Rusk, Palestine each agree to loan $500,000 to American Heritage
Rusk Economic Development Corp. will loan funds
BY LELAND ACKER

The assistance and promised support of the Texas State Railroad from the cities of Rusk and Palestine have persuaded American Heritage Railways of Texas to stop consideration of staff layoffs and start considering hiring new staff, said Texas State Railroad Authority (TSRA) President Steve Presley.

The Palestine City Council voted to loan the TSRA $500,000 from the city's general fund to help American Heritage with operations costs during a meeting last week. Meanwhile, the Rusk City Council voted to commit to authorizing a $500,000 loan from Rusk Economic Development Corporation funds during a special meeting held Thursday.

"We just want to see it in writing before we authorize it," said Councilman Don Jones.

"We're getting pretty good at calling emergency meetings and approving what we need to do," said Councilman Kris Morgan.

Councilman Jones expressed concern that the funds should not be loaned unless the state releases the $2 million promised through legislation on the transfer of the state railroad.

Councilman Morgan expressed his support for the loan, but added that he was concerned.

"We won't be able to do this again," Councilman Morgan said. "The economic development funds are like pennies from heaven. We don't have a lot of money. We don't have the same resources as the City of Palestine, such as alcohol taxes."

TSRA attorney Ron Stutes said no money will change hands unless the revised contract is signed.

Councilman Sam Florian made the motion to authorize the Rusk city attorney to begin working on amending the contract with the TSRA and to commit to loaning the $500,000 from economic development funds. Don Jones seconded the motion and the council approved it 5-0.

The $500,000 loaned from the City of Palestine comes from an unexpected surplus of sales tax revenue. The city will charge interest on the loan, the same rate as the city would have received had they left it in the bank.

"These loans save the day," Mr. Presley said. "Without the loans, the contract negotiations are over and American Heritage will leave.

"American Heritage has already changed from talking about 'what to do about laying off staff,' to 'we have to hire more people.'"

Mr. Presley said the TSRA will now focus on obtaining the $2 million promised by the state, which is being held up by House Speaker Tom Craddick's office, pending an agreement that the funds will not be used for operational expenses.

"We need to make sure the state funds the capital improvements," Al Harper, owner of American Heritage Railways said. "These are repairs that are back logged. The state told us they would fund the repairs."

Mr. Harper praised the cities of Rusk and Palestine for stepping up and helping the TSRA.

"I am amazed and in awe at these two cities," he said. "The state let the TSRA down. I work with several railroads and I see few communities pull together like these two have.

"As far as I am concerned, the railroad will do well and I plan to be there forever."

Mr. Harper said the fall has been uncomfortable for American Heritage.

"I loaned $300,000 to the state railroad (this fall) to make payroll and put on our first event (A Day Out with Thomas the Tank Engine)," he said. "Based on this railroad's history and what it stood for, I was willing to make the gamble.

"The people of Rusk and Palestine should congratulate the foresight and leadership of the TSRA and the Rusk and Palestine city councils."

Mr. Presley said the loans provide the TSRA another opportunity to "take lemons and make lemonade."

"With the loans, more funds will be available for capital improvements more quickly," Mr. Presley said, noting that such a situation will only take place if the state releases the $2 million. "Now it will all be spent on capital improvements and we can work more on commercial rail transportation or with the film industry."

The loans do not solve the TSRA's financial woes, however, Mr. Presley said. The TSRA still owes money in attorney fees, consulting engineering fees and grant consulting fees.

Contract negotiations will continue with American Heritage, Mr. Presley said.