The Palestine Herald, Palestine, Texas

Local News

February 3, 2012

Texas State Railroad owner seeking financial relief

PALESTINE — American Heritage Railways, who operates the Texas State Railroad, looks to have hit a proverbial bump in the rail — facing financial issues that could possibly lead to the railroad’s closure.

Palestine Mayor Bob Herrington brought the news to the public’s attention Thursday morning on his local radio show, announcing that he had received an e-mail from American Heritage asking for help with the problem.

“It looks likes they are having some financial difficulties,” the mayor said. “Not really bad, but enough of a worry that they need some more concessions, it looks like, from the City of Palestine, from the City of Rusk and the state in order for them to continue operation for calendar year 2012.

“And basically... it says unless the concessions, or a re-negotiation of the contract, the requests in that contract, are met that the railroad would shut down operation Feb. 15.

“...it’s just gonna be time for some hard decisions.”

Helping to make those hard decisions will be the Texas State Railroad Authority board, which include Palestine city council member Steve Presley and local attorney Hugh Summers.

“The good news is that the Texas State Railroad continues to make progress,” Presley said. “In the past year, it was close to breaking even.

“The problem is that ... almost all of the available cash for operations has been spent and it needs cash flow to stay open.”

Allan Harper, CEO of American Heritage Railways, reported that he has invested almost $3 million into the railroad since AHR took over operations almost four years ago, and he has continued to do so... until now.

“Up front I want to say that I love the Texas State Railroad and my heart’s desire is to continue to keep it open and see it continue to make progress,” Harper said during a phone interview with the Herald-Press Thursday. “But I have come to a point where I have to make a business decision — this is about requesting help.”

When the railroad was operated by the Texas Park & Wildlife Department, it was losing about $2 million a year. In the last year, 2011, the loss was only about $150,000.

“That is huge progress, things are turning around,” Harper said. “But it looks as though we need about $573,000 to keep things operational until we get to the fall (when there is) a positive cash flow.

“I need some help until we get there.”

Harper said that he issued the letter to the cities to portray the sense of urgency he feels in getting financial relief for the railroad. He has acquired $2 million in debt for the railroad through loans with the City of Palestine, the City of Rusk and the State of Texas.

“There are guarantees on those loans and they want me to pay them back,” he said. “I don’t mind paying back the loans, but I want some relief.

“I am not going to keep running a railroad that is piling on debt. I can’t keep going like this. We have to solve this problem.”

Both Harper and Presley agreed that the Texas State Railroad would at least break even in 2012; and both have ideas on how to keep the railroad running in 2012.

Harper reported that his letter included a list of 10 ways the cities could offer relief — from having city park service workers maintain the two railroad parks or relieving AHR from its marketing expenses to removing Harper’s personal guarantee on the loans, allowing them to be paid back in a more workable time period.

“Mr. Harper is wanting to talk to us to see if we can work better and share the risk with him,” Presley said. “I don’t think it will come to closure — we can somehow work this out.”

Harper agreed with Presley, reiterating that closing the railroad is not what he wants to do.

“I am proud to be part of the Texas State Railroad,” Harper said. “It is a great railroad. I have made a commitment to it and I want to come up with a solution.”

According to Harper, the Texas State Railroad Authority will be meeting to discuss the issue at a special meeting on Feb. 13, and the board has already begun work to come up with a solution.

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Mary Rainwater may be reached via e-mail at mrainwater@palestineherald.com

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