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Tax returns derail hope of viable train

February 1, 2012
By Jim McCulley , Adirondack Recreational Trail Advocates

As the rail vs. trail debate has unfolded, ARTA's position has been that the Adirondack Scenic Railroad is financially insolvent and it is a matter of time before operations will end. So why not move now on the alternative of a recreational trail instead of waiting for the inevitable?

We base these assumptions on the only reliable source of financial information for the ASR, its tax returns. We also combined its publicly stated ridership totals with their tax returns to come up with ridership numbers that are far more plausible than the claims we are now hearing from the ASR.

When we presented these numbers, we were attacked as being dishonest. Representatives of the ASR, at the ARTA meeting in Tupper Lake, stated that the loans given by their board members to keep the ASR operating "were from 10 years ago," insinuating our statements were false on this issue. In fact, they were from 2008 and 2009, and now we find more borrowing on their 2010 tax return, again from their board members. Since it was Bill Branson, president of the ASR, you would think he would have known that the loans were current and not accused us of misleading the public. Unfortunately many base their support of the ASR on misleading financial information or one busy weekend per season.

The ASR's 2010 tax return says that the state has given it $221,103 as a grant, yet they insist this is for work done on the corridor. If it was a contractor, the state Department of Transportation would pay it as any contractor, not as a grant recipient. Their claim that they are doing work that would otherwise have to be done by the state also falls flat when you consider that you would not need to spend more than $100,000 on a railroad crossing if no railroad was operating on the line. The ASR insists this is not a subsidy, but the definition of subsidy is "a grant or contribution of money."

Even more interesting, ASR's permit states on page 2, section 9, "Permittee is responsible for any repair and improvements or maintenance work of any kind on the property at Permittee's expense." Clearly it was never DOT's intent to be paying the way for this private organization; in fact, the plan states that resurrecting the line will be at no cost to the taxpayers. Here we are, almost 20 years later, still paying for the upkeep of the rails and for maintenance of the ASR's equipment. Even the utility bills to open and close their crossing gates are paid for by the taxpayer. Once again, the permit that the ASR is operating under says the ASR is supposed to be paying this expense.

When examining the ASR's 2010 tax return, we find current liabilities of $389,974 and current assets of $198,093, of which $88,578 is due from the taxpayers, apparently in addition to the $221,103 they already received in 2010. Included in current liabilities are loans from their board members totaling $88,500. And while they say they are interest-free loans, the fact that they haven't been able to pay back any principal is a sign of the desperate straits they are in. Legally that interest will have to be paid, as the IRS does not allow no-interest loans, making this just another liability. This is an insolvent operation, so why DOT continues to prop them up despite violations of their own permit is alarming.

I did find it interesting that their latest tax return has a ridership number from all operations (Utica to Old Forge and Lake Placid to Saranac Lake) of 56,323. Their public statements say that they have 8,200 Utica-to-Old Forge riders and 8,000 on their Polar Express. This leaves 40,000 riders split between the Old Forge local operation and Lake Placid, where they say they do 25 percent of their rides. Simple math produces a best-case scenario of 10,000 Lake Placid riders, which at $14 per ticket yields only $140,000 in revenue. These ridership numbers show a dying business that, without taxpayer support, would close tomorrow. After all, with operational revenue for both ends of the line of $839,392 and expenses of $1,128,012, the idea that the ASR could self-sustain is not in the cards.

Parent company Adirondack Railway Preservation Society Vice President J. Alan Heywood said last Saturday, in the Albany Times Union, "We have had limited success, but it is not fair to be judged by a track that is a third done." We have heard this for 20 years: If we just went further, the train would be a success. Of course, there is no basis for this claim. In fact, if they just go from Saranac Lake to Tupper Lake, four times the current run, according to the Camoin study, ridership will only rise 1.75 times, reducing the passengers per mile by more than half. And, of course, there is no money to extend the line anywhere. Garry Douglas's statement in the Times Union that "the state will be able to pay to eventually restore the 80 miles of track" is a slap in the face to the business owners between Old Forge and Lake Placid, especially in Tupper Lake, who are trying to survive NOW. In essence, he is saying, just wait another 20 years, and maybe the state will have the money to spend on a railroad that has already failed four times. How Mr. Douglas and several regional economic development agencies can continue to support this drain on the area economy is startling.

Our future lies in the innovative reuse of our past as we strive to wean this area off never-ending state subsidies. We have what can become a revival zone running through the heart of the Adirondacks. It's time for the residents of this region to make their wishes known and press for a multi-season, multi-use recreation trail in place of a mostly abandoned rail line. Support Get involved. Your future depends on it.


Jim McCulley lives in Lake Placid and is on the ARTA Steering Committee.



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