A trainload of questions

By Brian Mann

For more than twenty years, the Adirondack Scenic Railroad has struggled to create an excursion train from Utica to Lake Placid, an attraction that advocates hope will one day serve as a major draw for tourists, carrying passengers through some of the most rugged and scenic terrain in the East. “We view an asset like that as something you would never want to rip up,” Bill Branson, the ASR board president, said in an interview last year.

But a nearly month-long investigation by the Adirondack Explorer, in partnership with North Country Public Radio, has revealed stark and long-lingering questions about the non-profit railroad’s financial stability, its professional staff, and its ability to scale up what remains a largely shoestring operation that still carries passengers over only short stretches of the historic corridor.

After two decades in operation, the railroad and its parent company, the Utica-based Adirondack Railway Preservation Society, still appear to operate with almost no paid technical staff experienced in the marketing of a major tourism attraction or in the operation of a 140-mile rail line. Nor does the company have full-time fund-raising staff, an endowment, or savings, in contrast with other established non-profits.

The Explorer-NCPR investigation revealed, among other things, that in May, ASR lost a longstanding lease on its only maintenance facility, located in Rome. As a result, the company has been forced to repair its aging fleet of locomotives and passenger cars outside. “I don’t think it’s a secret that we’re repairing train cars under a bridge,” acknowledged ASR chief officer Bethan Maher, the company’s top executive.

“The major repairs that we do are essentially wheel replacements and brake replacements, and those are things we can do in the summer without a mechanic shop,” Maher said. She added that some repair work had been contracted out to other railroads and that securing a new workshop has been postponed until the state’s current review of the rail corridor is complete. “Before we secure any more long-term debt, we need to know where we’re going,” she said.

Earlier this year, the state’s Department of Transportation and Department of Environmental Conservation agreed to reconsider the best use of the corridor. In September, the agencies held a series of meetings to gather public input. The meetings were a reaction to growing support for removing the tracks and converting the corridor into a multi-use recreational trail—an idea pushed by a group called Adirondack Recreational Trails Advocates (ARTA).

A growing number of local-government and business leaders have expressed skepticism about the railroad’s future and endorsed the trail concept, which they feel would be a greater tourist draw. North Elba Supervisor Roby Politi—whose community anchors the north end of the corridor—once told the Adirondack Daily Enterprise that the Scenic Railroad was “a financial boondoggle.” More than four hundred business owners, most in the Tri-Lakes region of the Park, have signed an ARTA petition contending that the “current use of the corridor has not producedthe promised economic benefits.”

The two agencies could decide as early as January whether a full-scale review of the corridor’s unit management plan (UMP) is warranted, a process the railroad hopes to avoid.  ASR hopes to win a twenty-year lease to operate on the corridor, along with roughly $15.2 million in taxpayer funding to restore aging tracks, ties, and trestles.

Yet in order to meet the terms of the UMP—which rail supporters hope will be left in place—ASR will have to fund much of the rail corridor’s rehabilitation on its own. The UMP stipulates that “rail development will largely depend upon privately secured funding sources,” adding that “state costs related to rail development will be minimized by largely relying on private enterprise to fund corridor rail rehabilitation and development.” State officials have estimated that rehabilitating the line could cost as much as $40 million.

According to Maher, a commitment from state officials would help ASR secure needed long-term loans and grants, allowing the company to expand its operation and hire more staff. “We’re not reaching our full potential, and I don’t think anyone’s denying that,” she said. “We’re holding our own, but there is rebuilding work that needs to be done.”

But seriously dilapidated tracks and bridges, particularly between Big Moose Lake and Saranac Lake, are only one hurdle the company will face in realizing its vision. A review of internal railroad documents and a series of interviews revealed a range of concerns, including equipment and volunteer shortages, as well as an ongoing struggle to pay down debt and overdue bills, some nearly a decade old.

An effort late last year to raise $25,000 in much-needed funds fell short, raising just $20,000, according to a company newsletter. According to ASR officials and board members, the railroad operates regularly on a line of credit, with no savings or endowment to provide an economic cushion. The lack of resources has forced the company to borrow periodically from board members, particularly following crises such as the December 2011 derailment of the popular Polar Express train near Utica, which stranded more than three hundred passengers.

The railroad operates with few paid professional staff, particularly in technical positions. According to the same ASR newsletter, an experienced mechanic, James Deeley, was replaced by the company last year by a recent high-school graduate with no prior training. The internal report pointed to “a shortfall of funds needed to complete upgrades to equipment and a continued shortage of locomotives” as major concerns.

Speaking last month, Maher insisted that many of those problems have been addressed.  But as the company’s top executive, she herself is a recent college graduate who majored in anthropology, focusing her studies on the indigenous cultures of the Yucatan. During an extensive interview, she acknowledged being promoted to lead the ASR in 2012 despite having no experience running a business, leading a large-scale non-profit, or managing a railroad.

“In railroading background, I’ve learned pretty much everything on the job, and that’s no secret,” she said. Asked to expand on her professional experiences, Maher said that while in college she worked part time for various non-profit companies. And as part of her graduate studies, she said, she partnered “with indigenous women in Mexico, creating sustainable-tourism opportunities.”

Maher began working for the ASR in March 2011, shortly after returning from Mexico, initially serving as station manager in Utica. She noted that she has since taken training courses in the operation of diesel train engines and receives frequent guidance from ASR board members with railroading experience.

ASR executives and advocates contend that many questions raised by critics and the media amount to an unfair attack on the railroad, which they portray as a largely volunteer, grass-roots effort. Branson, a retired financial executive who lives in Syracuse, has described the Park’s railroad-advocacy community as passionate underdogs, waging a fight against “elitists” who would destroy a valuable historic attraction.

Branson himself declined to be interviewed for this story, suggesting that past media reports in the Adirondacks have been unfairly hostile. “Our executive committee has deemed that at this time an interview would not be in the railroad’s best interest,” he wrote in an email.

This unwillingness to answer detailed questions about the railroad and its financial future marks a sharp reversal from December 2012. At that time, Branson promised to release a business plan for the railroad, a document that he said had been in development since at least July 2012. That promise was repeated late this summer by Al Dunham, a member of the Adirondack Railway Preservation Society, who helped develop the document. He described the plan as “ironclad” proof that the railroad would be viable.

In late September, company officials shifted course, announcing that the plan would be withheld from journalists and the public. “I have received instructions from our board chair that the business plan will not be available to any media,” Dunham said in an email, adding that “as a member of the ARPS board, I need to comply with those instructions.”

Company officials insist that the business plan is complete and has been provided to “roughly 50” stakeholders and elected officials. But they declined to identify anyone who has seen or reviewed the document.

After the print version of this story appeared, supporters of ARTA leaked a partial copy of the ASR business plan to the Explorer and NCPR.  But this reporter was unable to ascertain whether that draft was in fact the latest version of the railroad’s working plan, and whether it included enough of the full document to assess its contents accurately.

Another lingering uncertainty involves ASR’s plans to operate a luxury Pullman-car excursion route from New York City to Lake Placid. The project was unveiled with fanfare in October 2012, with Branson describing a partnership with Chicago-based Iowa Pacific Railroad—owner of the Pullman-car franchise—as linchpin of the company’s revived operation.

At the time, train supporter Kate Fish, head of the Adirondack North Country Association, described the initiative as “very exciting news” that pointed to the long-term viability of the railroad. But in researching this story, the Explorer and NCPR could find no evidence that talks with Iowa Pacific proceeded further than the initial announcement more than a year ago.

Iowa Pacific has struggled financially in recent years. In August, the Santa Cruz Sentinel  reported that the company “has unpaid debts locally and across the nation, raising questions about the company’s finances and long-time viability.” The railroad recently repaid significant debt to Warren County, tied to an excursion train that the company operates between Saratoga Springs and North Creek.  ASR declined to answer questions about the status of the partnership.  But after the print version of this story was published, Iowa Pacific chief executive Ed Ellis agreed to an interview with the Explorer.

Ellis said that there had been no additional progress in developing the Pullman car proposal for the Adirondacks since it was announced last October.  He said that the effort would be on hold pending completion of the UMP-review and pending a decision from New York State about funding for rehabilitation of the rail road.  Ellis said he remained convinced that the partnership was a good idea and, if implemented, would produce more than $300,000 in annual revenue for the Scenic Railroad.

Another major unanswered question involves Adirondack Scenic Railroad’s inability to win a long-term lease from the state Department of Transportation. The last company to operate on the line under a multi-year contract, the Adirondack Railway Corporation, went bankrupt in 1977.  According to the DOT’s history of the line, that collapse sparked a “long period of litigation” that complicated management of the corridor until at least 1991.

In the decades since, DOT officials have insisted on limiting the Adirondack Scenic Railroad to a thirty-day permit that can be revoked at any time. Railroad boosters have suggested that the lack of a long-term commitment from New York State has crippled ASR’s ability to grow and expand. “We project asking for a twenty-year lease, so that we can get long-term debt and bank financing and get grants,” said Dunham.

“That is obviously one of the outcomes we’re hoping for with this review of the unit-management-plan process,” Maher agreed. “The UMP [adopted by the state in 1996] calls for a long-term lease, which I think the state probably never got around to.”

No one within ASR’s management or DOT would clarify why the railroad had been denied such a lease for so long. Nor could they say whether such a contractual agreement would likely be forthcoming anytime soon. “We were unable to reach agreement on terms,” said Ray Hessinger, director of DOT’s freight-rail bureau, in describing past negotiations.

Hessinger declined to elaborate, but he said that before a long-term lease can be issued, DOT would try to identify all potential operators of the rail corridor and solicit proposals from them. “There is no guarantee that ARPS would be the selected operator,” he said.

It’s unclear when that process might begin, how long it might take, or how it might affect ASR’s financial stability if no lease-agreement can be reached.

Asked to comment on the Adirondack Scenic Railroad’s capacity to operate an excursion train on the scale that’s been proposed by the company, Hessinger acknowledged that a “tourist rail operation is not a cash cow. It’s a hand-to-mouth operation.”  But he also said ASR’s railroad enthusiasts have a long record of overcoming major hurdles.

“They’ve been doing it for more than twenty years, so there’s a demonstrated history of being able to run a rail service,” he said.

ASR’s Maher says she’s confident that her non-profit is prepared to move forward if the state agrees to keep the tracks and offers the railroad a long-term commitment. “We would need to hire more staff,” she acknowledged, but she pointed out that the railroad has improved its bottom line in recent years, while managing to extend the usable track from Old Forge to Big Moose Lake.

“We’ve eliminated our long-term debt, and we’ve paid down our payable list considerably. We are certainly in a sound financial position.  The operation is self-sufficient on ticket funds, donations, and memberships that we have coming in,” Maher said.

Speaking last December, Branson also acknowledged that “we don’t make much money,” while noting proudly that ASR has operated for many years with a bare-bones, largely volunteer staff. He conceded that many local officials are frustrated by the slow build-out of the company’s operations. “Whatever is happening is happening in small bites, because the money has never been there to finish the job [of restoring the full corridor to rail service],” Branson said.

But Branson insisted that ASR’s business plan shows that the railroad would be successful and profitable once expanded over the entire corridor and would quickly repay a sizable taxpayer investment. “The amount of money that it would take to do this would be recovered in a very short order in terms of new economic impact,” he said.

 

(This story has been updated from the print version.)