This submission to RYPN is primarily directed to the voting members of Mid-Continent Railway Historical Society but also may be important to all voting members of railroad preservation organizations.

Last summer some active members of Mid-Continent Railway Historical Society, which owns and operates Mid-Continent Railway Museum, held several meetings to design changes in the bylaws that govern the Society. These members believed changes were needed because they felt the interests of the members were being ignored by the leadership. Because of this, they felt the Society and its Museum were going in different directions. The bylaws changes they proposed were presented to the board of directors, who opposed them. Nevertheless, four specific bylaws changes were presented to the voting members, as per the bylaws, and the changes were approved.

The manager spent the all of September publishing four weekly rants in his blogs about why these bylaws changes would hurt the Society and Museum. His view was that the voting members were incapable of determining the direction of the museum, but this is not the topic of my submission to RYPN.

The September 6, 2010 blog authored by the manager referred to a "scheme" that took place before the manager arrived on the scene and grossly misstated the situation, placing blame on the volunteer member manager. This scheme had to do with certain prominent members of the Society who donated a large piece of shop equipment to the museum around 2002 and over-inflated the value of this donation about ten fold for personal gain. The volunteer member manager at the time refused to write a letter documenting the fraudulent value. This same former volunteer member manager was able to bring about an immediate rewriting of the blog but received no apology from the paid manager for his insult and inaccuracies. A thin explanation appears starting in the third paragraph of the September 13 blog. However, this little story brings up the topic of schemes, which seem to be common occurrences at Mid-Continent these days, as I will attempt to illustrate.

Scheme is defined by Webster’s New Collegiate Dictionary in this context as: "A plan or program of something to be done; specif.: (b) a crafty unethical project."

In 2001, the Strategic Short and Long Range Planning (SSLRP) Committee submitted a 100-page strategic plan to the board, which unanimously approved it on November 4, 2001. This plan mainly focused on expanding the physical plant of the museum to protect and display the collections properly. I became a board member in December 2002. It became evident during my first year on the board that this plan was not being followed and any attempts by me to start specific projects described in this plan were intentionally blocked by other board members and the president. The first project approved by the board on November 4, 2001 was construction of a large collection storage building to be located west of the current Coach Shed #1. This was blocked by a decision of the board to move the proposed Display building to south of the current Coach Shed, even though it made no sense from a visitor traffic point of view and violated the master plan. A proposal I made to construct a platform on a freight house was blocked by putting that project in charge of another member who was not interested in the project, thus nothing happened. And a proposal I made to the board to construct a steel storage building as per the master plan was blocked by requiring an extensive water mitigation study for the entire property.

Is it possible that this was a scheme by the board to prevent expansion of the museum and, instead, to convert the museum with its demonstration steam train into a tourist railroad?

With strict enforcement of FRA regulations covering steam locomotives after the Gettysburg boiler explosion, came the need to bring the steam locomotives operated by Mid-Continent up to code. Thus, C&NW No. 1385, which had already been disassembled, was evaluated for restoration but was considered in need of a new boiler, even though Form 4 calculations were never done. This project was deferred because of lack of funds. Polson Lumber (Saginaw Timber) No. 2 was next to go into the shop. However, a squabble between the owner and Mid-Continent leaders resulted in this locomotive being pulled out of the shop, which in turn resulted in a lawsuit initiated by the owner. The court decision found Mid-Continent in violation of the contract with the owner and was liable for up to $180,000 in repairs. Western Coal & Coke No. 1, another privately owned locomotive, was made the primary steam project, as it has been from 2002 until today. The estimated cost for WC&C No. 1 was $475,000 and was promoted as the cheapest steam locomotive to repair (Mid-Continent Railway Gazette Vol. 42, Issue #2, 2006), even though PL No. 2 would cost Mid-Continent only $180,000. The WC&C No. 1 project is dead in the water since 2008 and Mid-Continent operates only diesel-switcher-powered trains.

Is it possible that this is a scheme by the president-for-life, who likes diesels, is the Foreman of Diesels, and is afraid of steam, to pursue a personal agenda of operating a diesel-powered tourist railroad?

The following is a quote from the first paragraph of the Manager’s blog of July 24, 2007. "This past week President Jeff Bloohm began assembling a new strategic planning committee. Their charge is to formally do what we have been informally doing via the web log these past few months – compiling our own version of a strategic plan as a guide for Mid-Continent’s development over the next several years." I believe the naming of the president does not violate RYPN policies because I am quoting an open publication.

Is it possible that this action further supports a scheme by the president-for-life to pursue a personal agenda of operating a diesel-powered tourist railroad rather than a museum?

According to 990 forms filed with the IRS during the past decade, the capital asset value of locomotives in the operating fleet increasing steadily from $32,693 in 2003 to $232,677 in 2004, $368,287 in 2005, $440,959 in 2006, $709,538 in 2007, $1,174,556 in 2008, and $1,414,224 in 2009 (after the flood). The vast majority of this increase can only be due to increased value of a privately owned steam locomotive by expense capitalization. The exception is 2009, which reflects repairs to diesel locomotives damaged by the flood. Records in the engine shop show expenses for this privately owned steam locomotive add up to about $300,000 to $350,000. Maybe another $150,000 was spent on design and boiler steel for C&NW No. 1385 and capitalized. But these do not explain the difference between $500,000 and the $1,174,556 appearing as capitalized on the 2008 form 990.

Is it possible that this is a scheme that by capitalizing the repair expenses of a privately owned steam locomotive the asset value of the organization is artificially inflated so that the leaders look like they are doing a good job? Is it also possible that the leaders of this organization have schemed to continued raising funds for steam then diverting most of those funds to keep the organization solvent? I believe it is unethical, if not fraudulent, to capitalize repairs of a privately owned locomotive. These repairs are the contractual responsibility of MCRHS in lieu of rental fees, which would not be capitalized but would otherwise appear as expenses. I further believe the IRS would take a dim view of diverting funds restricted for one project to another without permission from each donor.

This current business plan of the Society has proven to be a financial disaster as evidenced by train ticket numbers that have declined from over 50,000 in 1993 to just over 28,000 in 2007. I am unaware that any ticket numbers have been published for FY 2008-2009 and FY 2009-2010. If I multiply 28,000 visitors by the adult ticket price of $15, I calculate ticket sales for 2007 of $420,000. However, the form 990 for 2007 shows income from program services (ticket sales) of $289,516. And if I divide $289,516 by 28,000 riders, I calculate the average income per ticket of $10.34. And if I divide $289,516 by $15, I calculate 19,300 visitors. Of course, these extrapolations do not take into account group rates, first class and dinner train tickets, and child tickets.

Is it possible that there is a scheme afoot to hide from the voting members the real numbers that could indicate further a failure of the new business plan?

According to 990 forms filed with the IRS during the past decade, the long-term debt of the Society increased from $77,945 in 2003, to $107,411 in 2004, to $115,674 in 2005, to $180,247 in 2006, to $453,373 in 2007, to $758,124 in 2008, to over $821,000 so far in FY2009-2010. This debt is not due to the flood because the flood brought in more money than the train and is not due to new construction because there was no new construction.

Is it possible the increasing debt is the direct result of a failing business plan?

In other words, I am wondering in this submission if the leaders of this organization can be trusted. It is no wonder the members wanted changes and in the bylaws. I titled my second submission to RYPN that appeared on July 22, 2010 "Cornerstones for Trust". I find it interesting that the last word of the last blog published by the Contract Manager was "trust". I also find it interesting that the Contract Manager has not renewed his contract and his four years of blogs immediately disappeared from the MC website. After all, trust cannot be wished; it must be earned.

A new submission "Mid-Continent Finances" will continue this theme in a couple of days.

WOW! Do I sense a public feud brewing here???? Sorry to hear that the ugliness has to be played out in public on these pages.

I do see the conveyance of some publicly available fact mixed in with some opinion of the situation. But, fact is fact.....
I will say that all organizations wishing to get somewhere in todays not for profit world should have an advisory board consisting of impartial business persons with no personal or political ties to the institution. They make the decisions and raise funds and the volunteer board then carries out said decisions and disperses the funds accordingly.

Cheers, Jason

Jason, I agree with the concept of the Advisory Board. However, I think that their role should be to "Advise & Consent" on long range policies and goals (and political realities) and and act as the fundraising arm. Day to day decisions on operations, as well as preliminary long range planning is probably best handled by an "operating board" made up of people who are technically savvy in that field. It is a delicate balance.

Gary,

I agree with your statement. However, the issue comes in when there is a board of individuals that are not savvy. People that are well intentioned volunteers with less than a cursory understanding of railroad, curatorial practices or business management. Including but not limited to advertising/programming and the realization that is the general public that needs to be drawn in.
There are a few museums I know of within which the people that "get it" have moved on leaving individuals that only think they get it because they wound up with a title. So, I guess to better state, I conditionally agree with you dependent upon the specifics of the organization.
This statement is not necessarily directed at mid continent.

Cheers, Jason

Generally speaking that's between the donor and the IRS. The museum is not entitled to pin down a value. Their duty is to describe the characteristics of the donation, and to do so in writing. The donor must establish its value and defend that to the IRS. The IRS would treat the charity's opinion of its value as dubious, and I'm not even sure the charity is *allowed* to express a value anymore, as it confuses a great many donors. The only time you can use a cash value is when it *is* cash -- or when no other means will reasonably and accurately describe it, such as "$175.00 donated via Mastercard".
http://www.irs.gov/publications/p561/ar02.html#d0e1485

CORRECT: $175.00 charged to your Mastercard. (no other way to describe it.)
CORRECT: 400 shares of AAPL (Apple Inc.) received on 6/13/2010.
CORRECT: One turret lathe, Monarch, S/N 114106.
USELESS: One turret lathe, Monarch, S/N 114106, valued at $300,000.
ILLEGAL: $300,000 cash, in a restricted endowment solely to purchase Monarch lathe #114106.

That last little trick is made of fail. The google words are "intermediate sanctions", "disqualified person" and "self-dealing".



Oh, I have experience with this case... there are 1000 reasons why a railway museum will fail to advance its master plan or fail to achieve success. Yes, one of them is "We wanna keep the TRAIN CLUB exactly the way it is." However that is not the dominant one, and there are many others such as lack of belief in the organization's success, fear of change, lack of master plan people believe in, poor publicity of good master plan, lack of leadership, etc. Don't let paranoia rule the day, figure out what is actually wrong, and address it.

Yes, it's hard being on the outside (of the Board) looking in. But if you play your cards right you an actually have a lot of power "out there". It's a difficult chess game though. Just because they're not doing it doesn't mean they don't want it.


FAIL

Did I mention: FAIL

Never have privately owned equipment be important to your operation. It should be dealt with at arm's length if it's dealt with at all. There's nothing wrong with banning it from the property altogether. Museums should provide a top-notch preservation and restoration facility; and if a private owner wants his 'Precious' to benefit, then DONATE.

There are also serious IRS issues with volunteers turning a wrench on privately held equipment. Back to inurement and private benefit and intermediate sanctions. This can snowball into a tax Gordian knot real fast, and the IRS deals with Gordian knots simply: Rule against you and let you fight it out in tax court.

What happens when your primary runner is privately owned, the owner keels over, and the executor has a different view of the relationship?


A lot of people misunderstand trust. They think "trust" means the person is reliable in doing what you want them to do.

Trust is not that at all. Trust means they are reliable in doing what they actually do.

Since I'm not familiar with the structure of the organization, maybe you can explain that one for me. How did he get to be "president-for-life". Are you speaking sarcastically? If not, how does the organization justify not having that be an elected position?

I have given it a lot of thought over the years, and have concluded that most of these sort of organizations get exactly what the membership deserves based on their choices. If things are as imcompetently managed and even less competently remedied by the membership during elections, and it rankles you to the extent that your postings would suggest, for your own peace of mind and continued mental health you might want to seriously consider walking away and looking for a place that suits you better if you must take part at all.

Don't worry about the organization failing - they will or won't and nothing you can do will alter that. Not every group has to succeeed or even survive. They had a good run, might still or not, doesn't need to skin your nose in either case. If this is a dispassionate case study of management of an old school tourist railroad / museumish nonprofit, that isn't apparent from your words and the personal judgement calls you include, so I'm probably not misinterpreting, but if i am sorry.

Much has previously been said about privately owned equipment, amorphous "loan" agreements, and the need for qualified disinteresed third party fiscal monitoring. No point repeating that here or your pursuing those courses further.

Take comfort in how good your head feels when you stop banging it against a brick wall. Life is too short.

dave

A few thoughts on the above...
I agree completely on the big FAIL regarding ad-hoc agreements to depend on privately-owned equipment to run your railroad. Either purchase the equipment, or execute a long-term lease for it. Too many problems otherwise.

I think it is unbelievable that what was long one of the best steam railroads in the country hasn't run steam for 10 years, and isn't closer today than 10 years ago in getting an engine back in service. Imagine if Strasburg hadn't run steam for the past 10 years and wasn't even close to running steam again. I am still not sure what MCRM wants to be: while it lets its flagship excursion program wither, over the past 15 years it has spent big, big money on wonderful museum-quality restorations of static equipment in its display barns, much of which I don't think many people even know is there. Is MCRM a static museum, or a historic-preservation operation, or a tourist railroad?

Mid-Continent was long a very influential presence in the rail preservation community in the midwest, and it doesn't seem to be so any longer, and I think the overall community has suffered as a result. I hope for the sake of our community they get their problems taken care of.

Another thing that may be hurting MCRM is its location - I don't think this part of Wisconsin is exactly a growing or prosperous area, and it hasn't been for some time. Similar demographic issues have hit the Bluewater Michigan Chapter NRHS hard recently.

Chris.

Is it possible to be more than one of those?

I'd like to think it is, but I examples of it are few and far between. Steamtown qualifies, and Strasburg sort of does, though it's actually one of each kind that just happen to be conveniently situated next to one another.

Any of the others I can think of are strong in one aspect, but weak in the other, if they do it at all. Maybe it's just asking too much of a single organization?

Things don't look too static in this video from Snow Train 2011.

http://www.youtube.com/watch?v=TdIHXwBL45s

That snow train time lapse video is really interesting. Clever!

I wonder how much volunteer burnout and locomotive wear-out was caused by all the trips they made with the 1385 on the CNW?

-Hudson

I'm rather perplexed by the original poster's ongoing series of rants against Mid-Continent. Am I correct in recalling that he was actually thrown off its membership rolls under bylaw provisions for dealing with malcontents?

My occasional visits to Mid-Continent's website and member discussion board show an organization that has recovered from a disastrous flood that would probably have been the end of many other groups; professional accounting practices that take into account the true cost over time of operating historic equipment; continued progress in restoring wooden passenger and freight cars including several professionally-done restorations costing hundreds of thousands of dollars, mostly raised externally; and serious investment in infrastructure including upcoming re-railing of much of the railroad and ordering brand-new wheelsets for all of the "everyday" operating coach fleet.

Where progress has been slower has been in the resumption of steam operations; it's apparent that the "glory days" of three or four operating engines were accompanied by maintenance practices which may nearly have resulted in Mid-Continent being the next place to incur a boiler explosion. Recovering from such a state of affairs is expensive, and band-aid solutions thankfully now seem to be disavowed.

Two factors may be at play in this discussion thread. If you equate success as a railroad museum with "steam for the sake of steam," then none of Mid-Continent's accomplishments probably matter very much to you. Also, twenty-odd years ago Mid-Continent was often prominently featured in the pages of L&RP, whether due to Mark Smith's particular regard for the place, its importance to Phil Hastings, or related promotion that's no longer part of the picture. Given that the popular railfan press, and probably most of its readership, have very little in common with serious museum practices and considerations, the lack of similar exposure today is not surprising.

The original poster was removed from the board because he wanted to poll the membership on several issues and this was contrary to the practice of absolute control and power exercised by the president and the museum director. The issues pertained to things such as1) do you feel the museum has been fulfilling it's mission statement?(which it for a number of years has not) 2) do you feel the mission statement should be changed? 3) should we put a priority on returning steam to operation for the purpose of fulfilling the mission statement? There are more, perhaps Mr. Long could post the entire list. I assure all that the questions being asked are well intentioned and the answers to them are among the most important an organization such as mid-continent could and should ask.

He requested a mailing list for all of the membership so that he could, at his expense, mail the post cards out with prepaid envelopes for return. As a member of the not for profit he is entitled to such a list according to state law, they refused. He filed a law suit to seek the list. At this point they absolved his membership under the grounds that he filled the lawsuit and for the purpose of negating his legal entitlement to the mailing list since he was then no longer a member.

The organization is run by the president, not the board or membership. To illustrate this, a number of bylaw changes were APPROVED by the membership. The implementation of these changes was denied by the president because he and the museum director didn't like them. They are supposed to follow roberts rules, is this legal? I think not.....

All to often in this industry those that desire to bring to light the truth about an individual or an institution are discredited because what they have to say is contrary to what people desire to believe. Conversely, if a story comes about regarding an elected official or CEO then most every part of the population is quick to sensationalize them.

Explain the increase in stated value of operating locomotive rolling stock, keep in mind the financial information is out there for all to view in the form of tax filing's. How did the value increase exponentially? The locomotives they own are not, in any world nor under any circumstances, worth what they are listed for. Also, who was the outside third party that did the value evaluation on the equipment such as D.F. Barnhardt? Simple, there was no qualified outside third party utilized.

Lastly, before I step down off of my soapbox, I leave you with this. Why did they hire an early 20's museum director with no management, curatorial, museum or fundraising background? Why does he have to have his decisions approved by either the president or now former director? He is, quite simply put, a puppet to carry out the bidding of what is a long standing regime.

A good day to you all from your favorite purveyor of the unpleasant truth, John