East Texas

By MEGAN MIDDLETON
Staff Writer

RUSK - The Rusk City Council has jumped on board with Palestine to make it possible for the Texas State Railroad Authority to loan the new private operator of the tourist train $1 million, in place of state funding that is still on hold.

Expecting that American Heritage Railways Inc., which contracted to run the Texas State Railroad as of Sept. 1, will bring in droves of tourists along with their pocketbooks to Rusk and Palestine and all of East Texas, each city is committing to make available $500,000 to make sure the deal brokered to save the railroad from a shutdown doesn't dissolve.

The Palestine City Council approved 5-1 loaning half a million dollars to the railroad authority on Monday, while Rusk unanimously OK'd the loan Thursday night.

"I think it was a very good move on the part of the council," Rusk Mayor Angela Raiborn said. "I think everybody on the council recognizes how important it is to have the train running."

Ms. Raiborn said the half million dollars is a loan, and so the money will come back to the city. But, in the meantime, she expects the sales tax revenue the city will see as a result of American Heritage running the train will make it so, "we'll get that money back many times over."

Flooding rains washed out a portion of the tracks of the railroad in July, ceasing regular, full runs of the train until repairs could be made.

The Rusk mayor said the impact of that cessation of runs was felt in Rusk.

"We saw a little bit this summer of just how much the train influences our economic flow around here, especially with the tourist-type businesses, restaurants and the hotels," she said. "It's had a big impact on it being closed down this summer."

But it's not just about economics, she said.

"Besides it being a real big help to our economy, that's part of our heritage, that's part of what Rusk is known for is the train," she said. "Every one of the councilmen felt like it's our obligation to do what we have to do to keep it running. It really goes further than economics. It's our heritage."

Palestine is drumming up the funds from its general fund reserve. About $560,000 in extra revenue was available, officials have said.

"We expect the economic development and tourism that will come out of that will benefit our local economy more than half a million dollars worth over the life of the loan," Dr. Carolyn Salter, mayor of Palestine, said earlier this week.

Rusk is using revenue from the half-cent sales tax to fund the loan, although the funding is not a "4A" sales tax corporation project, officials said.

Bob Goldsberry, a member of the Texas State Railroad Authority and executive director of the Rusk Chamber of Commerce, said the city councils agreeing to loan this money shows that, "these two communities are fighting very hard to make sure that the Texas State Railroad stays open and running."

"We understand - we being the cities of Rusk and Palestine - the economic impact that the Texas State Railroad has had in the past and what the impact can be with American Heritage on board as our partner now to take the train into the future," Goldsberry said.

The Thomas the Tank Engine event at the Rusk Depot in October was an indication of the future, officials have said. The event brought in more than 12,000 paid riders.

"I fully believe that was a very small taste of just really how successful this railroad could be," Goldsberry said.

Steve Presley, president of the Texas State Railroad Authority and a Palestine city councilman, said the action of these two cities means, "we're a huge step closer to saving the railroad."

The $1 million means the new operator can move forward with plans to add employees and develop the railroad, he said, "instead of having to look at having to lay employees off."

Presley pointed out that a successful railroad will not just benefit Rusk and Palestine.

"It has a huge economic impact on our entire area," he said. "We expect ridership to increase to 200,000 a year, and that's a tourist attraction like none other in East Texas. It will be the biggest attraction there is in East Texas. It's not just our two communities that benefit from it."

STATE FUNDING

The loan from the cities comes as a result of a delay in expected funding from the state, among other things.

The railroad authority received a letter in early October from the attorney for American Heritage notifying the group it had "materially breached" its contract, in part, by failing to loan the private entity $500,000 to support operations needs.

Presley said that in the most recent contract with American Heritage, the authority agreed to loan $500,000 to the company immediately to pay for marketing and other operational expenses. The authority had also agreed to loan it another half a million dollars if needed, Presley said.

That money was set to come from $2 million in general revenue the state appropriated in the last legislative session.

But the railroad authority has said the state has not yet released that $2 million, which was also to be used as a match for the authority to receive $10 million in transportation enhancement funds.

Authority officials learned after a meeting with Texas House Speaker Tom Craddick more than two weeks ago that his understanding of the funding was it would be spent for capital improvements only, not operational expenses. However, Presley has said officials presented testimony that some of the requested funding would be used for operating expenses.

A spokesperson for Craddick has said he's concerned about whether lending public money to a private company would be illegal and also said his understanding was the money was to be used for capital improvements.

But the letter from American Heritage started the clock ticking for the private company to walk away from the deal that looked to save the railroad from being shut down.

American Heritage wants to operate the railroad, Presley has said previously, "but they can't operate it without getting the money they were promised."

Presley said the Texas State Railroad cannot operate without a large amount of operating funds.

The train was losing about $1.5 million a year before American Heritage took it over, he said.

"The only way to reverse that trend is to get ridership up, and it takes a lot of operating money to do that," Presley said. "American Heritage Railways is putting in money of their own, but for us to expect the ridership to grow and increase and for it to develop enough that they can then have profits to pay the additional capital repairs that are needed, we have to build ridership rapidly."

Presley also noted that the train has not been operated, save for the Thomas the Tank event, because of the washout.

"The combination of all those together made it necessary to make that million available to American Heritage immediately," he said.

STILL NOT SAVED

The railroad authority has submitted contract amendments to Craddick that work to take care of the issues he had concerns with, Presley said.

"We've complied with the speaker's issues and worked a tentative revision on the contract," he said. "Having this money available to them now has helped American Heritage go ahead and, in principle, agree that they can sign a contract revision that includes those provisions that the speaker wants ..."

But Presley noted - "we still have to get the money out of the state or it won't work."

Presley said the events planned for the remainder of the year will continue - such as "The Polar Express," which begins Friday.

"'The Polar Express' is going to run," he said. "Now with these new funds we're sure it won't close down at the end of the year. It will go beyond that into next year.

"For it to be saved permanently, we still have to get that money from the state."

The breach in the contract is still not resolved, even with the $1 million, he said. Signing a new contract is dependent on the state releasing the funds.

But he clarified that just because the contract states American Heritage can walk away does not mean they must.

"They have repeatedly told us, they don't want to walk away. This million dollars has made them say even more pointedly, we see the level of commitment of both your communities," Presley said. "They want to save the train, and they're trying to do everything they can to do it."

The Texas State Railroad Authority will meet at 9 a.m. Monday at the Palestine City Hall Conference Room to discuss several issues, including accepting the half million dollar loans, loaning $1 million to American Heritage, considering a new contract with American Heritage, an update on the washout repairs and "The Polar Express" event.