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voiced support for the company that threatened to shut down if its demands for financial help were not met and then rescinded its threat, pledging instead to continue to operate the tourist train through 2012.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