Railroad is in trouble again
Without $500,000 promised by rail authority, American Heritage could exercise bail-out clause
BY LELAND ACKER

The Texas State Railroad Authority (TSRA) is in material breech of the operating contract with American Heritage Railways of Texas, LLC, according to a letter sent to the authority on Oct. 3. The letter, sent by American Heritage attorney Edward T. Lyons, cites the failure of the TSRA to loan $500,000 to the railway as reason for the breech.

"Allen Harper (owner of American Heritage) has assured us that his intent is to operate the train forever, but he can't without the money that was promised," said Steve Presley, board president of the TSRA, during Friday's meeting in Rusk. Mr. Presley said the TSRA has not made the loan because the Legislative Budget Board has not released the $2 million which was promised by the state legislature.

The letter states American Heritage regrets having to give the notice of the breech, but had no other alternative as a matter of "prudent business." The letter concluded by stating that American Heritage "reserves all other rights and remedies, including a right of rescission."

"My understanding is that the $2 million is being held up for reasons that are unclear," Mr. Presley said. "When the legislation was passed, we were told the $2 million would be made available as soon as the Legislative Budget Board approved the contract. Someone (on the board) is studying every detail of the contract and is trying to change the deal."

Mr. Presley explained that all Legislative Budget Board members have to sign the agreement before the money can be made available.

Palestine Mayor Carolyn Salter said the delay appears to be on the part of Tom Craddick (R-Midland), who, as the speaker of the House, is a member of the Legislative Budget Board. Mayor Salter explained that one of Speaker Craddick's legislative aides, Casey Lamb, believes that allowing the TSRA to make a loan to American Heritage would be illegal.

"They are choosing to read it that way," Mr. Presley replied. "They are changing the deal, and it will not work."

Mayor Salter suggested the TSRA seek other sources of funding, such as loans and grants from local economic development corporations. Mr. Presley agreed that would be a good idea, but reminded the board that the TSRA is already behind deadline.

Paul Schranck, American Heritage vice president and general manager for the Texas State Railroad, suggested pursuing the state's job retention programs. Boardmember Dale Brown suggested selling scrap metal (which is subject to approval by Texas Parks and Wildlife Department). Boardmember Wesley Holloway suggested having surplus rail regraded and sold.

Mr. Brown made a motion, seconded by Mr. Holloway, to authorize Mr. Presley to seek other sources of funding. The motion passed 5-0.

Mr. Schranck gave reports on railroad property inventory and rail repairs. He reported that vegetation growth had become severe, preventing state railroad employees from being able to drive high-rail vehicles on the track. He said he had contracted with an individual to cut the brush off of the track and had hired a company to spray the track.

"By the end of the month, we'll have a train in Palestine," Mr. Schranck added.

Regarding the notice of material breech to the contract, the board decided to travel to Austin to meet with members of the Legislative Budget Board and to distribute copies of American Heritage's letter to board members. Mr. Schranck told the board he met with state railroad employees to let them know the letter was coming.

"I wanted them to hear it from me, and not some other way," he said.

Attending the meeting were Boardmembers Mr. Presley, Mr. Brown, Mr. Holloway, Dan Davis, Bob Goldsberry and Marie Whitehead, American Heritage representative Mr. Schranck, and PalestineMayor Salter, who is an honorary boardmember.