I just read a post over on the Chaski Railfan site clarifying the National Railroad Museum's position on the lease of Milwaukee #261. It appears that the folks there want to see #261 remain in operation and believe that Steve Sandberg's group is the right organization to keep it alive, but they are having a hard time agreeing on how much "a unique piece of machinery" is worth. I have to ask: is there any realistic way today of determining the true value of an individual steam locomotive?

When I was working for Steamtown Foundation in the early 1980's, Steamtown applied for a bank loan and had to have its collection appraised. We hired an appraiser familiar with steam at the time, and he went through a rather comprehensive evaluation of the collection based upon a "historical perspective". We tried to base the value of each piece upon its overall condition and its rarenes in the preservation picture. The bank wasn't very impressed with "historical value" approach; they were worried about how they were going to get their money back if Steamtown defaulted on its loan. There wasn't a long line of "buyers" waiting in the wings to buy Steamtown's locomotives back then, so the bank had a legitimate concern. Ultimately, the bank accepted a "scrap value" appraisal; that was pretty easy to determine: X number of tons per locomotive times the current scrap price.
There was a huge difference between the values from a historical perspective and a scrap standpoint.

So how do we go about determining the real value of a steam locomotive today. Obviously, its worth at least scrap value. But is there any formula out there that makes one locomotive worth a lot more than another? Operating locomotives and those that have been kept in reasonable mechanical shape in recent years are undoubtedly worth more from an investment standpoint--but when a locomotive comes due for a 1472 day inspection, what affect does that have on its true value?
Operating locomotive today; artifact tomorrow. And how about the difference between a locomotive in a park and one on display in a museum; does the fact that a locomotive is in a museum as an artifact make it worth more than a similar specimen in a park? Is a Burlington 4-8-4 worth more than a Frisco 4-8-4 or a Santa Fe 4-8-4?

It appears that there is no real scientific way of determining a "restorable to service" steam locomotive's value today. Currently, there are a couple of ex-Army 0-6-0's available on the market for under $50,00. The original asking price for ex-Alaska RR 2-8-0 #557 was $400,000 dollars; yet a Nickel Plate 2-8-4 was sold for around a quarter of a million dollars. An SP&S 2-8-2 was literally acquired by a private individual for a song; he traded it to the Grand Canyon RR for a pair of 2-8-0's (one easily restorable; the other derelict)--what is the Grand Canyon RR asking for that same SP&S 2-8-2 today? A Chinese 2-8-2 went for $100,000 and the a H&BTM 2-8-0 for a bit less in the recent Knox & Kane auction.

So how much is Milwaukee #261 really worth in its current condition? If the National Railroad Museum really thinks its the $1.7 million figure that has been bantered around on various forums, they may be a bit out of touch with reality. At the moment, it is really nothing more to the museum than another artifact--albiet probably the one in the best shape that they own. Having someone willing be sink another $500,000 or more into an artifact would be incentive enough for most museum's to act positively to such a proposal.

Frederick G. Bailey

Its worth is based upon its ability to generate revenue for its operator in excess of its capitalization and operating costs.

Or, as a piece of mechanical art - or artifact.

Or as scrap materials.

Or as a collection of recyclable parts and fittings.

Collectors item? Smaller is easier to move and store, so size is a negative in this arena.

Fair to one person might be cheap to another, or outlandishly costly. I think the best we can do is look at our proposed use and try to find comparables within that framework.

dave

There are at least two distinct precedents for appraisal that I am aware of:

-The lawsuit over the scrapping of Jensen's GTW 5629
-The appraisal of the PRR locomotive collection at the RR Museum of Pa. for the purposes of determining value to be discounted from the Penn Central's tax liabilities to the Commonwealth of Pa.

Aside from this, we're up against that massive morass of valuations that comes up with every episode of Antiques Roadshow--even they occasionally have to stop and explain the differences between "auction estimate," "retail value," and "insurance replacement value." This is perhaps a case where antique-automobile folks have more experience. There's a world of difference between having a parts-supply 1965 Caddilac, a running example, and a showcase car--but to sell the latter at top value, there has to be some buyer. Ditto a Model T, a Pierce-Arrow, an MGF, or a Facel Vega.

To be sarcastic, the "replacement" value of da Vinci's "Mona Lisa" is perhaps $250 in canvas and paint. But who knows what would happen if it were to be put on the auction market right this moment?

One wit in the 261 group, when asked to summarize the position of the museum with reference to the 261 paraphrased that wacky Iraqi who was so often quoted after the first Gulf War:

Museum: All your dollar are belong us.

Leasing steam is a very interesting topic. When you lease a car you are getting something new and paying to use a portion of it's serviceable life. When you lease a steamer you lease something worn out with the intention of rebuilding it and then giving it back in better shape.

If I ran a museum I would look at it this way. The locomotive will be providing a living example of history. More people have probably seen and learned from #261 in her short excursion career than her decades parked in a museum. So as a living creature she will do much more good than parked. Her running will bring much publicity to the museum and can probably be leveraged to do a lot of good. When it is all said and done she will be returned and in better shape than if she were never removed.

Nobody is getting rich on steam. Expecting anything more than a token payment is outlandish. There are a number of similar sized locomotives out there that can be put into operation for a reasonable amount of money and I am sure more of the owners would be more than happy to be contributing to the greater good.

As for selling a steamer anything goes. Looking at the sale price for a steamer is way different than the true value. Something is only worth what someone else is willing to pay. If someone smoked some wild stuff and decided a unserviceable 2-8-0 is worth $400,000 they are going to be holding onto it until they die and then someone else will sell it for what it is actually worth. We've seen this happen with rail equipment before.

Entymologically, I believe that originated with a really bad translation in a Japanese video game.
http://en.wikipedia.org/wiki/All_your_b ... long_to_us
Around 2000 someone rejuvenated it and turned it into one of those internet things. Other pop-culture phrases that come off that same game are "Someone set up us the bomb" [sic] and "For great justice!"

Back to the topic at hand, to establish fair value, you need a *market* and that requires a fair population of people who are willing to pay money for that thing. What's the street value of a Westinghouse S-514-B pantograph horn? BAERA is casting some, but maybe 3? 4? organizations on earth even possess S-514 pans, let alone use them.

Now how many people are actually equipped to bid for, move, and make practical use of a steam engine?

Eh. Just sell them to the air horn and "hornblaster" crowd. They''ll buy ANYTHING if they think it's a horn. >;-D

My absolute favorite fractured translation was on a dining car menu on the Trans-Sibirskij Magistral (Trans-Siberian Express). On the Russian side of the menu, at the bottom of the page, it said (in Russian of course) You'll remember our cuisine your whole life.

On the English side, in the same place relatively, it said, "You'll tell your children about our food on your death bed."

So.....what would a matched pair of legal QJs go for these days?

dave

On a related note-is anyone willing to stipulate that an ex-D&H RS2 is worth the $92,000 asking price ?

Dave

Into what market, i'd have to ask? It ain't going to get that in the used power marketplace, so that leaves the historic/museum marketplace. Not a market which tends to have that kind of cash lying around, and if they did have it, has lots of better things to buy.

However the owner is perfectly welcome to donate it, write off the $92k (if they can justify the valuation to the IRS) which in those nosebleed brackets is worth north of $30k cold hard cash depending on the state.

Small steam locomotives that can earn money on a tourist line may have some actual market value if they're in restorable condition. Whoppers like the 261 have no meaningful dollar value. All you get when you buy or lease a large steam locomotive is the right to spend money on it. How much that right is worth to you depends on how eager you are to use it to further your institution's mission, or to have some fun from time to time. Earnings will not be involved.

We were given PM 1225 for free by the MSU Museum, and financially the University got the better end of the deal.

Since the museum is LEASING the locomotive and will get it back at the end of the lease for further display, the calculations are very simple. If you specify the return condition, the cost of the lease is the value of useful life consumed during the lease plus a reasonable return. Since the 261 group is and has restored the locomotive, most of the useful life value was due to their efforts, not NRM. The folks at Green Bay appear to be trying to value the engine for sale , fully restored, rather than an operating lease, where the operator bears the cost for restoration and maintenance.

Mr. Frobom is exactly correct. Owning a large mainline steamer is very akin to owning a large pleasure boat. The only variable is how much money you'll need to pour into it to keep it active...... OVER AND ABOVE whatever net revenues (if any) it can earn through its operation.

As the old saying goes...." how do you make a million with a mainline steamer??? Start with five million!!!"

Take it from one who knows!!!

Ross Rowland