Well with that being true, what is the short line's rationale behind prohibiting HVRM's usage of the track? It seems as though HVRM has "prior rights" so to speak.

More than I care to count. I don't want to hijack this thread about HVRM, but there are dozens of operations across the country that are under threat or have already been shut down because of a sudden change of heart of the owner or lessor.



Not wanting to take away from the HVRM story, the track which Kevin refers to that the R&GV Museum operates is located on a permanent easement on private property. We do not own the property, but the permanent easement remains fully enforced, nonetheless. The trolley museum to the north leases their property from the town, which is a completely different situation.

-otto-

A nonprofit definitely can haul freight. They don't because it'd be crazy not to use a corporate structure.

#1 is the FRA regs. An off-general-system road is under "FRA Lite". If they haul freight for third parties for pay, they must comply withfull FRA regs, at least insofar as their freight operations. Figure they'll need at least one full time employee just to satisfy the inspection, PM and paperwork requirements. It's not feasible to do it on a small scale, and hard to do it on a shortline scale.

#2 nonprofits run into some entanglements dealing in inherently for-profit trades. They pay "Unrelated Business Income” tax (UBIT) at tax rates somewhat higher than normal corporate tax rates. They are allowed to deduct some expenses of that business, but not as many as a standalone for-profit could. It makes your tax forms very complex and ugly, and mind you, the 990 is already the most complicated tax form on earth.


True that... UBIT is a nice problem to have.

#3 is liability shields - the whole reason corporations were conceived in the first place. If your nonprofit operates freight, it is infinitely liable for the consequences, and even the nonprofit directors and potentially members are personally liable if the problem is serious enough.

Because of #1-3, you'll want to use corporate structures to put a Chinese wall between your freight operations and heritage railway operations. Usually this is a corporation (indeed some state laws require railroads to be corporations) but it could also be an LLC or even the new LLLC (L3C). States confer corporate structure types, the Feds only try to keep up... But the L3C type is rather interesting as it is a semi-nonprofit: a for-profit with a mission other than (the implied) maximizing shareholder value. Good examples would be a Ben & Jerry's which fully intends to donate most of its profits to charity, or a church which intends to be political (so not 501c3).

Normally a corporation pays taxes on its profits, pays dividends with that already-taxed money, and then the shareholders pay taxes on the dividends. That's called "double taxation"... which is the reason many people like LLCs in pass-through mode, where the owners pay the LLC profits on their personal taxes. That's bad news for a non-profit, as pass-through would cause all the problems of #2. For a nonprofit, dividends are not UBI, so are tax free. Leases are also not UBI, so the nonprofit could charge high leases to the freight subsidiary, which would add to the expense ledger of the freight subsidiary, reducing its profits and thus its taxes.

Just don't lose money every year, or the IRS may deem the structure non-legitimate and bust it up.

Some states require railroads be not non-profits. This is often a statutory arm-wave that legislators will happily reverse if you give them a reason. They did just that in Michigan and Nevada, where they expect nonprofits to operate transit systems.

The "high executive salary" trope always annoys me. A huge fraction of the US economy is made up of businesses where nobody is making 6 digit income. What annoys me is this kind of fantasy ignorance of how business actually works - people would rather buy into teabag or commie mythology than be successful business people themselves. Andrew Carnegie lamented that people asked him for a job or a loan, but never the secrets to success. People don't want those secrets. Why?

And it does extend to the boardroom, which is why boards will pay Jack Welch a salary competitive to what he could make running his own business, rather than develop capable people from within.



Another example of people turning their backs on success becuase they prefer to believe a lie. Last time I was told "we can't succeed because it's the economy", I tripled their passenger business in a year.


Yes, but it's really caught fire as of late. It's far bigger than the list you saw, and you'll want to build defenses into your organization. Partly, the rails to trails gang has run out of abandoned lines to convert.

Hi,

It is amazing how many "lies" or misinformation is taken as "fact".

In the book Wizard's First Rule by Terry Goodkind, the first rule is people will believe a lie because they fear it is true or they are afraid it is true.

Once I read that statement, it has been amazing how true it is.

It is amazing how many people misinterperate the "non-profit" phrase. It does not mean they can not make a profit, just that there are no shareholders to pay dividends to or who worry about stock price being under valued.

One non-profit I was a member of in Live Steam had a member that said we could not make a profit on the sale of rail because of the restrictions.

It is always interesting to see an expert's point of view.

Thanks.

Doug vV

Bob, I don't see how those lines in a contract between INDOT and the Town help the museum, a 3rd party.

Is there language elsewhere in the agreement that specifically provides the museum with the right to enforce the contract between INDOT and the Town?

Absolutely. They are a third-party beneficiary.

They might also have standing simply by being a citizen of the State.

What's more, since the contract's benefits are rather lopsided in favor of the town, it weighs heavy on the town to fulfill the conditions.

Here's the thing. There surely must be a civil contract town-museum, and another town-freight RR. I don't know what those say. But I seriously doubt the town would be able to contradict the above, since it's with the State. What's more, since the above is public and certainly relevant to the other contracts, each party would be expected to be aware of those terms, so the freight RR and museum would be expected to act as if they knew.

Consider the common definition of tort interference:
1. A contract exists between two parties (town-museum or town-State)
2. A third party (freight RR) knows that).
3. The third party (freight RR) intends to get a party (town) to breach the contract.
4. They have no right to do that.
5. The contract is in fact breached.
6. A party is damaged.
Now think of all the ways it applies to these contracts. If this is the freight RR's best play, they're "rolling the hard six" which seems like an attempt to win short-term at the cost of an assured loss long-term: cheesing off the people you want a contract renewal from is close to an auto-lose.

Why do I sense railfan arrogance?

I am not a lawyer and I will never be able to adequately explain every caveat of this situation. Here's an article for you to dissect:

http://www.wkvi.com/2016/05/north-judso ... um-trains/

Quote from the above referenced article:

"But the point is, we’d like to resolve this and get back to where we all can play together nicely. People can make money running cars. People can make money shipping grain. People can make money by owning a railroad. We don’t make money. We just are trying to be the caretakers of history.”

Sounds like people can make MORE money storing cars, and that's incompatible with running trains.

Les & Bob,

Just proves that no good deed goes unpunished...

Take Care & Work Safe (Greetings from Audreyland)

New update:

http://www.wkvi.com/2016/05/north-judson-extends-agreement-railroad-operator-challenges-remain-museum-trains/

The Hoosier Valley Railroad Museum’s excursions to LaCrosse will likely remain suspended for at least the next few months. The North Judson Town Council voted Thursday to extend an agreement with the Chesapeake and Indiana Railroad, the operator of the line.

Town Attorney Rachel Arndt says the original operating agreement was set to expire in December. It had been extended until this month to give the town a chance to accept proposals for a lease of the line, but Arndt says the process has taken longer than expected, “Because of some delays that were out of our hands, really, we’re waiting for some information so that we can publish the RFP, we’ve had to agree to another extension, and we’re doing that for a couple reasons: One, so that we can guarantee some passenger excursions on the line. And the other reason is so that we can guarantee continued payments of revenue shares to the town which funnels into a maintenance fund for the railroad.” The extension approved Thursday gives the town until August 15 to find a firm to lease the railroad.

However, the Hoosier Valley Railroad Museum has been opposing the extended agreement, due to its restrictions on the museum’s passenger trips to LaCrosse. While the excursions to English Lake are allowed to continue, the museum is only allowed to run two trains to LaCrosse during the term of the extended agreement. Even then, the museum would have to make a request at least 30 days in advance and would require the approval of both the Town of North Judson and the Chesapeake and Indiana Railroad.

That may be a bit of a challenge. Museum officials say that the Chesapeake and Indiana has decided to store rail cars on the line in LaCrosse, further complicating issues. Meanwhile, the operator says it will no longer maintain the segment of track between English Lake and North Judson, leaving that responsibility up to the town for now.

Arndt says there are a few reasons why the town agreed to restrict the museum’s trips to LaCrosse, “The biggest one was that we were having some insurance concerns come up that we tried to iron out and those are about ironed out, but that was one of the requests that the other parties made to us as a point of settlement to get this extension done, and the town really just had to balance the downside of doing that with the benefit of getting the continued revenue shares.”

Arndt and members of the North Judson Town Council said if the town didn’t agree to the terms of the extension, the operating agreement would expire. That would mean control of the railroad would pass to the Surface Transportation Board, leaving the town with no way to ensure that the museum’s excursions could continue.

Museum officials argued that the operation of the excursion trains should already be protected, as one of the stipulations of the grant funding provided by the Indiana Department of Transportation in 2004 to allow the town to buy the line. The terms of the grant imply that freight traffic may not interfere with the museum or its excursions, but museum officials say these conditions are currently being ignored.

However, Arndt says that provision may not be enforceable due to conflicts with federal law, and a legal discussion with INDOT continues. As for the terms of the new extension of the operating agreement, Arndt says INDOT approves.

The LaCrosse trips are considered a major tourist draw for the museum, and the uncertainty of the situation has caused significant challenges for both the museum and other groups. For example, the LaCrosse Public Library regularly partners with the museum for programs and special events there. Doug Kosloske, vice president of the Hoosier Valley Railroad Museum Board of Directors, says he just wants a solution that benefits everyone. “We’re very concerned when we start losing the ability to do things like go to LaCrosse,” he says. “Is it going to cut at our income? Yes. Is it going to kill us? Well, figure out a way to do it like we always have. But the point is, we’d like to resolve this and get back to where we all can play together nicely. People can make money running cars. People can make money shipping grain. People can make money by owning a railroad. We don’t make money. We just are trying to be the caretakers of history.”

Arndt says once a lease is finally signed, the museum may see some additional protections, “The long-term goal of the town is to give more teeth to any agreement that we have. And so what I’d like to see is some very specifically outlined passenger excursion details, so they get to do x amount of trips per month, if we’re going to do any expansion in services, adding provisions in for those, so that’s the plan.”

Town officials say they’ve already heard from five firms interested in leasing the line.

One addition to Trainlawyer's note. If the incumbent freight railroad is an STB regulated common carrier (looks like it may be from some of the other notes), it's not just a state law landlord-tenant issue. Even if the landlord has the right under its agreement(s) to evict the incumbent railroad, it may need to first obtain "adverse discontinuance" authority from STB before it can do so. See, for example. STB Docket AB 878, City of Peoria et.al. - Adverse Discontinuance - Pioneer Ind. R.R. served 8/10/05, available at the following address:

http://www.stb.dot.gov/Decisions/readin ... 590048F3CF?

Bottom line - the landlord (whoever it is) may need to get a lawyer with STB experience before taking any self help.

Adverse discontinuance was filed with the STB last year:

http://www.stb.dot.gov/filings/all.nsf/ ... 238219.pdf

One of the byproducts of HVRM's being locked out of train operations to La Crosse, Indiana occurred at the museum this past Friday. The Big Train Operators Club had scheduled their national convention for nearby La Porte, Indiana and as part of that get together, had arranged for a special Friday train to La Crosse. That obviously couldn't happen so the museum did a bit of "scrambling" and came up with an alternate plan. The special would operate over museum trackage east toward State Route 10 (which we ordinarily only use for our Easter bunny and Pumpkin trains) and then come back past the depot to where we head west toward English Lake. But for the BTOC group, we actually went back east again, this time over the ex-C&O short line track, again out toward State Route 10. Although the mileage certainly did not come close to equaling the amount of the cancelled English Lake-La Crosse segment, it was an effort by the museum to make things a bit nicer for the BTOC riders.

The two photos below show this special operation. The first is of the train pushing back west after crossing the flagged Main Street crossing in North Judson with the museum track to the right side in the photo and with the museums depot building off in the distance. The second shot is after the westbound train cleared Mulberry Street with museum member Bob Jachim walking back from his flagman duties.


Les

Storing cars on one linear track doesn't work well, because it's rather difficult to pull a string of cars that's too far down the stack.

But HVRM in North Judson proper has lots of parallel tracks in town, 3 miles of them, but a need to run trains on a single track.

Each has what the other would need. That says "work together".

yeppers, instead of being "stuck up"