East Texas

Concerns with a contract that delayed state funding for the Texas State Railroad and jeopardized the arrangement made to save the train appear to have been settled, officials said Thursday.

Steve Presley, president of the Texas State Railroad Authority, said the authority on Wednesday came to an agreement with the office of Texas House Speaker Tom Craddick and the private company operating the tourist train on changes to the contract between the authority and the private company.

Final approvals from the Legislative Budget Board came through Thursday, Presley said.

He said the much-anticipated $2 million in state funds are expected to be released after American Heritage Railways Inc., the private company, and the authority sign the new contract. American Heritage has signed off and the authority board meets Monday to do the same.

“It means that the railroad is finally saved because without the money, the railroad can’t operate,” Presley said. “We’re just tickled to death that it’s been worked out so that we can ensure the success of the railroad for the long term …”

Concerns Craddick had with the contract between the railroad authority and American Heritage had kept the Legislative Budget Board from authorizing the release of the funding, officials have said.

Craddick’s office released a statement Thursday announcing an agreement was reached, “ensuring taxpayer dollars are adequately safeguarded and the railroad can begin its new chapter.”

“I am pleased that we were able to find a solution that satisfies the railroad authority, the private contractor and legislators who were concerned about the use of these public funds,” Craddick said in the statement. “There were a number of legal and fiscal issues that played into the concerns we had with the contract, all of which have been addressed in order to move forward with repairs for this historic railway.”

But the delay in state funding had caused the railroad authority to be in breach of its signed contract with American Heritage, making it possible for the private company that owns two tourists trains in other states to eventually walk away from the agreement.

The delay frustrated some involved with working to save the railroad in the last two years from a shutdown, including the mayor of Palestine.

Mayor Dr. Carolyn Salter said Thursday this should have been completed in September, when the train was transferred out of Texas Parks and Wildlife and to the railroad authority, and that there should not have been any issues with the contract.

“I thought the contract the rail authority negotiated was the one that was in the best interest of the taxpayers of the state of Texas and our communities in East Texas, in particular,” Ms. Salter said. “I’m disappointed the contract was changed at the Speaker’s request, but we met his demands, and now hopefully the $2 million will be transferred to us.”

She said of the funding, “I’ll be very happy when the money actually gets in the bank account. That’s the only time I’m going to believe it’s real.”

State Rep. Chuck Hopson, D-Jacksonville, released a statement Thursday that made it clear he was not pleased with the process, although glad the money would be released.

“This was an agreement we had coming out of the legislative session,” Hopson said. “We worked hard to get this done in a manner that all parties could be happy with — the state, the authority and American Heritage,” Hopson said. “Over the summer, this agreement was put in jeopardy for no good reason. The train is one of the most important sites in East Texas, and I think some people got into the process late that didn’t have East Texas as a priority.”

Hopson added he was glad American Heritage waited for the process to be straightened out.

“But it is disappointing to me that the state was slow in getting this done,” he said.

Al Harper, president and owner of American Heritage Railways, the private company that contracted to operate the train as of Sept. 1, called it a great day, adding he’ll be happier when it’s officially done Monday.

“I have signed the third amended documents now and I have signed all the other necessary paperwork and it is in the Fed-Ex as we speak and … will be presented Monday in Rusk,” Harper said. “I feel like we finally have made it.”

Harper said it is a relief and complimented the mayors and councils of Rusk and Palestine, the board of the railroad authority as well as his staff for working through the process.

“There seemed to be so many technical impediments,” he said. “But we hung in there — we never gave up, on all sides.”

OVERCOMING HURDLES

The authority’s contract with American Heritage had called for it to loan $500,000 to American Heritage immediately to pay for marketing and other operational expenses. The authority had also agreed to loan it another half a million dollars if needed.

That money was set to come from $2 million in general revenue the state appropriated in the last legislative session. That money was also to be used as a match for $10 million in transportation enhancement funds.

Authority officials learned after a meeting with Craddick in late October, though, that his understanding of the funding was it would be spent for capital improvements only, not operational expenses. However, Presley has said previously that officials presented testimony that some of the requested funding would be used for operating expenses.

A spokesperson for Craddick has said the speaker was also concerned whether lending public money to a private company would be illegal. There were also concerns the loan was “not envisioned by the Legislature … and that it might jeopardize the additional $10 million in federal matching funds,” according to the statement from Craddick’s office Thursday.

The cities of Rusk and Palestine decided earlier this month to step in, each agreeing to loan $500,000 to the authority to help keep American Heritage on board. The $1 million loan the authority will make to the company will help pay for operating expenses.

But the company could have still walked away because the $2 million in state funding had not yet come through, officials have said.

Presley said the authority had decided that if the agreement was not worked out by Wednesday, “we wouldn’t be able to get it done.”

The new contract restricts the use of the $2 million in state funds to capital improvements and rehabilitation of facilities, and prevents their use for the everyday operating expenses of the private company, according to Craddick’s office.

Other contract changes include a provision that permits the railroad authority to buy back all of the railroad ownership interests in the event of any termination of the contract, according to Craddick’s office.

The contract will remain for an eight-year period with the company earning ownership for meeting certain benchmarks each year, Presley said.

In September, officials had believed the railroad was “saved” after legislation transferred the train to the authority from Parks and Wildlife, which had threatened to turn the railroad into a static display because of funding issues.

Presley said Thursday that while he feels this will be the last hurdle to overcome, “there probably will always be hurdles put in front of us.”

“It will be an ongoing effort to save the railroad,” he said. The mayors of Palestine and Rusk noted how far the communities and the railroad authority, made up of appointees from the two cities, have come to save the train.

“When the talks first started about finding a private operator, it just seemed like it was such a mountain to climb,” said Angela Raiborn, mayor of Rusk. “I don’t think we could have gotten where we are without all of these different entities just working so closely together to do it.”

Ms. Salter said, “There were people who said this could never be done — and I am so glad that the hard work of both the communities has paid off ...”

STATE OFFICALS React

State Sen. Robert Nichols, R-Jacksonville, authored the legislation that created the railroad authority and authorized the transfer of the train out of Parks and Wildlife. Nichols said the agreement is a testament to the hard work of the authority as well as Rusk and Palestine.

“Because they simply would not give up, the train will receive desperately needed funding for the future,” Nichols said in a statement.

He also praised American Heritage.

“American Heritage stuck with it even when they had the option to walk away,” Nichols said. “Their willingness to work through this process shows their dedication to preserving this important piece of Texas history.”

Hopson also applauded the work of the cities of Rusk and Palestine.

“I am proud that our communities were willing to fight for the train,” he said in his statement. “I think that, more than anything, helped get this agreement done today.”

Agriculture Commissioner Todd Staples, who formerly was the state senator from Palestine, congratulated the citizens of Palestine and Rusk, American Heritage Railways and legislative leaders. “Because of their efforts, future generations of Texans will have the opportunity to experience this invaluable piece of living Texas history,” Staples said in the statement.

But Presley made a point to say that all those elected officials, as well as state Rep. Byron Cook, R-Corsicana, state Rep. Leo Berman, R-Tyler, and state Sen. Kevin Eltife, R-Tyler, were crucial in accomplishing this as well as Craddick and Lt. Gov. David Dewhurst. “Had any one of them decided they didn’t want it to happen, it wouldn’t have happened,” he said. “It’s a cooperative effort really from all of East Texas and a bunch of people from outside of East Texas interested in saving a piece of our Texas history and heritage.”