard to do it and turn a profit.”
He said if a private operator is successful, it will be because the state would have to put more money into it down the road.
“These people are going to hold it over the people of Palestine and Rusk and over the people of the state of Texas, that if you want the railroad, you’re going to have to come up with some more money because they cannot operate it for a profit,” Banks said.
Other concerns he has include that ticket prices would increase, that the new operator might not make investments back into the train and that it might make demands of the operating authority. He also has concerns about current employees at the railroad “not being taken care of.”
Presley, who disputes Banks’ concerns and said American Heritage will make a profit and put money back into the operation, has pointed out that if the private operator violates the provisions of keeping the railroad operating and maintained, under the contract, the operating authority can “boot” the company out and buy back the assets it had earned for $100.
“Every year they earn more and more, they have more at risk by not performing,” Presley said.
In regard to ticket prices, Presley said American Heritage may offer varying levels of ticket prices and, at the agency’s request, offer discounted tickets, at or below the current prices, for local residents during certain off seasons.
Current employees of Parks and Wildlife would be offered jobs by a new operator, Presley said. However, they would lose state benefits unless they take a job elsewhere within Parks and Wildlife or with another state entity.
Banks has said with the transfer of the railroad out of Parks and Wildlife, they are “giving away” a “130-million asset,” a number that Presley also disputes.
Presley has said the operating authority would own the rails and right of way, but as part of the contract, American Heritage is required to “fix it up and maintain it.”
“The only ‘giveaway’ that’s occurring is that the new potential operator, American Heritage, is giving improvements to the state of Texas,” Presley said.
But Banks said, “it’s just a better deal for the state to operate it.”
“If the state operates it, it’s not going to go away,” he said. “It’s been there 31 years. I’d go with a 31-year track history before I’d go with the track history of American Heritage.”
No one has a crystal ball, Banks said.
“They think they got pie in the sky. They think that they can pull it off. It’s going to be a tough road for them,” he said. “I hope they win. I hope in 10 years we can say we’ve got a Disney World out there and people are flying in here to participate on a train ride. But the likelihood of that is very slim, and there’s a greater likelihood that that track will be barren in 10 years.”
Presley said the group considered “every possible angle that we could in making this decision, and we put in every safeguard that we possibly could.”
“…And now at the 23rd hour, we have groups coming in making all these accusations without having the facts. …,” he said. “Or in some cases they have the facts and have chosen to ignore them.”