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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Tue Jun 11, 2024 7:45 am 

Joined: Thu May 24, 2012 1:37 pm
Posts: 2335
By the time it is finished, it will be a much larger chunk of money than presently expected. That will increase still more if the plan to do progressive high-speed track testing is implemented, and if the support vehicles and transportation/test cradle are built.

The result is worth it, though.

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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Tue Jun 11, 2024 10:35 pm 

Joined: Wed Sep 25, 2013 12:36 am
Posts: 617
Location: Anchorage, Alaska
Quote:
You are combining locomotive restoration with the costs of creating and running a business.

Exactly. To only capture direct costs and not incorporate the overhead costs will result in badly understating the actual cost of a restoration project.

When overhead costs apply to several projects or program areas undertaken by an organization or business, they are proportionally charged against each project/program. In the case where they support a single project such as the overhaul of one steam locomotive, 100% of them are costs of the restoration. In our case there are a few minor costs for outreach, education, and fundraising which represent less than 1% of the total overhead cost and 5% of the volunteer hours. These costs are not considered to be restoration costs.

Disclaimer - I am not an accountant, but have been treasurer and bookkeeper and prepared the tax returns for over 10 years for a million plus dollar restoration project.


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 11:21 am 

Joined: Sun Aug 22, 2004 5:55 pm
Posts: 1005
Location: Warren, PA
I'll grant you the 4014 but it seems like the 1361 has been a 'project' for as long as I've been in the business, like 30 years, eating money and careers as it went.

I don't even know how you would account for it, with multiple entities over multiple years working on it. You'd have to do some kind of regression analysis forward...

Also, as an 'accountant' and have audited several programs, it's always impressed me how an organization can deliberately throw overhead and indirect cost on a pet project of the CEO if they know it is safe, at least for the time being. I won't say when and where, but one locomotive restoration had an outrageous amount of travel charged to it that had pretty much nothing to do with the locomotive, and supplies were billed to it by the shop that were actually diesel parts and supplies that weren't in the capital budget. But at that time the locomotive was a sacred cow internally and well known as such. And as you would guess, eventually cab alarms went off.

Just the opposite can happen too, where all manner of indirect cost gets 'lost' as there is no way to charge it to a capital program other than percentage allocation.

When you have one organization with one project goal, it's a lot easier to establish, but put it as a project in a bigger organization and always be suspect.


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 1:13 pm 

Joined: Wed Jan 20, 2016 1:15 pm
Posts: 1612
Dick_Morris wrote:
Quote:
You are combining locomotive restoration with the costs of creating and running a business.

Exactly. To only capture direct costs and not incorporate the overhead costs will result in badly understating the actual cost of a restoration project.


Well, yes but you aren't spending more money than Strasburg, Durango, or TVRM spends on a steam locomotive for example - you are just throwing in other costs. I would say those are costs of running the organization, not for restoring the locomotive.

TVRM or Strasburg could argue that the Ticket Agent hourly pay is part of the locomotive restoration cost since the revenue from selling tickets goes to restoration of locomotives.


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 5:00 pm 

Joined: Wed Sep 25, 2013 12:36 am
Posts: 617
Location: Anchorage, Alaska
Quote:
TVRM or Strasburg could argue that the Ticket Agent hourly pay is part of the locomotive restoration cost since the revenue from selling tickets goes to restoration of locomotives.

No. For an organization with a single program e.g., locomotive restoration, all direct costs and 100% of overhead is charged to that program. In a more complex organization, e.g., one with passenger operations, maintenance shop, and gift shop, direct costs of each program (conductor, ticket agent, machinist, gift shop clerk, tools and outsourced work) are charged to the appropriate program. Then all overhead costs (rent/utilities for a shared building, insurance, book keeping, CEO, etc.) are combined and a percentage is apportioned to each program, which then become part of the total costs of that program.

An organization with two locomotives, say one in service and one undergoing overhaul would probably take it a step further and track direct costs unique to each locomotive and apportion shared costs between the two so that the actual cost for each locomotive can be determined.

I believe TVRM is non-profit and Strasburg is for-profit. That will also affect how the accounting is done.

Bringing this back to the original topic, this is how to make comparing restoration costs between different projects/organizations more of an apples to apples comparison.


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 6:25 pm 

Joined: Wed Jan 20, 2016 1:15 pm
Posts: 1612
Dick_Morris wrote:

I believe TVRM is non-profit and Strasburg is for-profit. That will also affect how the accounting is done.


I certainly hope not!


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 7:49 pm 

Joined: Sun Aug 22, 2004 11:12 am
Posts: 573
Location: Somewhere off the coast of New England
Crescent-Zephyr wrote:
Dick_Morris wrote:

I believe TVRM is non-profit and Strasburg is for-profit. That will also affect how the accounting is done.


I certainly hope not!

Hope not which - That the Strasburg is for-profit or that there are differences in the accounting?

GME

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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 12, 2024 8:54 pm 

Joined: Wed Jan 20, 2016 1:15 pm
Posts: 1612
Differences in accounting.

Obviously I meant differences in the subject - locomotive restoration.

If Strasburg 90 and TVRM 630 have major differences in accounting I would be surprised. But if anyone knows more info it would be interesting.

(Or... Durango 482 and C&TS 488 for a real head to head! haha).


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Tue Jun 18, 2024 7:06 pm 
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"Non Profit" is a tax status, not a business plan... In both cases you have expenses, and revenue.

The non profit is more likely to have access to volunteer (unpaid) labor... they may benefit from exemption from sales tax. They may have access to grants. They may be able to solicit donations.

The for profit business may have access to tax credits. Some activities may be business expenses and therefor deductible (against income).

In either case, revenue has to meet or exceed expenses for the business to be viable.

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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Tue Jun 18, 2024 7:38 pm 

Joined: Sun Aug 22, 2004 5:19 pm
Posts: 2602
Location: Sackets Harbor, NY
Between the $ 3M spent on the failed attempt done at Steamtown and the additional $ 3M being spent in Altoona, the 1361 will be up there with some of the most expensive.

You'd have to guess that in total dollars spent the 4014 would take the prize. My WAG is that UP spent at least $ 20M bringing her back to life which within the UP's multi-billion dollar annual budget is a rounding error, and a great investment based upon the huge positive media she has generated.

Onward & Upward. Ross Rowland


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Tue Jun 18, 2024 8:30 pm 

Joined: Thu Feb 27, 2014 10:08 am
Posts: 713
co614 wrote:
Between the $ 3M spent on the failed attempt done at Steamtown...the 1361 will be up there with some of the most expensive.

Especially if one expresses that estimate in terms of 2024 dollars. My recollection is that STEA never charged for storing the carcass for all those years and storage costs should likely be included in any calculation of the full true restoration cost. A couple of photos from that era.


Attachments:
1361 at STEA RIP.jpeg
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1361 at STEA Wall of Fame.jpeg
1361 at STEA Wall of Fame.jpeg [ 214.03 KiB | Viewed 1212 times ]
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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 19, 2024 2:58 pm 

Joined: Tue Aug 22, 2017 11:27 am
Posts: 135
Well this should give you an idea of what 4014 cost to overhaul. The reason why 3985 was turned over to the people in Silvas was the bean counters in Omaha got scared when they got the bill on 4014 and then realized that 3985 was actually in WORSE SHAPE overall than 4014 was. Just remember that during the aborted 1472 on 3985 they found massive amounts of things wrong with her that made 844 the better choice for a redo and 844 had the same problems. My friend that is in the UP Steam program as a boilermaker said 844 came in at 9 million during her last overhaul by the time all was said and done 4014 came in at around 17 million 3985 UP was looking at 25-30 million for the standard of those 2 locomotives were overhauled to.


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 Post subject: Re: What has been the most expensive rebuild/restoration to
PostPosted: Wed Jun 19, 2024 5:55 pm 

Joined: Thu May 24, 2012 1:37 pm
Posts: 2335
But we shouldn't forget that the steam program is overseen by the quality management department at UP, and that the cost of 4014's restoration was wildly more than a typical volunteer-overseen restoration like 2926 would be. If there was any question of the provenance of a given part, it was remade with known materials and methods. Yes, that's the way it ought to be done; yes, it involves cubic dollars BEFORE the work is done (unlike the situation with both 1361 and 1307), and it helps when the entire course of the work is guaranteed by assured deep pockets.

I remain very proud of UP for deciding what to do with 5011 and 3985 without being 'dog in the manger'.

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