I am having a bit of a go round with our director about building a slush fund for our operating steam locomotive at the Roundhouse. We have a pretty good handle on real costs such as fuel and staff time, but the amount to add to the fund every (choose appropiate interval here) is still nebulous. Miles isn't good for us as we have no track other than the house leads and turntable.

Has anybody out there done any figuring on the value of what amount of locomotive is used up in an operating day not based on distance traveled?

Dave

irondave@bellsouth.net

> I am having a bit of a go round with our
> director about building a slush fund for our
> operating steam locomotive at the
> Roundhouse. We have a pretty good handle on
> real costs such as fuel and staff time, but
> the amount to add to the fund every (choose
> appropiate interval here) is still nebulous.
> Miles isn't good for us as we have no track
> other than the house leads and turntable.

> Has anybody out there done any figuring on
> the value of what amount of locomotive is
> used up in an operating day not based on
> distance traveled?

> Dave

My son and I have a Vulcan 0-4-0 T very much like your Porter. We have leased it to the group that has PM 1225. The lease is to be renewed at the end of the first year when we can come up with the figures to cover the cost of "ware and tare" to the engine. We want to tie it to the flue time in some way so that when it comes to the end of our 1472 days that there are funds to take care of the inspection. We would be very interested in what others do to cover the cost of the future repair. There are to many engines that were restored and run but nothing was put back for the "re-restore" that will come.

John


johncgra@locl.net

Dave,

Can you look at the projected wear and tear costs, annual maintenance costs, and any looming expenses that might occur due to new FRA mandates and come up with the amount of money you will probably spend within the next year, the next two years and the next five years?

In the leasing business, so many have been burnt by either NOT knowing those numbers or by knowing them and not charging enough to cover them. How many times have we heard stories where a group spent $50,000 to restore a locomotive, leased it out for a while under "good sportsmanship" contracts which brought in only enough income to cover the basics, and then ended up a few years down he road with an inoperable locomotive and no funds to repair it? The same realities occur at a museum, don't they?

If a miles formula doesn't work, maybe a service days and projected expenses formula will help even if it can't possibly cover the unexpected big ticket repair.

Realistic donors and accountants will see quite quickly that the locomotive in a museum setting probably cannot pay for itself in terms of surviving on operating income. There has to be a basic acceptance of the fact that running it is the right thing to do and that it has an educational value to the visitors that cannot be calculated in a dollar and cents return to the museum.

Yet the donors will have a right to be angry if they pay big bucks to get it restored and then find it sitting in the weeds five years from now because the organization never calculated the true costs of running it and did not create a fund for its on-going maintenance and preservation.

If you create a steam locomotive fund which is restricted and cannot be used for general fund expenses, then you can segregate the money with some of it in money market accounts or CDs so that the money not being used is earning money instead of sitting. In addition to seeding this fund yearly with budgeted transfers from museum operating accounts, your fund raising program mentions this and other funds by their name so that those who want to contribute can earmark their donations for those funds rather than allowing them to go into the general fund. If you put a donation box on the train and publicize the fund, then when the big foundations ask about community acceptance of the program, you can show that individuals have been helping you cover the expenses that operating income will not.

During the period when I served as the collections manager at SRM, we used this system to help restore and maintain Georgia Power #97. At the time when I left the museum, we had been discussing the use of similar funds for some of our other equipment. Our fund was seeded by a grant which showed subsequent donors, including NRHS Atlanta chapter members, that we meant business: we not only intended to restore the locomotive but to keep it running as well.

Good luck.

--Malcolm



grinnellglacier@yahoo.com

> We have a pretty good handle on
> real costs such as fuel and staff time, but
> the amount to add to the fund every (choose
> appropiate interval here) is still nebulous.

Echoing the input of the previous poster, in business, when I have to budget for nebulous costs, I look down the road for known points where expenditures will be required. I always plan conservatively and if things work out better than expected, I always have recomendations ready to brief my customer so he or she can make an informed decision as to how to proceed.

For a steam locomotive, known future costs would probably include recertifications, mandated or otherwise scheduled inspections and renewals, and insurance. These are foreseeable things that you know you will have to plan for. Use a spreadsheet and go out about 10 years. Total everything up and increase that figure by either a third or a half depending upon what you feel is the risk of some unexpected expense occuring - I don't care what business you're in, something always happens. I'm going to stay away from the idea of borrowing funds, although bridge loans are quite common in the industry. But if borrowing will be necessary, you must include financing costs. Then multiply that total by about 5% to account for inflation, rising costs, etc. After that, sit down with your finance person and go through everything, things you know for sure, your assumptions, suppositions, you name it. You will be surprised how infrequently people do this and you'd be amazed at how much good it does. If you've got an MBA there, use that person's expertise - you both will better learn what's involved in running the business and that will make you both more valuable to the operation. He or she can also help you factor in missed items, like opportunity costs and so on.

This method should keep your steam program on track. Naturally, if your conservative numbers leave more excess than expected, develop recommendations for the use of those funds and brief your administrators accordingly. You will find that your previous openness will only give your numbers more credibility - especially for those rare occasions when your plans run a little short.

My two cents ...

Best Wishes and Regards,
Glenn


christenseng@altavista.com

After you do all the calculations and come up with a reasonable number ..... take that number multiply by two and add 50%. This will be the actual cost.

I hate to second such a large slop factor as recommended above, as 15% is usual in engineering work, but from experience with PM 1225 it is the only safe thing to do. You're entitled to use a standard contingency percentage only if you've got a large base of experience to reason from. With a data set of just one locomotive, in the hands of managers without a lot of experience to draw on, there will be surprises. Before we did it, I never would have imagined that it would cost $22,000 to make and install two thermic syphons in the 1225, but it did, with our people doing all the engineering and much of the fabrication. And that included working with contractors who were willing to help us parcel the work out to the lowest-cost supplier for each element of the job.

We don't have much to add to the advice above, about calendarizing foreseeable expenditures over 10 years or so, and dividing the total (plus slop factor) over the likely number of operating days, except to emphasize that the resulting number of dollars MUST be restricted for every day the engine is hot, unless you intend to park the engine while you wait for new capital to show up. The source of the money doesn't matter, but it MUST be there, and I have a tough time believing that any museum manager will not grasp this principle.

Aarne H. Frobom, editor
The Steam Railroading Institute
M.S.T.R.P., Inc.
P. O. Box 665
Owosso, MI 48867-0665


froboma@mdot.state.mi.us

> After you do all the calculations and come
> up with a reasonable number ..... take that
> number multiply by two and add 50%. This
> will be the actual cost.

Ah, a realist!

Grins,
Glenn


christenseng@altavista.com

Glenn gave great advice! One component to add to the mix is a projection of total hours under steam during those projected ten years. This could be accomplished based on your actual histories plus planned variances in future operation. Once you figure your total ten-year costs then divide by the total projected hours under steam and you will create a per hour cost for steaming. To be on the safe side, I would actually work with a monthly cost. Guessing wrong by a few hours a month is better than guessing wrong by an hour or more per "operating" day.

wyld@oc-net.com