The recent thread on the 261 brings a subject that is near and dear to my heart to the surface Lease vs Own. For many years groups have been formed to make use of someone else's locomotive, rolling stock, rail line, etc. In most every case the efforts eventually run into the end of the lease. As in the case of the 261 it may still be a few years off, but when a significant investment is required the lease is effectively over. I think there have been other examples of this in the past including the 759, 1522 and others.

TVRM has faced this many times over the past 48 years. In the early years TVRM leased a Gainesville Midland 2-10-0 from the Atlanta Chapter of the NRHS. It never made it to anything but a static display and it is now safely back in Atlanta. TVRM's first three homes were a train station (now hotel), a City Park (now closed for environmental reasons) and a industrial railyard (a pole yard and equipment repair facility owned by Western Union, now for all practical purposes extinct, or at least out of the telegraph and pole line business). TVRM has long recognized the importance of owning, or controlling through long term leases our railroad. If all else fails we can fall back to the core three mile railroad and survive.

At various times private owners have moved to preserve equipment or rolling stock and have offered to let TVRM use it in exchange for restoration. TVRM has always attempted to approach these transactions with written agreements that cover the needed return on investment period of the item in question. Some projects have ended at that point because the owners didn't want to tie up the item in question for a long enough period.

Of late we have entered into several agreements that feature a set term (designed to generate a rate of return to cover the initial investment) and a provision to automatically extend the agreement annually. This always gives us a window to either extend our investment, or reduce our investment as the lease period winds down. We are currently working on some additional agreements that will be similar. While not as complex as a steam locomotive these projects will still require a significant investment and must remain in TVRM operation long enough to generate a satisfactory ROI.

Bottom line, while owning is usually best there are innovative ways to lease equipment while generating, and protecting, a sufficent ROI.

Thoughts?

Tim Andrews
TVRM
Chattanooga.

This would make an excellent topic for a group discussion at an ARM meeting. I would think that one legal aspect you would want to cover in any agreements are arrangements for a disposition of the equipment if it is "stranded" by changes in the rules under which the Class 1s and regionals will accept the equipment for movement. It is entirely possible that rule changes during its stay could make it impractical or impossible to move the equipment out the same way it originally arrived.

PC

I learned a powerful lesson years ago, DO NOT invest in anything that you do not own outright!!!

I made an arrangement with the original founder of Steamtown Mr. F. Nelson Blount to lease his NKP 759 under the High Iron Company banner for mainline use and in return HICO would completely fund her restoration to service AND pay S'town $1 for every ticket sold to ride behind her plus extensive credit/publicity in all HICO press releases, on board literature etc. When Nelson was killed in the plane crash several years into the deal the Steamtown Foundation hired a new exec. director who had sugar plums dancing in his head. He convinced himself that HICO was getting rich on the 759 deal and when the original 5 yr. lease was nearing its end he proposed all kinds of horrendous new terms which we found totally unacceptable.

We returned the 759 and in no time he'd ruined her mechanically and she's been a static derelict ever since.

It was a lesson I've never forgotten....unless you own it you're a fool to put serious money/effort into it, whether it's a machine or real property!!!


IMHO-Ross Rowland

I wholeheartedly agree. I've seen a live steam group in Ohio evicted from their home of 30 years when the property they had been leasing changed hands. Their quite extensive 7.5" gauge railroad had to be ripped up in 30 days after all that work. So what did they do? They moved to a public park and set up shop there. Some people never learn!

In New Castle, PA there is an interlocking tower that a railroad group moved to that site. No ownership of property, no lease, just a verbal agreement. There were two sidings on that land upon which they kept their equipment. The tracks are now gone and the tower sits there alone. What a waste.

We own our site free and clear, as I will not ever be subject to the whims of an outside property owner. You cannot preserve something "forever" on something as transient as leased property.

I've always been on the fence regarding leasing museum equipment to other organizations. When I was at the Kentucky Railway Museum, I was part of a crew that traveled to New Haven, IN to prepare 2716 for its tow back to New Haven, KY. Poor 2716 has to be one of the most-towed steamlocomotives in modern history, having been leased from KRM by three different railroads/organizations (Clinchfield, Southern, and FWRRHS), victim of one abortive restoration attempt and two short excursions careers.

One one hand, the locomotive did operate, was stored indoors at Irondale for a long time, and is probably in better shap than she would have been had she remained in Kentucky. She was, along with Mr. Rowland's 614, the only other modern C&O locomotive to operate in the preservation era. On the other, I wonder what her future would have been had she remained. Leasing has its pros and cons, a group must weigh them should they decide to become a lessor or lessee.

Well, a private owner has a predicament. He needs to store the car somewhere safe. He also needs to do maintenance on the car so it doesn't deteriorate. None of which is tax deductible.

But there's that museum. Lots of spare track and a cadre of volunteers who just love working on other people's cars for some reason. So hey, why not my car?

The museum is going to insist on the back half of the deal (run the car for the public) but the owner is not so keen on it. Why wear out a nice new restoration? So he's going to want out of the deal as soon as the work is done, naturally.

We Own, free and clear our 20 miles of track.(with quite a bit of acreage) We own 2 coaches(and a few other pieces of rolling stock). We have 2 locomotives both privately owned. One owner is mad at the group and his locomotive just sits. The other owner holds operations of the line hostage with his decisions on when to do the 92 day inspections to suit his budget.
Flip side we do not incur these expenses. We are working at fixing this problem with the purchase of our own locomotive. I personally am sick of private owners. If you want to store a car or locomotive on our property sign a lease stating what is expected up front (preferably operation) (we don’t need more junk)not after the deal is underway and then try to make it suit your wants and needs. (Both sides)
We feel we have the advantage over most groups in the fact we own the property and can never be kicked off. The biggest problem with ownership is protecting your rights against everyone who things they can use, abuse, cross, hunt, ride their 4 wheelers, steal etc etc. your property. You will have a first name Christmas card type relationship with your legal counsel.
The drawback to this is losing members who don’t understand the importance of protecting your property. Some have asked why don’t you just let farmer brown drive his tractor across the right of way? Let’s see the crossing is on a blind curve, he covered the tracks with Gravel, hooked it with his plow and knocked it out of gauge (good thing we do track inspections before we run since he didn’t tell us) and expects us to pay for his crossing and the liability that goes with it. NOT!
We own all of our track maintenance equipment. When we need to lease something bigger we lease it with a crew to operate it.
In about a month look for the story of one particular theft issue we have had to deal with. It will make it clear some of the “joys” of owning your property. Still in the end it is ours. There is nothing better than owning something.

Another aspect of the lease issue involves equipment owners who just want to store their rolling stock on museum tracks temporarily. Sometimes temporary gets to be quite a while, and the museum is stuck with equipment taking up track space for which is does not have legal title.

I know in at least one case, IRM agreed to lease track space for a nominal sum. They included in the lease language that, if the lease payment was in arrears for a certain number of months, ownership of the equipment automatically transferred to the Museum. In fact lease payments did stop, the Museum took title, and the cars were "parted out" as they say.

If an asset is essential to your core mission, theme or franchise, it should probably be owned. If it is incidental or merely provides supplemental capacity, leasing is an option if all parties benefit and the terms and conditions are clearly established up front, in writing, and the parties have known resources to fulfill their obligations.

Alan Maples

I can’t think of something more likely to end badly than a lease of an operating or potentially operating steam engine…

Generally when you lease a piece of equipment there is agreement as to as received condition, standards for maintenance and care,

How do you define the mechanical condition of a 50 some, 60 some year old locomotive at the start of the lease…

What is appropriate care, maintenance and use? Read the archives of the list, I believe that we don’t agree.

What condition should it be in at the end of the lease… Would you want to defend thin side sheets or a stress cracked front flue sheet in court in front of 12 non railroad jurors.

At the end of the lease, the owner is likely to argue that you used the locomotive too hard, didn’t follow good firing procedure, didn’t wash the boiler as you should have, used the wrong boiler chemicals, and therefore damaged the locomotive….

You as user will argue that it is old, that you had do deal with unexpected problems due to undisclosed problems, and that it is just old.

Attention Mr Jack A. Siffert;

Today may be your lucky day. For a mere $15,000 you can solve two problems.

1. Eliminate a lessor

2. Finally after 18 years the LSRA can own the locomotive that put it in the railroad business.

Should the deal go through, it will make the Lake Shore Railway Association the sole owner of a 100 ton GE center cab 1000hp switcher, frame number ge13031 (as is, where is).

Send me a check for $15,000 written on the Lake Shore Railway Association and I will send the organization a bill of sale, maintenance manuals and GE catalogs ... no further communications are necessary.

I cannot help but agree, never, ever, under any circumstances lease a piece of equipment to a railroad museum!

Dennis Lamont

PS: This is probably a first for RyPN