October 29, 2009

Mr. Jim Wrinn
Trains Railway Post Office
PO Box 1612
Waukesha, WI 53187

Dear Jim,

There has been much discussion and speculation regarding the future of the National Railroad Museum’s 261 Milwaukee Road locomotive, most of it inaccurate. As the President of the Board of Directors, it is my duty to clarify the National Railroad Museum’s position regarding the lease of the 261, and our relationship with the management team currently leasing the locomotive.

Since 1957, the engine has been a museum piece owned by the National Railroad Museum, but is leased to Railroading Heritage of Midwest America Inc., out of St. Paul, Minnesota. It is the Museum’s first acquisition, and with the possible exception of the UP Big Boy, it is arguably the most important steam locomotive in our collection. Although it may sound trivial at first, this is in fact an important point. As some of your members may know, the current lease agreement for the 261 is set to expire in late 2011, and the Museum’s Board and the management team that runs the engine have been in negotiations for over two years, so far without result.

On August 15, 2008, the Museum’s executive director, and two board members went to Milwaukee to see the 261 in action. They had been invited as guests that night on one of the short excursions. It was a great experience. We deeply appreciated the chance to see the terrific operation that the management team runs. What most impressed them was the corps of dedicated, friendly, and knowledgeable volunteers who have kept our 261 working in fine fashion. Simply, it’s lovingly cared for. For that, we are grateful.

I speak for the entire Board of Directors when I say that we want nothing more than to continue to lend our museum’s only operating steam locomotive to this management group. However, the future of this arrangement greatly depends on them. It goes without saying that the Museum’s Board of Directors has a fiduciary responsibility to keep the National Railroad Museum financially strong so that it can continue to maintain its collections and continue to interpret the nation’s railroading past. But in these tough economic times, all museums – not just the National Railroad Museum – are all looking at their assets, and trying to find ways to maximize their returns. It would be irresponsible for us to ignore this lease agreement as it impacts our ability to continue to meet our mission – fostering an understanding or railroading and its significance to American life.

Over the next few weeks, your members might read or hear about the negotiations regarding the 261. Again, we want to continue to make this engine available for excursions so that as many rail fans can enjoy our railroading past as possible. We appreciate the dedicated work of the Friends of 261 and would like to maintain our relationship with that group as well as the management group who runs the engine. I think we can all agree a fair and equitable business arrangement is the best way to do this. However, I would ask for everyone’s patience as the management team who runs the engine decides what relationship they would like with the National Railroad Museum, with its Board of Directors, and with our locomotive.

Sincerely,

Dr. Paul Koch
President Board of Directors, National Railroad Museum

Seems to me that the bottom line here is that the NRM needs to come to its senses and wake up and smell the coffee!!

As one who has paid the bills and walked the walk please believe me when I tell you that keeping the 261 in active mainline service is most definitely a labor of love and one that will only happen if the Sandberg family is willing to continue to subsidize its operation. Anyone who thinks that a mainline steam operation can be " profitable" doesn't understand the realities.

I for one can certainly understand why Steve Sandberg and his family are unwilling to sink the considerable funds needed to pay for the 261's FRA workup without a reasonable long term committment from the NRM. I must admit that I fail to understand the museum's decision to play hardball with the Sandbergs as they've already got a barn full of "stuffed&mounted" iron and unless they come to their senses soon they'll just have another dead display piece to find room for.

Seems to me if the NRM only got a dollar a year plus all the good PR and marketing exposure they get from the 261 being alive and a "roaming goodwill ambassador" they'd be far ahead of just having another display piece???

I must be missing something in this equation???

Anyway, there's certainly no shortage of other mainline capable machines ( some already dressed and looking for a party to go to!!!) that would love to be adopted by a wealthy sugar-daddy,so if I were the Sandberg's I'd tell the folks in Green Bay to fish or cut bait and be quick about it!!

Ross Rowland

Having just ridden behind No. 4449, maybe I should be considered biased. And I am.

Is it me or is the letter that started this thread double-talk? I simply don't get the point of the letter. What has the financial viability of the NRM have to do with good faith negotiations to allow the work on No. 261 to proceed? Is the NRM saying that the revenue from the 261 lease is the breaking-point in the museum's financial health? If it is, heaven help them. I also hope that Trains doesn't print the letter as I would consider it an embarrassment if I were on the NRM Board.

I hate the word "maximize." IMHO the NRM, while they might think they're doing their museum a favor by taking a hard line will in the long run, lose the respect of many of us rail historians by their bottom line approach to the 261 situation.

I agree with the previous poster. Another locomotive will do just fine. Put the No. 261 to rest in Green Bay where it will earn the Museum no revenue at all.

Thanks!

I agree with Ross that it certainly seems unreasonable for the NRM to expect any revenue from the lease of 261. It certainly would be a shame to see 261 go cold simply because allowing her to run doesn't turn a profit. I can't imagine anyone would be short-sighted enough not to see that she will certainly NOT make them any additional income stuffed and mounted. The way I see it, NRM has two options: one: renew the lease on 261. Make no money on it, but generate positive PR. Two: make an offer that will be refused. Make no money, but forever be the bastards who doomed another great engine to "static display." Come on, guys.. do the right thing. 261 is not a revenue machine no matter what you do. Do the right thing.

"I speak for the entire Board of Directors when I say that we want nothing more than to continue to lend our museum’s only operating steam locomotive to this management group."

Does the NRM still think that the 261 is an operable locomotive, needing nothing more than a set of new tubes and a fresh coat of paint? The 261 is in need of a major overhaul - do they *really* understand how much money this is going to cost?

Mr Wrinn is being spoken to in a less than truthful manner, as are we. The museum is in fact perfectly willing to continue a lease. However, they want to increase the yearly rate to some 6 or 7 times the original fee...this is not doable. Despite there poor mouthing regarding "these tough economic times" they started this line of disruptive communication back in the last quarter of 2007. They have even gone so far as to "get rid" of the only board member standing up for the 261 friends on the technicality that his membership renewal check was a few days late.

From this afternoon's Trains news wire. Jim Wrinn

Doubts swirl around steamer 261’s future

MINNEAPOLIS — Negotiations between Milwaukee Road 4-8-4 No. 261’s owner and its operator could lead to the engine’s retirement from active service. However, the National Railroad Museum in Green Bay, Wis., said it hopes an agreement can be reached that would see the engine get a necessary overhaul and return to active service with the Friends of the 261.

The friends’ lease of the engine expires in late 2011. The museum board and the friends’ management team have been in negotiations for more than two years on a contract extension, so far without result. NRM said it plans to present an amended lease agreement to the friends following its Nov. 11 board meeting. The museum has said this will be its final offer to the friends.

Michael E. Telzrow, the museum’s executive director, told TRAINS News Wire that the museum hopes to bring the issue to a close soon. “We want to continue the relationship with Steve [Sandberg, the friends’ chief operating officer], and the ball is going to be in his court here, as to whether he wants to do that or not.” According to Telzrow, Sandberg presented what he said is his final offer to the museum. “My board has to look at this and decide, ‘yes, we’ll take this,’ or, lets go back to him and tell him, ‘we prefer this.’ My sense is that it would be the end of the story then if we don’t accept what he’s offered and he doesn’t accept our counteroffer.”

Telzrow pointed out that there are still two years left on the lease. “It’s up to him in respect to what he wants to do with the locomotive,” he said. “If he doesn’t want to sign a new lease, he’s still entitled to hang onto the locomotive until November 2011.” No. 261 currently sits in a Minneapolis roundhouse, disassembled and awaiting a Federal Railroad administration-mandated overhaul.

Telzrow also said that the “Friends” has had an agreement with the museum for nearly 20 years that included no cost increases. “I don’t know where you can go and rent something for 20 years and pay the same rate. Why should we be any different? In this economic environment, the museum has to look at every aspect of its operation to make sure what we are doing is in our best interest.”

In a letter to Trains Editor Jim Wrinn on the Railway Preservation News website, museum board president Dr. Paul Koch wrote, “I speak for the entire board of directors when I say that we want nothing more than to continue to lend our museum’s only operating steam locomotive to this management group. However, the future of this arrangement greatly depends on them. It goes without saying that the museum’s board of directors has a fiduciary responsibility to keep the National Railroad Museum financially strong so that it can continue to maintain its collections and continue to interpret the nation’s railroading past. But in these tough economic times, all museums – not just the National Railroad Museum – are all looking at their assets, and trying to find ways to maximize their returns. It would be irresponsible for us to ignore this lease agreement as it impacts our ability to continue to meet our mission – fostering an understanding or railroading and its significance to American life.”

Telzrow said the Museum does not want the 261 back at this time. “We’re not maximizing its potential if we get it back at this point. We know that keeping it operating is what’s best for the engine now,” he said. In the future, the museum hopes to construct a roundhouse that would house much of its collection, including the 261.

Sandberg said the Museum has asked for “significant two or threefold increases in annual rent,” which the friends can’t afford. “We more than anybody know the railfan community, and how we operate excursions is what supports the operation of the locomotive. I’m not sure the museum fully comprehends the economics of running the steam engine.”

Sandberg said the FRA-mandated overhaul will cost $300,000 to $600,000. “We can’t have an agreement with the museum that’s going to handicap our ability to get the engine operational,” he said, adding that several other groups pay no money at all to lease their steam locomotives. “How much does the City of Pine Bluff [Ark.] charge for Cotton Belt 819, or the City of San Bernardino [Calif.] for Santa Fe 3751, the City of Portland [Ore.] for the [Southern Pacific] 4449, or Fort Wayne [Ind.] for the Nickel Plate 765; the list goes on and on. This is a labor of love. We do not do this to make money. The money that we make goes back into capital and infrastructure improvements within the organization. We have been very public about our financial situation and what has been made. We have a fiduciary responsibility to our organization to make decisions for the future of our group, not just for the 261, but for other pieces of equipment we own, such as the [Milwaukee Road “Skytop Lounge” observation car] Cedar Rapids. We have to look at the big picture for what’s right for our organization.”

The preservation community will be looking on as well as the fate of the Milwaukee Road 261 is determined next month. – Steve Glischinski

I think the museum's use of the term "fiduciary responsibility" has merit in many situations. However, this situation is different. If there were competing factions all lined up to bid competitively, that would be one thing. However, that is most likely not the case. Also, "fiduciary responsibility" might have some merit if the "historic fabric" was being consumed, i.e. if 261 was being subjected to adverse conditions. I doubt that's the case.

Since there don't appear to be competing bidders, there are two choices: (1) strike a deal with a responsible group, with a proven track record, to operate the locomotive, maintain it, and upon lease expiration, return it to the museum in the same or better condition than when it was first leased; or (2) no deal, and the locomotive returns to the museum. The museum "gains" another static display, which probably won't have much bearing on the amount of visitors it attracts, and the impact of 261's return on the museum mission statement (whatever that may be) may be big (doubtful), so-so (likely), or have no impact whatsoever.

Realistically, there is only one group out there interested in the 261. They have, from what I have read, established professional relationships with Class One and regional carriers that are models for the rest of us. They appear to operate in a safe, professional manner-and in this paranoid era of excessive litigation and risk management, that counts for something. They take good care of their equipment. They have a business model that evidently has allowed them to be successful thus far. None of this has apparently occurred to the detriment of either the 261 or its owner(s).

I don't see what the museum gains by their stance on this. Said differently-what do they have to lose by maintaining what appears to have been a good working arrangement?

[quote="Wowak"]I agree with Ross that it certainly seems unreasonable for the NRM to expect any revenue from the lease of 261. It certainly would be a shame to see 261 go cold simply because allowing her to run doesn't turn a profit. I can't imagine anyone would be short-sighted enough not to see that she will certainly NOT make them any additional income stuffed and mounted. The way I see it, NRM has two options: one: renew the lease on 261. Make no money on it, but generate positive PR. Two: make an offer that will be refused. Make no money, but forever be the bastards who doomed another great engine to "static display." Come on, guys.. do the right thing. 261 is not a revenue machine no matter what you do. Do the right thing.[/quote]


But the bottom line is that 261 HAS made money for NRM from the inception of the lease. It has never been a free ride. NRM has no financial risk in the operation of the 261 just a guaranteed, annual income. What NRM wants is more money. That is the goal in their negotiations. They really need to ask themselves do they want to take the risk of getting no pie in their quest to get all of the pie.

Don C.

"Telzrow also said that the “Friends” has had an agreement with the museum for nearly 20 years that included no cost increases. “I don’t know where you can go and rent something for 20 years and pay the same rate. Why should we be any different? In this economic environment, the museum has to look at every aspect of its operation to make sure what we are doing is in our best interest.”

Using Mr. Telzrow's logic, someone renting an apartment which is uninhabitable should not only have to pay for the total rehabilitation of said apartment but also pay periodic rental, then pay to totally rehab the property 20 years later, only to pay an increased rental for the privilege to occupy the property which they just rehabbed. Am I missing something?

Don C.

Then I'll ammend: NRM has two choices: 1) continue to make a small amount of money and generate much good will by allowing 261 to operate, or 2) make no money and be the bastards who ended another locomotive's excursion career.

I hope and assume that a railfan boycott of NRM will begin if they do not relent.

Well, that SOUNDS good. But I wonder how much of their visitor base is actually railfans. If it is anything like most railroad museums, I would expect it is a very small percentage of their attendance.

Les

"all museums – not just the National Railroad Museum – are all looking at their assets, and trying to find ways to maximize their returns."

Whoa there! Are museum artifacts now to be considered the same type of assets that are owned by for profit corporations? Is an historic locomotive equal to a lathe in a machine shop or a delivery truck at the local lumberyard, to be junked when it no longer makes the owner a profit?

Is the NRM the only museum that is expecting to "maximize their return" on an artifact in their collection? What annual return does a railroad museum get from a locomotive sitting amidst a sea of other equipment? I WISH all of this rail equipment that we have collectively saved would generate a return on investment.

The NRM is getting greedy, and if they fail in their negotiations with the Friends of the 261 they will receive as much bad publicity as St. Louis has received regarding the Camelback and as Altoona has received regarding the K4.

I know Steve and his work, and it is all top notch. What the NRM is doing borders on the criminal. I have been in the cab of this beautiful machine on the road and to see her go cold for no other reason than misguided greed is enough to get my personal safeties feathering. Come on NRM! Back off and give Steve terms he can live with so the 261 can continue to perform her mission...a mission I am beginning to wonder if the NRM shares. A steam locomotive in the 21st century is not an instrument of wealth; she is an instrument of goodwill, the best teacher for the mission you want to accomplish NRM; introducing the steam locomotive and the role the railroads of the United States played in the growth of our country. Do not lose this in an attempt to turn the 261 into a cash cow for the museum. That is not her role, and you guys at NRM should reexamine your motives for why you are there and how you truly wish to accomplish the goals of the museum. Somewhere, I believe you have lost focus. It's time to get it back. Now.

I'm going to, once again, play "devil's advocate" here.

I have, since the initial arrangement with NRM and 261, "crossed paths" with the 261 three times and with the NRM twice--all times as an outsider and a paying customer, with NO "inside track" or expectations other than average, typical "Joe Railfan" would have or get.

As far as I could tell or discern, there was NO connection between 261 and that museum at Green Bay. And I, as a knowledgeable rail preservation "insider," was LOOKING for it.

As far as I could tell, the guys running 261 (or 1661) pulled it out of a park or that "legendary" tunnel that houses the NYC Hudson. And as far as I could tell in Green Bay, the stars of the place were the UP 4018 and the LNER streamlined A4 Pacific.

[Multiple unprintable cuss words], is there room for improvement in this situation here, or what? As far as I could tell, NRM Green Bay gets naught out of the lease, and 261 doesn't owe the folks responsible jack. And neither of these is right, or even ethical, if you ask me.