PALESTINE — After many months of uncertainty and whispered intentions, officials announced intent for the Texas State Railroad to change operators on Thursday.

The announcement comes on the anniversary of the ceremonial hammering in of the final “golden spike” connecting Central Pacific and Union Pacific railroad lines on the Transcontinental Railroad on May 10, 1869, Ed Ellis, president of Iowa Pacific Holdings, told Texas State Railroad Authority board members at the start of the meeting in Palestine.

The TSRA approved the proposed acquisition of the Texas State Railroad from its current operator, American Heritage Railways, to Iowa Pacific, which currently owns six railroads in the United States, with two in Texas, as well as two lines in Great Britain.

The transition would change the business model of the railroad from a tourist-only operation to combination of tourist and freight rail services.

“I don’t want anybody to think we walk through the door and all of a sudden snap our fingers and there will be a bunch more people riding the train and a bunch of freight business,” Ellis said. “It is something that happens slowly and over time, but we are patient investors and we are willing to take the time to do it.”

The deal is not completely finalized, with conditions on both sides of the bargaining table.

The TSRA requested copies of Iowa Pacific’s financial records and documents that would portray a snapshot of how each rail line is doing in terms of ridership and profitability.

“We have over $100 million in assets, we have $11 million in borrowing capacity with our bank, and when you see the financials you can decide,” Ellis said told the TSRA. “If they meet your standards, then great and if they don’t, then we will still be here.”

Ellis said before Iowa Pacific could take over, it needed to have a guarantee that a 3-mile stretch of track from the Palestine depot would connect to the Union Pacific line. The entities would also have to come to an agreement on terms of a lease for the 3-mile stretch.

“That involves some agreements with you all, the commitment of funds to reopen the track and a filing with Surface Transportation Board in Washington, D.C.,” Ellis told members.

“On our part, we are already working directly with the Union Pacific to set up an interchange agreement that allows access to their yard for freight traffic now,” Ellis said. “Before we can begin marketing for freight traffic, any customer is going to say, ‘Do you have an interchange agreement with the U.P.?’ We want to be able to say, ‘yes’ on the day that we start.”

If the details get hammered out, Ellis said he hopes to take over operations in between 60 and 90 days.

Ronald Steuts, TSRA’s attorney, said the authority currently has a contract with a corporation owned by American Heritage, and the deal would simply assign Iowa Pacific as the owner of that corporation. He said because of this, the entities the board receives grants from will not have to be notified of the change. Iowa Pacific would also take over as the guarantor on two loans totaling $1 million granted to American Heritage by the cities of Rusk and Palestine.

Board members expressed gratitude to Allen Harper, CEO of American Heritage Railways, for taking over the railroad from the state and bring it to near-profitability.

“Some things have changed financially for Al, and it has changed the railroad here and so it is the right time for everybody to move forward with this change, and Al understands that,” said Steve Presley, president of the TSRA. “I made it clear to Al that I wanted him to leave with a good taste in his mouth because we are all very appreciative of what he has done for us.”

Harper said he loves the railroad and only wants what is best for it.

“The important thing is the sustainability of the Texas State Railroad, and I think with their financing and freight ability, they bring the final key that makes it a huge success,” Harper said.



fharper@jacksonvilleprogress.com