Could someone who is a Trains subscriber summarize what this newswire item says?

http://trn.trains.com/news/news-wire/2016/12/29-saginaw-woes

It says that there is a dispute over the terms of the relationship between the private owner of the locomotive and the museum. Well, not really a dispute over the past terms, but a dispute over the future. It appears the museum thinks this is a bad deal with high liabilities, and would like to back out of it.

I think there have been plenty of stories over the decades of bad situations arising from private property at institutional museums. We have already seen smaller disputes reported on this locomotive and owner in the past few years. It doesn't matter who is "right". Just the liability and risk of more disputes recommends the museum should not continue this contract.

"Lichter restored the locomotive on his own, and the museum agreed to reimburse Lichter for the work as it was performed and to lease it for operation for 15 years after the work was done. When the rebuild was completed, the engine performed test runs on museum track in May 2016. Even though the museum did not own the engine, over the course of the restoration, the museum posted regular updates on the museum’s website. Several museum volunteers assisted on the project. It appeared the museum would finally end its steam drought in 2017."

Sounds to me as though the museum had sanctioned the restoration project, promoted it and let it be known that the No.2 would become a part of the operating roster when completed. People supported that project, gave volunteer hours toward that goal in ways that they might not have otherwise given and spent MCRM funds for the project. This abrupt change in course will create many negative perceptions to be formed about the MCRM and may result in upsetting the very volunteers that they will depend upon to operate 1385.

This appears to me to have been a private/museum partnership that would have been successful. Usually private equipment owners are the ones who do not perform and leave a rotting hulk on a museum's property. In this case the private owner completed the restoration only to have the rug pulled out from under him at the last moment. This does not instill much trust in the institution.

MCRM could be preparing for their first full season of steam in 2017 with resultant ridership increases, but instead are now preparing for a backlash of negative publicity and possibly some volunteer loss.

I am certain there is more to this story than is being told, just as there is down at the Texas State. Poor communication can be blamed for these two issues now casting doubt upon these operations. We should always strive to make sure that we control events and that the events do not control us.

Over in classifieds there was an inquiry from a railroad wanting to lease an operating carded steam locomotive a couple weeks ago...... perhaps an opportunity for a win-win?

It is my understanding that the owner is owed around $350,000 in damages from a lawsuit where the museum was found to have not maintained the engine properly pre-2000. The conditions stipulate that the money is owed when the locomotive first operates again.

The belief, apparently, is that if the engine never operates there, the money is thus never owed, hence the situation you see here.

Our industry is good at reporting on situations, but leaves a little to be desired in investigative reporting.

...or not accurately reporting the situation. I was curious as to what they meant by a large financial liability from operating the locomotive.

Thanks for shedding some light upon this situation.

It sounds like the kind of situation where a mediator is needed to sit down with both parties and help them come to a resolution. Both parties want the loco to run at Mid-Continent, so they have a common goal. I have read that Oregon attorney, M. Hansen, has experience with steam locomotive transactions and suits.

There is an arbitrator appointed by the court in the matter of the lease that was agreed to in 2003. Further, the 2002 agreement limits Mid-Continent's obligation to $200K. And that is whether the locomotive operates there or not.

I do not see that the argument put forth by the museum regarding warranty of the work the owner did and insurance liability holds much water, especially the insurance part. The C&NW 1385's running gear is being rebuilt at a contractor shop under the supervision of representatives of Mid-Continent and a new boiler is being constructed by another contractor. No mention has been made of any warranty of that shop's work should the locomotive break after being placed in service perhaps in 2018. I would assume that there will be a warranty for the boiler, however. The only difference is that the 1385 is owned by the museum. How that affects insurance liability is confusing, at best. Seems that insurance liability would be the same for either locomotive if the boilers are both certified by the FRA under Part 230.

Well Mid-Continent made their bed... Now they've got to lay in it. Here's the question, where do they come up with the cash? I get the feeling that most of their restoration funds are about to disappear (rightfully so in this case), but will that be enough?

The unfortunate part of this judgement is that it isn't directed towards some huge multinational company with deep pockets, it's directed at a museum, supported by donations and grants. There is no well to draw out of, without causing harm to the organization. It may just be that the funds earmarked for 1385 just disappeared. How would you as a donor feel about your contributions being syphoned off because egos and disagreements couldn't be amicably resolved? I'd be mad as hell.
I do understand Skips frustration though, he put his own sweat equity and dollars into this project with the hopes that steam could return to mid-continent, but for reasons only those on the inside understand, he has been thrown roadblocks.

Maybe not exactly. Donor restricted funds mean just that, the donor donates the money, for example to the 1385. In theory, you cannot use donor restricted funds for non-restricted purposes, such as paying the light bill, or lawsuit judgments.

What some organizations do (such as your alma mater), is insert wishy-washy languaage in the donation agreement that allows them to repurpose the money as they see fit.

If not, the organization can try to go get consent from the donor to release the monies.

This is sad, because it shows that the current board of directors and management of MCRR are not fit to do their jobs and operate the place with a mind toward their fiduciary responsibilities. I wonder if the entire board is going to resign? Probably not.

Why would any donor donate money to MCRR now and feel secure that the money will be managed correctly, let alone the project that you donated the money to?

The fact of the matter is they just managed to deal a blow to the museum in excess of $200,000 and the BOD should absolutely be sacked. Without knowing who's on the board I can only assume that they've been around since the original deal in 2003, long enough for them to decide they'd never be caught dead running #2 because they'd be forced to pay out, which they could find an impossible pill to swallow for any number of reasons. That being said they now have an even bigger hole and look to be even more than just plain negligent (I'd argue they're downright despicable). With that in mind I see a few things that need to happen;

1) The current BOD needs to go and the sacking needs to be public. Potential donors and volunteers need to know that what they've done is entirely unacceptable, and the best first step is to clean house.
2) After replacing the previous BOD, the new one needs to come clean with what has happened, keep to the facts. Keep in mind that since December there hasn't been much out of the museum through official channels as to the issues with #2 (at least that I've seen). At this point they need to issue some sort of statement.
3) Any new BOD needs to not only present a plan as to how they'll ensure that their obligations are met, but they need to prove it.
4) They'll have to at least try to make amends with Skip Lichter. I don't know what the current BOD has against him, but with how all this has ended I can't see him as having done anything wrong... If anything he's gone above and beyond to ensure that Mid-Continent could benefit from what he was doing. Even if it isn't successful and Skip goes his own way it's the right thing to do and would show that Mid-Continent can learn from its mistakes.
5) Mid-Continent would need to prove it could still function assuming the BOD is removed and replaced. With that in mind they've got a ten wheeler well along the way to completion. The best way to prove they can still do the work would be to finish 1385, no matter how long it takes. If it takes longer because of the arbiter's ruling then that is what it is. Finishing 1385 would only serve to help Mid-Continent, both in ridership and rebuilding their public image.

Disparaging remarks here about the competency of another museum’s governing board are not productive. It seems likely that none of the commentators above know the full details of what Mid Continent is facing and what resources are currently at their disposal. Nor do we know how individual board members may have previously voted on motions related to the locomotive. We can take heed of their problem and apply the lesson to our own circumstances but, unless one both is a Mid Continent member and fully informed on the facts, calling for their entire existing board to be “sacked” isn’t our call. That’s presumably a decision to be made by their membership in accordance with their bylaws.

/s/ Larry
Lawrence G. Lovejoy, P.E.

Personally I think that number 4's time has come and gone long ago. I know that we should make amends for actions in the past, but this is even a bit much for me. If I had been screwed over by a museum twice through the first agreement and then another one that came along with a court order, which they attempted to break I would be furious.