TSR debate heard by Senate committee
TSR Rail Operating Agency finishes 13-page document, sends to TPWD and the Texas Legislature
BY TERRIE GONZALEZ MANAGING EDITOR

A 13-page contract was signed Friday by the Texas State Railroad Operating Agency and American Heritage Railways which outlines the agreed-upon terms to operate the Texas State Railroad as a public-private partnership.

The Texas State Railroad will be transferred to American Heritage Railways over an eight-year period at a rate of 12.5 percent of assets each year that AHR meets threshold ridership goals. The contract also requires the state to pay $12 million up front to the new rail authority so that needed improvements to the tracks can be made.

The contract will not be valid until the Texas Senate and the House of Representatives approve HB 3133 and SB 1659 and the governor signs the legislation. HB 3133 is authored by state Rep. Byron Cook (R-Corsicana) and SB 1659 is sponsored by state Sen. Robert Nichols (R-Jacksonville). The cities of Rusk and Palestine must also ratify the contract or it is void after 30 days.

Both bills were heard in Austin Tues-

day by the Culture, Recreation and Tourism Committee in the House and the Committee on Natural Resources in the Senate. (See related story, page 1A.)

Currently, the Texas State Railroad will run out of money by Aug. 31 and be turned into a static exhibit unless the Legislature approves a rider submitted by state Rep. Chuck Hopson (D-Jacksonville) to fund the railroad for another two years or passes the bills for the public-private contract.

"We've been talking to legislators the whole time, and we're telling them we have money (set aside) in Article 11, and that this (privatization) is a backup plan," said State Rep. Chuck Hopson.

In anticipation that the Legislature might not approve additional funding for the TSR or the Article 11 rider, a local task force began exploring options to privatize the train more than a year ago.

"We need to save the Texas State Railroad," said Steve Presley, president of the TSR Operating Agency. "After a lot of study and thought, I believe this is the best way for East Texas."

Mr. Presley pointed out that currently, tickets to ride the TSR are not assessed a sales tax. "Sales tax is only collected at the gift shop at this time."

This will generate additional revenue to both cities and the county, he said. AHR will also be required to pay ad valorem taxes to the cities, schools and counties.

Mr. Presley said the operating agency negotiated a better deal than he had hoped. "We are in good shape."

He also explained that the contract includes both threshold and target ridership goals for AHR to meet. The threshold represents the target goal for which AHR will receive ownership shares. The target ridership is the goal that the rail authority wants the company to try and achieve.

If threshold goals are not met, the AHR will receive a prorated amount of assets, based on ridership numbers. (See related chart, pg. 7A.)

Terms of the eight-year contract ask the Legislature to create a new, Texas State Railroad Operating Authority, which will replace the ad hoc Texas State Railroad Operating Agency.

To avoid violations of the open meetings act, three TSROA members met individually with members of the Rusk City Council last week to explain the contract and seek their support. The city of Rusk owns the property where Rusk State Park sits and is part of the assets that American Heritage wants to manage. The 13-page contract stipulates that American Heritage must enter into a separate agreement executed by the city of Rusk by June 1.

"The city of Rusk is in a different position than Palestine," Rusk Mayor Suzann McCarty told the Cherokeean Herald Monday. "We have a valuable asset sitting there," she said, referring to the Rusk State Park property.

"I want to do what's best for Rusk today and in the future, and I want to keep the train running," she said.

Mrs. McCarty said the city will not likely finalize any action to negotiate a separate contract with AHR until the Legislature approves the contract and agrees to fund the rail authority with $12 million.

"I've seen the 13-page contract, but I have not yet been shown any of the exhibits (documents) that are cited in the contract," she said. "I keep hoping it will be forthcoming." The exhibits provide details of railroad property and rolling stock assets.

The tracks will be owned and maintained by the rail authority, which will be comprised of seven members. The cities of Rusk and Palestine will each appoint three members, and the board will appoint a seventh member.

However, after the initial $12 million from the state, AHR will be responsible for track maintenance.

American Heritage Railway will be required to lease the tracks from the governing authority for $100,000 each year or two percent of the gross operating revenue, whichever is more. AHR will also be required to provide the authority $50,000 annually in the form of railroad promotional expenses to promote the TSR at the company's other two parks for a minimum of five years.

The contract calls upon the rail authority to establish a $2 million interest free revolving loan fund once it receives $12 million from the Legislature; this fund can be used by AHR to pay the annual leasing fee of the tracks.

"This is a loan to them (AHR) at no interest," explained Steve Presley, president of the current Texas State Railroad Operating Agency. "They can use up to $2 million."

The remaining funds will be earmarked for improvements to the rails.

AHR also agreed to guarantee $50,000 of in-kind charter train services for non-profit fundraisers, such as "Murder on the Disoriented Express" and "Polar Express."

Some of the other contract terms include:

+ The governing authority agrees to replace a minimum of 2,500 cross ties each year.

+ AHR must provide general purpose personal injury and property damage insurance related to the railroad.

+ AHR must purchase the inventory from the gift shops from the rail authority at cost. Currently, the TSR gift shop is the highest grossing gift shop of all state parks in Texas.

+ AHR agrees to endeavor to offer continued employment to all Texas Parks & Wildlife Department employees currently employed at the TSR.

+ AHR is given the option of continuing to use the name "Texas State Railroad"

+ valid reasons for contract termination by AHR or the rail authority are detailed in the contract. (For example, failure to operate at least four round-trip schedules per week, with a capacity of at least 200 passengers during March through September, is considered a material breach of contract unless mechanical failures, weather or other uncontrollable circumstances are involved.)

Rep. Hopson is not certain what the Legislature will decide on the Texas State Railroad. "There are some in the Legislature who have told me the train is a 'black hole,' and that we must stop dumping money into it."

He said he remains optimistic and is still working to keep the train operated by TPWD. "I appreciate everyone who has worked to keep this train rolling," he said. "I think everybody's priority is to keep it rolling."

Not everyone is pleased with the efforts to privatize the TSR.

"The privatization bills definitely do not represent the best interest of the people of Texas; they give away the people's asset of $130 million to an outof state company in eight years, along with $12 million now. The TSRR could be operated by the state, with improvements, for $7.8 million at a net cost of only $3.4 million over two years," said Michael Banks, president of Save Texas Parks. "The legislature, our elected officials, do crazy things."

The contract was negotiated by attorney Ronald Stutes, Potter Minton Law Firm in Tyler.

Members of the TSR Operating Agency include: Mr. Presley, president; Charles Hassell, Marie Whitehead and Bob Goldsberry, all of Rusk; Dale Brown and Dan Davis representing Palestine.