How can any reasonably sane person familiar with railroad preservation talk about return-on-investment of any kind with a large, mainline steam locomotive? Really, what any such discussion should properly center on is how much cash the purchaser is willing to bleed each year to take care of his "toy". Think of it as a land "Yacht" - a hole into which you pour money for recreational enjoyment. Unfortunately, most of the people who can afford yachts would rather be on the water doing that than dealing with freight railroads and the FRA. Reading 2102 made paupers out of some fairly well-off people, and seriously drained the finances of others over a 20 year period. The only reason I didn't lose money on it was because I was 10 at the time, and my allowance wasn't big enough to buy a share (I used to have a prospectus for Steam Tours somewhere - would be quite the historic document now). I'm sure there are similar stories for other famous mainline queens.

You don't do this stuff to make money. It's not an "investment". At best it might be a near break-even hobby. Outside of isolated operations like Strasburg or Durango, is there any occasionally operating independent big steam locomotive program that has made money, at least enough to do the necessary upkeep and pay salaries, without having to pass the plate frequently for donations for major repairs or financial crises? I can't think of one. Every group that has a long-term track record of successfully operating mainline steam is a 501(c)3. You run diesels to make money (and probably not passenger diesel trains either), and steam for the love of it.

And all God's children said AMEN!!!!!

Ross Rowland

I understand your points about running steam being a labor of love rather than a good business investment. When I asked questions about the investment potential of paying $225,000 for #261, I am not suggesting that the investment should be good in a normal business sense. I am only wondering about the likelihood of somebody purchasing the engine and leasing it back to the most likely operator, that being the Sandberg group.

To me, it makes no sense that the museum drove such a hard bargain on the lease renewal as to make the Sandberg group decline, and then turned around and offered the engine for sale for only $225,000. What it says to me is that the museum management killed the deal because they emotionally got their back up and could not compromise during the negotiation phase. And now, they realize the shot themselves in the foot, and are attempting to salvage the deal by drastically cutting the sale price.

I predict that the Sandberg group will be running the engine again, either through a lease from a new owner, direct purchase of the engine, or a new lease from the museum.

I don't think anybody suggests that anybody is going to make a buck with steam (unless the business model is very particular, allowing for high yield and utilization), the idea I would suggest is if somebody was not looking for an immediate ROI, that they could by the engine and lease it to whomever and recover their principal eventually. Somebody still needs a business plan to recover the short term operating costs and Form 4 depreciation. I don't think Sandberg and Co. are going to continue with 261 as the brand has been blemished and they may see fit to create a new brand. However, even then they're not going to make money to a degree that would satisfy investors.

It might be worthwhile to study HOW the D&S makes steam work and use that information to build a sustainable business model. I suspect a lot rides on extra-fare ticketing and premium product promotion. Scenery doesn't hurt them either.

Michael Seitz
Missoula MT

And having an ever changing clientele to ... errr, fleece, known as tourists. It works pretty well for the WP&Y, too. However, just a couple hours drive from the D&S the C&TS barely makes ends meet. Why? 'Cause nobody goes to Chama unless they want to see the train, and there's not enough of those folks.

Biggest problem with the tourist angle is it's pretty easy to convince yourself that most of your riders don't know what is up front, and could care even less. The Grand Canyon convinced themselves, and the WP&Y is pretty much there, also. It's only a matter of time before that same thinking infects the D&S. I'm sure all those Johney-come-lately Yuppies in Durango would like nothing better than to see the line electrified, or maybe running Fiat railbuses burning bio-diesel.

I think that the more diversified your base of operations is, the more likely you will get a diversified clientele. WP&Y, the Grand Canyon and the C&TS all fall into the same trap of "that's all there is". Aside from railroad operations, there are not other activities to make these locations destinations. For the WP&Y (tour ships) and the Grand Canyon (the Grand Canyon) there's already drivers in place that negate the value of whatever is on the front end--the novelty of steam is not the visitation driver. Were the C&TS to abandon steam, Chama would become a much quieter place.

Have no doubt that the D&S has looked and continues to look at alternative ways to get people to Silverton--however they already have sunk costs operating steam. To scrap all that and assume a new capital burden without a guarantee of increased ridership (or subsidy from a clean air program etc) would be folly for them. They obviously think that steam has some bearing on the success of their operations, otherwise they might have abandoned it well before now (especially after the disastrous roundhouse fire). Steam is core to the D&S and C&TS brand. The Grand Canyon had it, but opted to pitch being "green" and the W&PY never had it in the first place (they've really only had the one engine and attempts to expand that didn't justify the costs).

Has anybody done a proper market survey (or know of one) that can determine the importance of steam as a visitation driver? I know on the operation I'm involved with (the Alder Gulch Shortline in Virginia City MT) that there is anecdotal evidence that the steam engine is a draw and increases visitor duration. However I don't think they have a formal study to prove this either.

I think that if an operation is running out of a diversified destination area, with a long operating season and can acheive strong passenger densities, steam will work. Unfortunately there are not that many places out there to work out of but are probably more than we might imagine.

Michael Seitz
Missoula MT

If I had the quarter mil to buy 261, I would buy the wonderful machine just to own her! ....just to ride in the cab, just to see her cruising along on the rails.....just to hear her whistle....just to see people stare and enjoy......just to show off to my friends and family!!!! I couldn't care less if I made one red cent of profit with such a purchase! There's many other investments you could put that kind of money toward and do exceedingly better than putting it into a steam train. The emphasis should be on preserving and running an American dream! A dream that came true for this country! To heck with all the profit nonsense. There is a time and place for profit but this isn't it. PERIOD!

If The Friends of 261 were willing to rebuild, maintain, run, store and take care of my engine for me, they would be welcome to reap any profits they might be able to come away with and I would consider myself lucky I had them to do such things. That's just me because this is a huge passion for me.

It's too bad everything has to be about making more money. There must not be too many millionaires out there who have a passion and love for steam power......225 for a very large beautifully preserved steam locomotive seems like a bargain as others here have already mentioned.

I can't help think that perhaps the Sandbergs are ready to wash their hands of this locomotive in light of all the haggling and hassles they've had with the owner and money issues. I would understand if they feel the need for a fresh start with a completely different locomotive. A new challenge always keeps life interesting!

I've tried to stay out of the 261 conversations, but....James, your last paragraph hit the nail on the head.

There is one thing to all the steam operations like this and that is it keeps the steam technology alive, if for any whatever reason a comeback of steam happens, there are people prepared for it. Profit motives have pushed the steam off commercially but the love of steam aint dead yet.

The sale of the 261 is not going to solve NRM financialities, they have to find other means of support like other museums should also, and not look at scrappings etc as the means of raising cash.

If NRM makes the engine their debacle than their celebration, they will get nowhere with the engine with or without the engine.

I doubt that the Sandberg group will throw the baby out with the bathwater just because of their frustration with NRM or because they are bored with #261 and want a new engine. They will be running #261 again soon, either owning it themselves or leasing it from a new owner. NRM will go their own way.

Sources?

In fact. dealing with the 261 is NOT Steve's first (and probably not even his second) priority. Steve has repeatedly said that his first priority is to complete the negotiations that are ongoing with at least one, and possibly two other locomotive owners. First, foremost and above all else, these negotiations and their associated locomotive(s) have priority.

That having been said, certainly Steve's group might be interested in the 261, especially in owning it. I am not at all sure that he has any interest in leasing the locomotive (again), but I could easily be wrong. So please be patient. Results of the negotiations are expected soon. Very soon.

I believe the discussion about 261 as an investment would be for a buyer who has someone willing to lease it. That's a simple matter of crunching numbers and speculation on interest rates, future value of the machine, etc. (To be safe you take it down to scrap value.) That's a purely financial matter and entirely different than someone who thinks they could make a profit running it which is extremely unlikely.

Steve

I have about $225,000.00 in some of my investment accounts. I like to earn about 6% on it each year, and have been doing that, mostly with a mixture of corporate and government bonds and older bank certificates of deposit.
Let's see, if I spend all that money to buy about $70,000.00 of scrap metal (I think someone guessed that was what the locomotive would fetch if delivered to a steel mill), I need to charge about $13,500.00 each year in rent to keep my income about the same. But, at the end of 15 years, I will get back only $70,000.00 of scrap metal, say $75,000.00, in hopes that I can sell the bell, headlight, and other "jewelry" for more than scrap prices. So, over the 15 years, I also have to cover my depreciation of $150,000.00, or another $10,000.00 each year. That means, I have to charge $23,500.00 each year for rent to earn as much as I am now in relatively safe investrments. This price requires that the renter pay ALL expenses to fix up and maintain the locomotive, and insure me against being sued for renting this "dangerous" machine. I also need insurance against "loss of rents" and early termination of the lease, due to some disaster. If I can't get the renter to pay any of that up front, I'll have to increase the annual rent charge to cover the insurance premium that I'll want to pay.
Is it worthwhile to an operator to pay me $23,500.00 or a little more each year for 15 years?
(Also, if the money was coming from someone who invests heavily in the stock market, he might be used to an even greater return on his money!)

The ONLY way you're going to get a straight answer to this is to approach Sandberg directly. My opinion would be pretty irrelevant.